The books’ goal is to answer the question: Do the weaknesses of value-free economics imply the need for a paradigm shift? The author synthesizes criticisms from different perspectives (descriptive and methodological). Special attention is paid to choices over time, because in this area value-free economics has the most problems. In that context, the enriched concept of multiple self is proposed and investigated. However, it is not enough to present the criticisms towards value-free economics. For scientists, a bad paradigm is better (...) than no paradigm. Therefore, the author considers whether value-based economics with normative approaches such as economics of happiness, capability approach, libertarian paternalism, and the concept of multiple self can be the alternative paradigm for value-free economics. This book is essential reading to everyone interested in the current state of economics as a discipline. (shrink)

Behavioural economics has taught us that human agents don't always display consistent, context-independent and stable preferences in their choice behaviour. Can we nevertheless do welfare economics...

Research in psychology and behavioral economics shows that individuals’ choices often depend on “irrelevant” contextual factors. This presents problems for normative economics, which has traditionally used preference-satisfaction as its criterion. A common response is to claim that individuals have context-independent latent preferences which are “distorted” by psychological factors, and that latent preferences should be respected. This response implicitly uses a model of human action in which each human being has an “inner rational agent.” I argue that this model is psychologically (...) ungrounded. Although references to latent preferences appear in psychologically based explanations of context-dependent choice, latent preferences serve no explanatory purpose. (shrink)

I reconsider Bleichrodt, Pinto Prades and Wakker’s 2001 paper about eliciting utility measures from stated preference surveys. That paper pioneers a method that is now widely used in behavioural economics to correct individuals’ ‘biases’ and to recover their ‘true preferences’. However, BPW propose this method as way of dealing with inconsistent responses to stated preference surveys, in contrast to more recent applications which aim to help individuals to avoid supposed mistakes in their private choices. I argue that the concepts of (...) true preference and bias are empirically ungrounded, but that BPW’s approach can be interpreted as not invoking those concepts. By ‘regularising’ preferences revealed in actual choice, this approach constructs measures of individual welfare that are broadly aligned with actual preferences and consistent with normative standards of rationality that are appropriate for public decision-making. Public decision-makers’ normative judgements are made explicit, rather than being disguised as apparently empirical claims about true preferences. (shrink)

This paper responds to six contributions to a symposium on my 2018 book, The Community of Advantage. I defend that book's claim that most normative behavioural economics implicitly uses a psycholog...

When is it legitimate for a government to ‘nudge’ its citizens, in the sense described by Thaler and Sunstein (2008)? In their original work on the topic, Thaler and Sunstein developed the _‘as judged by themselves’ (or AJBT) test_ to answer this question (Thaler and Sunstein 2008, p. 5). In a recent paper, Paul and Sunstein (2019) raised a concern about this test: it often seems to give the wrong answer in cases in which we are nudged to make a (...) decision that leads to what Paul calls a _personally transformative experience_, that is, one that results in our values changing (Paul 2014). In those cases, the nudgee will judge the nudge to be legitimate after it has taken place, but only because their values have changed as a result of the nudge. In this paper, I take up the challenge of finding an alternative test. I draw on my _aggregate utility account_ of how to choose in the face of what Ullmann-Margalit (2006) calls _big decisions_, that is, decisions that lead to these personally transformative experiences (Pettigrew 2019, Chapters 6 and 7). (shrink)

Multiple selves is a conventional assumption in behavioural welfare economics for modelling intrapersonal well-being. Yet an important question is which self has normative authority over others. In this paper, we advance an argument for what we call the ‘ontological approach’ to personal identity in behavioural welfare economics. According to this approach, ethical questions – such as which preference should be granted normative authority over another – can be informed by the ontological criterion of personal persistence, which aims at determining what (...) it takes for an individual to persist from one time to another. (shrink)

The conceptual foundations, features, and scope of the notion of rationality are increasingly being affected by developments in embodied cognitive science. This article starts from the idea of embodied rationality, and aims to develop a frame in which a debate with the classical, possibly bounded, notion of rationality-as-consistency can take place. To this end, I develop a game theoretic description of a real time interaction setup in which participants' behaviors can be used to compare the enactive approach, which underlies embodied (...) rationality, with game theoretic approaches to human interaction. The Perceptual Crossing Paradigm is a minimal interaction interface where two participants each control an avatar on a shared virtual line, and are tasked with cooperatively finding each other among distractor objects. It is well known that the best performance on this task is obtained when both participants let their movements coordinate with the objects they encounter, which they do without any prior knowledge of efficient interaction strategies in the system. A game theoretic model of this paradigm shows that this task can be described as an Assurance game, which allows for comparing game theoretical approaches and the enactive approach on two main fronts. First, accounting for the ability of participants to interactively solve the Assurance game; second, accounting for the evolution of choice landscapes resulting from evolving normative realms in the task. Similarly to the series of paradoxes which have fueled debates in economics in the past century, this analysis aims to serve as an interpretation testbed which can fuel the current debate on rationality. (shrink)

