Behavioral Welfare Economics and the Quantitative Intentional Stance

Glenn Harrison and Don Ross

A chapter in Models of Risk Preferences: Descriptive and Normative Challenges, 2023, vol. 22, pp 7-67 from Emerald Group Publishing Limited

Abstract: Behavioral economics poses a challenge for the welfare evaluation of choices, particularly those that involve risk. It demands that we recognize that the descriptive account of behavior toward those choices might not be the ones we were all taught, and still teach, and that subjective risk perceptions might not accord with expert assessments of probabilities. In addition to these challenges, we are faced with the need to jettison naive notions of revealed preferences, according to which every choice by a subject expresses her objective function, as behavioral evidence forces us to confront pervasive inconsistencies and noise in a typical individual’s choice data. A principled account of errant choice must be built into models used for identification and estimation. These challenges demand close attention to the methodological claims often used to justify policy interventions. They also require, we argue, closer attention by economists to relevant contributions from cognitive science. We propose that a quantitative application of the “intentional stance” of Dennett provides a coherent, attractive and general approach to behavioral welfare economics.

Keywords: Behavioral economics; welfare economics; behavior toward risk; revealed preference; normative economics; cognitive science (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rexezz:s0193-230620230000022001

DOI: 10.1108/S0193-230620230000022001

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