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Choice theoretic foundation for libertarian paternalism: Reconciling the behavioral and libertarian approaches to welfare

Guy Barokas

Journal of Mathematical Economics, 2019, vol. 81, issue C, 62-73

Abstract: In this paper, we generalize the standard revealed preference theory in line with the idea of libertarian paternalism; roughly, x is said to be welfare superior to y (denoted x≿ℓPy) if x is chosen when y is available, and x is more normative than y according to a possibly endogenous normative criterion (i.e. a criterion that depends on a positive model). We find testable conditions on choice behavior that are equivalent to ≿ℓP being an order. The resulting framework is applicable to many positive models of bounded rationality, with intuitive welfare implications, while maintaining a natural libertarian principle. In addition, our framework can reconcile the often-conflicting libertarian and behavioral approaches to welfare.

Keywords: Revealed preference; Behavioral welfare economics; Libertarian paternalism (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:mateco:v:81:y:2019:i:c:p:62-73