Abstract
The normative turn of behavioral economics has led to a reconsideration of paternalism in normative economics. This article argues however that the preference-satisfaction account of welfare that still dominates welfare economics makes impossible to account for all the dimensions of the debate over paternalism. The laundered preferences approach and the alternative selves approach are two available frameworks to reconcile the consumer sovereignty principle that underlies the preference-satisfaction account with the fact that preferences are endogenous and context-dependent. I show however that neither of them is able to account for autonomy-related issues which are central in current debates over “soft” or “libertarian” paternalism. I suggest that a justification of paternalism compatible with liberal principles depends on the ability for reasonable persons to voluntarily consent to a collective choice rule with paternalistic tendencies. This argument relies on a distinction between preferences (which can be attached to other entities than persons) and values which is unknown to welfare economics.
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Notes
Actually, there is a fourth possibility which I have not mentioned since it has little analytical interest: one can argue that welfare is nothing but preference satisfaction by definition. This seems to be Gul and Pesendorfer’s (2008) view hiding behind their claim that welfare economics is actually about positive rather than normative economics. Then, welfare economics consists in a set of statements about the properties of some institutional setting that depend only on logical relations. This seems dubious because such a view depends on a strong dichotomy between (judgment of) facts and (judgments of) values but also because historically the theorems of welfare economics have been used as arguments for the superiority of market economies over other systems of resources allocation. Finally, let me note that if it was true, this view would completely disqualify cost-benefit analysis, since the latter makes normative judgments on the basis of people’s willingness to pay, and thus indirectly on their preferences over alternatives.
In consumer theory, choice consistency is most of the time defined on the basis of the “weak axiom of revealed preference” (Samuelson 1938) which states that if a bundle of goods x is chosen over a bundle y for some budget limit and price vector, then y will never be chosen over x when x is affordable. In social choice theory, the weaker “basic contraction axiom” is virtually always required. According to it, if x is chosen for a set S of available alternatives, then it must also be the case for any smaller set S’ where x is available.
In the latter case, changing preferences can be accommodated by postulating that preferences change on the basis of past choices according to some “metapreferences”. This is the approach famously endorsed by Stigler and Becker (1977). However, this approach solves the problem of endogenous preferences in normative economics only provided that agents are able to foreseen the consequences of their choices on the content of their future preferences. This a strong assumption to say the least. Clearly, behavioral economics makes it even less plausible.
We should distinguish the case of preference reversal due to hyperbolic discounting from behavioral inconsistencies due to strategic inconsistency and learning effects with imperfect information, even though they may take an intertemporal form. The latter two do not involve an authentic preference reversal since inconsistent behavior is generated by a strategic or an informational element that was not foreseen by the agent at the moment she makes her first decision. No preference change is involved in this case, unless we stick to a purely revealed-preference framework where preferences are defined as choices. While strategic inconsistency may be qualified as “irrational”, it is not so clear in the learning case. However, we may speak of irrationality if the individual fails to make proper use of a new information, thus leading to “imperfectly informed preferences” (Cowen 1993). But such imperfectly informed preferences are not due to hyperbolic discounting.
In a later writing, Harsanyi (1996) continued to argue that welfare should be defined as the satisfaction of informed preferences. However, he was also claiming that humans’ basic desires are almost all the same, which makes his view very similar to an objective-list account. Indeed, he dared to propose such a list (Harsanyi 1996, 139).
See Sunstein’s (2012) distinction between “means paternalists” and “ends paternalists”. Sunstein claims that “[b]ehavioral economists generally focus on paternalism about means, not ends” (2012, 7). But he also recognizes that the “distinction between means and ends raises a number of difficult puzzles” (2012, 12). Actually, Sunstein (2012, 26) even reaches the conclusion that in some cases (e.g. problems of time-consistency) the distinction is not far from being meaningless.
See Broome (1991) for a technical and philosophical discussion of Harsanyi’s theorem which emphasizes the role of these separability conditions.
It is also generally assumed that C(X) ≠ ∅ for all X ⊆ X.
Note that Bernheim and Rangel do not make this assumption. This will be of importance below when I will compare Berhneim and Rangel’s approach with an alternative selves framework.
See Bernheim and Rangel (2008, p. 164–166). They show however that it is possible to construct an acyclic strict preference relation P* and note that most of time acyclicity is a sufficient condition to conduct welfare analysis (since generally acyclicity guarantees the existence of maximal elements in the set X).
The criterion of strong multi-self Pareto optimum is obtained in a similar fashion than the standard case. With choice-inconsistencies across ancillary conditions, no such optimum may exist.
Bernheim and Rangel (2008, 181-3) discusses this point using the Edgeworth box. When choices are inconsistent across ancillary conditions, the contract curve is thicker than in the standard case. The number of “generalized” weak Pareto optima is thus larger.
Expression (1) satisfies the two standard axioms of continuity and weak Pareto but it does not satisfy anonymity, which is an important axiom in the multi-profile approach in social choice theory (Blackorby et al. 2005). This is due to the fact that the coefficients α ik have not to be equal. Note moreover that (1) does not presuppose that each person i’s utility function is additively separable, i.e. that u i (x) = ∑ k u ik (x).
In principle, some weights may even be negative, even though this seems ethically quite unnatural.
That does not mean that all choices are actually observed, at least in a revealed preference framework. It is the role of the positive analysis to make inferences about hypothetical choices on the basis of actual and observed choices. The key point however is that these inferences are not done on the basis of some metaphysical or ethical considerations about “rational” preferences, but through the identification of choice patterns given ancillary conditions.
Interestingly, in the (short) section entitled “Autonomy and Paternalism”, Parfit (1984, 321) does not note the tension between his reductionist account and the very notion of autonomy. He only mentions the “well-known objections” against paternalism, that “[i]t is better if each of us learns from his own mistakes” and “it is harder for others to know that these are mistakes”.
Actually, this is a bit imprecise since the utility numbers that serve as inputs in (1) reflect the alternative selves’ preferences and not the individuals’ preferences.
Using Sen’s (1970b, 59–61) distinction, preferences thus correspond most of the time to “non-basic judgments” while values are rather “basic judgments”, i.e. they are unconditional. For sure, this is not always the case in practice.
Dworkin is not fully explicit regarding how consent is to be established in a population. I leave this issue pending as it would necessitate long developments. Nevertheless, I see two ways to operationalize the notion of consent. The first is the Rawlsian one: consent refers to an agreement for paternalistic institutions under the veil of ignorance. This is clearly the sense intended by Rawls in Theory of Justice. The second approach is rather grounded on Sen’s notion of public deliberation and reasoning. The basic idea is that while persons’ preferences are necessarily context-dependent, deliberations in public settings force us to argument for our preferences and values. On this view, consent should be obtained in contexts where persons have to justify and to reflect on their own preferences and values until some consensus is reached.
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Hédoin, C. Normative economics and paternalism: the problem with the preference-satisfaction account of welfare. Const Polit Econ 28, 286–310 (2017). https://doi.org/10.1007/s10602-016-9227-5
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DOI: https://doi.org/10.1007/s10602-016-9227-5