Chapter 8 - Paternalism in economics

Summary

Introduction

Economists are notoriously averse to paternalism. Yet the reigning methods of policy analysis in normative economics frequently counsel profoundly paternalistic policies. Or so we shall argue.

We take our cue from the current debate over the use of happiness and other psychological measures of well-being in economics. The debate concerns those who take happiness to be a relevant policy consideration, employing the methods of psychology to study the impact of economic policies on well-being, and those who don’t. We will call the former approach happiness-driven economics (HDE) and the most important variety of the latter minimalism. Minimalists argue that economics should minimize its normative commitments by adopting a preference-satisfaction theory of well-being and a decision procedure based solely on optimizing preference satisfaction; and, crucially, minimizing its use of psychological notions, relying instead on an austere methodology of revealed preference – “choice,” in a loose manner of speaking. Happiness-driven economics need not take happiness to be the sole, or even a central, focus of normative economics; it may see it only as one significant concern among others. But it does trade freely in psychological notions like happiness, asserting that economic policy analysis must go beyond a narrow focus on choice behavior. For convenience, our discussion centers on “happiness,” using that term loosely to refer to mental states like subjective well-being, life satisfaction, or emotional well-being, which have dominated recent discussion of well-being policy. However, the argument more broadly concerns the use of well-being indicators for policy, and the points made about happiness will generally apply to well-being regardless of which of the major theories of well-being is adopted.