Wednesday, July 22, 2015


Timothy Taylor (aka The Conversable Economist) has sport with the behavioral economists;
The writing on behavioral economics often follows this pattern: first explain why people aren't rational, and then suggest a government policy--sometimes called a "nudge"--that could help people to overcome their irrationality by providing certain kinds of information structured in a certain way, or by specifying default options that would work better for most people. But what happens if the insights of behavioral economics are also applied to government? After all, if we are going to take into account that people often display a lack of self-control, have difficulties in understanding complex situations, and preferences that appear quirky in certain situations, then it makes sense to apply these same insights to elected officials and regulators.
An argument developed in detail many years earlier by Thomas Sowell in Knowledge and Decisions. Back to Timothy Taylor;
Insights from behavioral economics applied to consumers, workers, savers, investors, and firms often suggest some basis for government actions to "nudge" behavior in other directions. But it seems plausible to me that behavioral economics as applied to government will suggest that a number of existing government actions are misdirected or misconceived. And when that happens, it's not clear who will "nudge" government in appropriate directions. Just as the "nudge" policies applied to consumers may sometimes specify what default options should usually be taken, or perhaps limig the number of options available, perhaps behavioral economics as applied to elected officials and regulators suggests the potential importance of specifying their default actions and limiting their choices.
Which is why (and Taylor clearly realizes this) we have a Constitution that instituted checks and balances upon the federal government. Because power corrupts. In the USA, as in Venezuela.

Upon further reviewSlam, Bang (from Richard Epstein)

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