• Economist Douglas Bernheim (2016) lists three premises when discussing individual welfare: (1) a person is the best judge of her wellbeing; (2) judgments are governed by our coherent, stable preferences; and, (3) preferences are what guides our choices.
• None of these premises is self-evident; indeed, they might all be incorrect.
• If people lack stable, consistent preferences, or if their choices are skewed by bias, how can we judge how well off they are, how good a job they are doing at serving their own interests? Further, their preferences might be shaped by rules and laws, so crafting rules to promote current interests might be a mistaken (or arbitrary) approach.
• Behavioral science makes us suspicious of consumer sovereignty, or the claim that people are the preferred judges of their own situation, best positioned to make desirable self-regarding choices.
• The behavioral evidence rightly undermines our unquestioned respect for consumer sovereignty, but we should be loath to turn it into general disrespect. It might make sense to start with deference to consumer sovereignty, but be willing to look to alternatives if evidence suggests welfare might otherwise be compromised. [Respecting consumer sovereignty as a default...!]
• A standard description of rationality is that it consists of taking optimal (or, less stringently, reasonable) means of achieving your goals.
• Nudges or other interventions that are designed to make choices more navigable, to make it easier for people to achieve their goals, are paternalistic with respect to means.
• Economists generally are not in the business of questioning people’s goals, the ends they have in mind – but Professor Sunstein suggests that there can be strong evidence, in some settings, that (self-regarding) ends should be questioned: “The ends that people choose might make their lives go less well [p. 196].”
• So, Sunstein starts from a position of alignment with Bernheim, where individual self-regarding choices are respected – but only if those choices are informed and free from behavioral biases. Further, Sunstein will not make a means/ends distinction: the ends could be problematic, just like the means can be. Nonetheless, “means” issues are generally what Behavioral Economics takes on. Tread carefully with “ends” stuff.
• Bernheim thinks outsiders essentially lack standing to coerce the “direct” choices of others; the outsiders’ preferences are mere opinions and only one opinion, that of the individual involved, counts. Sunstein disagrees. [Benheim refers to choices that matter in themselves as "direct," whereas choices that only matter instrumentally in serving some larger purpose are "indirect."]
• People might be bad at forecasting the welfare they will receive from a choice, and prospective and experienced welfare needn’t match. (We might add retrospective welfare into the confusing mix, too.)
• The three main contenders for what identifies “welfare” are: (1) preferences; (2) Subjective Well-Being; and (3) (the obtainment of) specified "objective" goods. All of these approaches to welfare are inadequate.
• There are many circumstances in which people’s choices are wrong, with serious welfare consequences. And what is a direct choice? Perhaps “direct” issues only come in such high levels of abstraction – enjoy a good life – that choice architects in practice are unconstrained by respect for such issues.
• Given the increased scope for intervention provided by behavioral considerations, how can they be held within reasonable bounds? Guideposts we can use for increasing our respect for individual choices are that the choices be informed, active, free of biases, and the product of a broad perspective.
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