Towards a 'Constitution' for Behavioral Policy-making

34 Pages Posted: 1 Dec 2016 Last revised: 31 Mar 2019

See all articles by Marco Fabbri

Marco Fabbri

University of Amsterdam - Faculty of Law

Michael G. Faure

University of Maastricht - Faculty of Law, Metro; Erasmus University Rotterdam (EUR) - Erasmus School of Law

Date Written: November 30, 2016

Abstract

Behavioral policy interventions aimed at redirecting individuals’ behavior toward optimal choices are characterized by an important issue which is often overlooked: the lack of an instrument to define what “optimal” means. If agents are subject to behavioral biases leading them to make “wrong” choices, the policymaker can no longer rely on the revealed preferences approach (e.g. what people choose is what people prefer) for defining a welfare criterion. In this article, we reiterate the argument put forward by some scholars that choosing a suitable welfare criterion once the link between observed choices and individuals’ preferences is broken becomes a problematic task. We review the state of the art in the literature and the possible approaches proposed to overcome the problem, concluding that a solution has not yet been reached. Moreover, we argue that the lack of an established welfare criterion characterizing behavioral policymaking could pave the way to government wanting to restrict individual freedom. In the absence of any legislative constraint for the executive, stating that what individuals choose is not what they prefer in principle justifies any freedom-reducing government intervention, since choices can be arbitrarily labelled “sub-optimal” or “welfare-reducing”. To avoid this risk without turning down the potential of behavioral policymaking, we propose that an independent committee establishes ex-ante procedural rules and domains where behavioral policymaking can be implemented. The article suggests some possible examples of normative provisions characterizing this constitution-type document, such as the selective identification of the only sectors where behavioral policies could be effectively applied, the periodic evaluation of policy effects, and the use of sunset clauses.

Keywords: Law and Economics, Nudging, Public Policy, Revealed Preferences

JEL Classification: K30, K40

Suggested Citation

Fabbri, Marco and Faure, Michael G., Towards a 'Constitution' for Behavioral Policy-making (November 30, 2016). Maastricht Faculty of Law Working Paper No. 2877826. Available at SSRN: https://ssrn.com/abstract=2877826 or http://dx.doi.org/10.2139/ssrn.2877826

Marco Fabbri (Contact Author)

University of Amsterdam - Faculty of Law ( email )

Amsterdam, 1018 WB
Netherlands

HOME PAGE: http://https://sites.google.com/site/alfamarcofabbri/

Michael G. Faure

University of Maastricht - Faculty of Law, Metro ( email )

PO Box 616
Maastricht, 6200 MD
Netherlands
+31 - 43 - 388 30 60 (Phone)
+31 - 43 - 325 90 91 (Fax)

HOME PAGE: http://www.michaelfaure.be

Erasmus University Rotterdam (EUR) - Erasmus School of Law ( email )

3000 DR Rotterdam
Netherlands

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