Intrapersonal Utility Comparisons as Interpersonal Utility Comparisons: Welfare, Ambiguity, and Robustness in Behavioral Policy Problems

Canishk Naik and Daniel Reck

No 32813, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Inconsistent choice undermines the revealed preference foundations of traditional welfare economics, leading to controversy about policymaking in the presence of behavioral frictions. We model an optimal policy problem wherein a benevolent planner is uncertain which behavioral frame reveals normative preferences. We axiomatize welfarist criteria that are similar to social welfare functions, with intrapersonal frames replacing interpersonal types. Under paternalistic ambiguity aversion or paternalistic risk aversion, the planner values policies that are robust to normative uncertainty. We apply these welfarist criteria and robustness concepts in examples, including default options, manipulation of reference points, present focus, corrective taxation for internalities, and nudging.

JEL-codes: D60 H0 I3 (search for similar items in EconPapers)
Date: 2024-08
New Economics Papers: this item is included in nep-mic and nep-upt
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