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Irrationality and Public Policy

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Book cover Economic Perspectives on Government

Part of the book series: Foundations of Government and Public Administration ((FGPA))

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Abstract

This chapter explains the critique of mainstream economics from behavioural economics. Research by economists and psychologists shows that people are irrational in ways which violate the basic assumptions of economic theory. Humans use heuristics which lead to biases, and decisions can be influenced by framing effects. Such irrationality widens the scope for government intervention, particularly through libertarian paternalist policies which nudge people in the right direction without explicit coercion.

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Notes

  1. 1.

    ‘Linda is more likely to be a bank teller than she is to be a feminist bank teller, because every feminist bank teller is a bank teller, but some women bank tellers are not feminists, and Linda could be one of them’ (Tversky and Kahneman 1983: 299).

  2. 2.

    We emphasize that our point here is not to equate moral warnings against homosexuality with health warnings against smoking or to accuse public health advocates of bigotry. Our point is simply that policies can be non-coercive but still very harmful. Another difference is that there is strong evidence that smoking has deleterious health effects, whereas no such evidence exists that homosexuality is harmful.

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Authors and Affiliations

  1. School of Politics and International Relations, Australian National University, Canberra, ACT, Australia

    Keith Dowding

  2. School of Commerce, University of Southern Queensland, Springfield, QLD, Australia

    Brad R. Taylor

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  1. Keith Dowding
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Correspondence to Keith Dowding .

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Dowding, K., Taylor, B.R. (2020). Irrationality and Public Policy. In: Economic Perspectives on Government. Foundations of Government and Public Administration. Palgrave Pivot, Cham. https://doi.org/10.1007/978-3-030-19707-0_3

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