On the Econ within

Abstract

This essay examines the critique of behavioral economics that Infante, Lecouteaux and Sugden (ILS) offer in:"Preference Purification and the Inner Rational Agent.” It identifies and questions three main criticisms that ILS make: (i) a methodological criticism, alleging that there is no psychological basis for the attribution of purified preferences, (ii) an epistemological criticism, alleging that there is little evidence for claims about purified preferences, and (iii) a normative criticism, arguing that policies should aim to facilitate people’s choices rather than to satisfy purified preferences. The essay also distinguishes the view of welfare economics defended in Preference, Value, Choice, and Welfare from the claims of behavioral economists ILS criticize.

Keywords:

• behavioral economics
• preferences
• paternalism
• welfare economics

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

I am grateful to Gerardo Infante, Guilhem Lecouteux, and Robert Sugden for comments on an earlier draft of this essay.

1. See Sugden (2004). He argues for the importance of securing people’s opportunities to choose; that position is consistent with the view that people will choose badly and that a concern for people’s welfare will compete with a concern to promote opportunity. But if one identifies welfare with preference satisfaction and takes behavioral economists to have shown that people do not have coherent preferences, then one may be skeptical about the possibility of promoting welfare.

2. ILS argue that there is no point in invoking purified preferences unless one believes that they determine what is good for the individual. They write (pp. 13–14), ‘Consider the implications of the contrary position, that behavioral welfare economics uses a criterion of (supposedly) objective well-being. What would be the point of taking the circuitous route of reformulating that criterion as the satisfaction of latent preferences, defining a person’s latent preferences . . . and then postulating that such choices would maximise latent well-being?’ If one believes, quite plausibly, that with respect to certain choices people are largely self-interested and that it is sometimes possible to ascertain what their preferences would be if they did not have false beliefs and suffer from rational foibles, then one can use those purified preferences to help decide what is objectively good for them.

3. Focusing so much attention on the Allais problem, as ILS do, is misleading because it tends to obscure this consensus. Although Savage’s original preferences in the Allais Problem are inconsistent with expected utility theory, there are other theories of rational choice that defend them.