Paternalistic Economic Policies: Foundations, Implications and Critical Evaluations

Abstract

The paper analyzes the inherent risks of paternalistic economic policies associated with the newly established economic sub-disciplines of behavioral economics, happiness economics and economic psychology. While the authors in general welcome these sub-disciplines for enriching and critically evaluating mainstream economics – especially their criticism of the Homo-oeconomicus heuristic is of great value contributing to a more realistic idea of man –, the derived implications and recommended lessons for economic policy should be received with concern and, thus, be subjected to a critical (‘ordnungs-political’) review. The paper also shows that the new economic sub-disciplines are not necessarily accompanied by a paternalistic style of politics; traditional, constitutional-political recommendations can also be derived from the (new) ‘normative economics’: Frey’s et al. approach, for example, not only avoids the inherent risks of a paternalistic state, it also stands in the Kantian and constitutional economics tradition taking the autonomy and (citizen) sovereignty of people, human dignity and human rights seriously. It, thus, seems to be better suited for a modern version of Ordnungspolitik.

Keywords: Libertarian/soft paternalism; hard paternalism; Frey; Kahneman; Layard; Thaler/Sunstein; constitutional political economy; Ordnungspolitik/regulatory policy.

JEL Classification: B25, B5, D02, D03, D87, P16, P48, Z1