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ABSTRACT
What should be the ‘informational base’ of welfare economics if one takes the insights from behavioral economics seriously? Sugden proposes individuals’ sets of opportunities. This paper discusses his opportunity criterion and argues that it largely neglects intricate problems of context-dependence and personal agency. We contrast Sugden’s approach with Buchanan’s understanding of choice, which highlights the importance of agentic capabilities to navigate choice sets, particularly in situations where individuals face subtle interdependences between preference formation processes and their situational or social environment. This paper advocates that the informational base of welfare economics may need to go beyond opportunities if it is to command general assent among individuals who have an interest in being sovereign ‘authors of their own lives’. We argue that economists who take individuals interests seriously should not only consider the size of opportunity sets but also individuals’ sense of personal agency when comparing alternative social states.
Acknowledgments
We would like to thank Constanze Binder, Elias van Emmerick, Shlomi Sher, and Julie Tannenbaum for valuable comments on an earlier version of this paper.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 For a list of proponents of behavioral welfare economics, see Infante et al. (Citation2016).
2 In an interview, Sugden (Citation2020, p. 68) states: ‘I’ve never felt this desire to change myself. Buchanan’s picture is of people wanting to change themselves and you are going to go through programs of transformation. … this whole idea of ‘making yourself’, I don’t know, is just not the way I feel. My hunch is that most people don’t feel like that.’
3 This more comprehensive understanding of liberty has a long tradition in psychology: choosing without a sense of agency (or without a sense of effort that accompanies the self-reflective process of making up one’s mind) tends to become mechanical. However, there is no freedom in the mechanical. The sense of agency is part of the truly free act (James, Citation1890, pp. 449–454).
4 Equating agency with a subjective perception of individuals of their own agency sidesteps intricacies of ‘happy slave’ examples, i.e., situations where individuals perceive to ‘own’ their choices, but where their preference formation process has been marred by submissive adaptation, social oppression, and manipulation. In such cases, individuals might lack agency in an objective or substantive sense, but actually still perceive a sense of agency. Since we consider welfare to be a subjective notion (as Sugden and most economists do), we deem this conceptual narrowing acceptable.
5 ‘Why should I think of myself as lacking in autonomy because my choices are governed by mechanisms that operate through ordinary human psychology? Indeed, one might ask: What else could govern them?’ (Sugden, Citation2018, p. 98).
6 This example ignores the possibility that an individual might choose to avoid B, the store with more options, because at the moment of a choice between A and B, she doesn’t want to eat pizza. In this case, is the individual signaling that she prefers fewer opportunities? If so, then what is the compensating value? Immediately, it is obvious that an increase in opportunities is not unambiguously good (and that a decrease is not unambiguously bad).
7 We agree with Sugden that choice overload might not be a severe problem in many real-word scenarios since ‘there are mechanisms at work in retail markets which favor the emergence and persistence of conventions that reduce the complexity of consumers’ choice problems.’ (2018, 146). Instead, the idea that large choice sets are overwhelming might in fact stem from ‘culturally conservative or snobbish attitudes of condescension towards some of the preferences to which markets cater’ (id., 147).
8 Menu dependence is an umbrella term for situations in which a person’s preferences over items on a menu change with the ordering of the items on the menu (e.g., first items on a list are chosen more often) or the expansion of the list (e.g., when newly introduced, asymmetrically dominated items make older items on the list look more attractive). The latter phenomenon is called decoy effect, see Angner (Citation2016, 46–52).
9 The distinction between the opportunity component and the agency component of freedom goes back to Sen (Citation1985). A recent discussion can be found in Alkire (Citation2009).
10 Buchanan’s conceptualization of agency is in line with modern psychological (e.g., Bandura, Citation2006) and sociological theories (e.g., Emirbayer & Mische, Citation1998) that highlight imagination (projectivity of future trajectories of action) and practical evaluation (raking alternative possible actions) as core agentic capabilities.
11 For instance, an interesting question concerns methods of agency measurement, see Alkire (Citation2009).
12 In general, boosts are interventions that focus on creating and promoting cognitive and motivational competences, either by directly targeting competences (e.g., decision strategies, procedural routines) or indirectly by changing the choice environment (e.g., information representation); see, Hertwig and Grüne-Yanoff (Citation2017).
13 Sugden allows for an active role of the welfare economist. He says that he himself wants to ‘persuade’ (2018, 256) and ‘convince’ (id., 281) the reader that a morality of mutual benefit is an appealing view of how we should interpret market interactions.
14 For a philosophical defense of agency, see Claassen (Citation2018) and Korsgaard (Citation2009).
15 We assume the following structure of nested choice sets: O3 O1
O4
O2. In this case, a simple application of the opportunity criterion – which considers only the size of the choice set and neglects the issue of agency – would lead to the following ranking of the four outcomes: O3
O1
O4
O2. In our example, the relatively larger sizes of the choice set in O3 (compared to O1) and O4 (compared to O2) contributes to a lower sense of agency on behalf of the individual, e.g., due to the higher likelihood of menu dependent choices (see note 9 below). If this is the case, then it is conceivable that a person concerned about her sense of agency will rank O2 above O3 which would violate the opportunity criterion.
Additional information
Notes on contributors
Malte F. Dold
Malte F. Dold is Assistant Professor in the Economics Department at Pomona College in California. His research lies at the intersection of behavioral economics, philosophy of economics, and history of economic thought.
Mario J. Rizzo
Mario J. Rizzo is Professor of Economics at New York University. He is the coauthor of Escaping Paternalism: Rationality, Behavioral Economics, and Public Policy (Cambridge 2020).