Protecting Consumers from Themselves: A Guide for Policy-Makers

Abstract

The latest findings in the field of behavioural economics suggest that consumers often make seemingly irrational choices that decrease their welfare. A crucial question for policy-makers is whether paternalistic laws designed to protect consumers from making these ‘poor’ choices are ever justifiable. This article provides a decision-making framework for policy-makers to use when attempting to answer this question in respect of any given paternalistic intervention. It recommends a multi-factorial approach to determining legitimacy followed by a second step of assessing likely effectiveness and considering unintended consequences.

Keywords: paternalism, consumers