We propose a methodology for normative evaluation when preferences are context-dependent. We offer a precise definition of context-dependence and formulate a normative criterion of self-determination, according to which one situation is better than another if individuals are aware of more potential contexts of a choice problem. We provide two interpretations of our normative approach: an extension of Sugden’s opportunity criterion and an application of Sen’s positional views in his theory of justice. Our proposition is consistent with Muldoon’s and Gaus’ approaches (...) of public reason in social contract theory, which account for the diversity of perspectives in non-ideal worlds. (shrink)

We critically survey explicit discussions of the narrativity of economic agents by economists. Narrativity broadly refers to the way humans construct and use stories, notably to define their personal identity. We borrow from debates outside of economics to provide the critical dimension of our survey. Most contributions on the narrativity of economic agents do not discuss one another. To establish communication, we suggest a structure of oppositions that characterize these contributions taken as a whole. These oppositions are notably characterized by (...) three tensions: in terms of methodological attitudes, of underlying theories of personal identity postulating the existence of a unique sense of self or not and of the normative implications of narrativity. The main goal is to clarify the structure of opposite positions within a more or less explicit debate about the identity of individuals in economics. (shrink)

In this paper, we explicate an underappreciated distinction between two conceptions of valuing. According to the first conception, which we call the surface-account, valuing something is exclusively a matter of having certain behavioral, cognitive, and emotional dispositions. In contrast, the second conception, which we call the layer-account, posits that valuing is constituted by the presence of certain representational mental states underlying those dispositions. In the first part of the paper, we introduce the distinction in proper detail and show that the (...) accounts have different implications regarding the valuings of agents. In the second part, we situate the accounts within the extant philosophical literature. First, we relate them to the recent debate between so-called dispositionalists and representationalists about the nature of beliefs and point out that this debate can help anticipate some of the main dialectical fault lines to be expected between surface- and layer-theorists. Second, we examine the contemporary meta-ethical debate on conceptualizing valuing, indicate that scholars have largely ignored the distinction introduced here, and outline that this oversight has substantial theoretical costs: as we show, key arguments within the meta-ethical debate require thorough re-evaluation in light of the proposed distinction. The third part of the paper illustrates the theoretical leverage of the distinction for practical research by exploring its implications for behavioral welfare economics. (shrink)

We report the results of an experimental test of whether preaching the normative appeal of the sure-thing principle leads decision-makers to make choices that satisfy it. We use Allais-type decision problems to observe the incentive-compatible choices of 147 subjects, which either violate the sure-thing principle or adhere to it. Subjects are presented with normative arguments that support the counterfactual behaviour and then repeat their decisions. We observe violations of the sure-thing principle are robust to its normative justification. This result replicates (...) a famous small-sample observation using hypothetical tasks that was published by Paul Slovic and Amos Tversky almost half a century ago. We argue that this finding is as relevant now as it was then and that their design can be usefully applied to address contemporary issues in behavioural economics. (shrink)

As behavioural economics reveals, human decision-making deviates from neoclassical assumptions about human behaviour and people (often) fail to make the ‘right’ welfare-enhancing choice. The purpose of Sunstein and Thaler’s concept of ‘nudge’ is to improve individual welfare. To provide normative justification, they argue that the only relevant normative criterion is whether the individual is ‘better off as judged by themselves’, so that the direction in which people are to be nudged is defined by their own preferences. In light of behavioural (...) findings, however, people’s choices do not provide a sound basis for eliciting preferences and thus for assessing welfare. In this paper, I aim to challenge Sunstein and Thaler’s normative view, arguing that it is unreasonable to rely on conventional welfare economics, particularly considering the given context. Sunstein and Thaler depend on an approach of ‘preference purification’ which assumes informed, latent, and true preferences: As a result they face crucial methodological, epistemological, and practical objections, and cannot show how their approach enhances individual welfare. By building on the concepts of R. Sugden and C. Schubert, I develop an alternative normative framework for behavioural public policy, based on a contractualist perspective in which people may consent to collective choice rules in order to align future behaviour with values, to achieve particular goals or to preserve personal integrity. Individual consent and citizens’ participation and deliberation are crucial to this approach. This contractualist approach may provide a normative justification for behavioural public policy, and help to reconcile behavioural and normative economics. (shrink)

New technologies not only contribute greatly to society and the economy; they also involve fundamental societal shifts, challenging our values and ideas about ourselves and the world. With a view to aligning technological change and innovation with ethical values, the concept of responsible innovation advocates the inclusion of a variety of stakeholders, in particular from society. In shifting moral responsibility towards the producers of innovations, responsible innovation rejects the standard normative economic view that the ethical evaluation of innovations is a (...) matter of individual consumers’ market-based choices. However, in this article we argue that responsible innovation should not abandon all normative consideration of the individual outright, to which end we present an alternative normative economic approach based on preference learning. We show how this approach can provide an enhanced understanding of responsible innovation by clarifying the redistribution of moral responsibility and casting individuals in the normative role of co-innovators, rather than mere consumers. We argue that responsible innovation should enable individuals to form preferences and evaluate innovations, so as to align innovation with ethical demands. Finally, we show how our proposed approach can be put into practice in so-called laboratories in real-world contexts, using methods from the field of design. In short, drawing on normative economics, this article aims to establish a new understanding of responsible innovation that is conceptually sound and can form the basis for novel innovation practices. (shrink)

This paper explores the extent to which behavioral public policies can be both efficient and democratic by reflecting on the conditions under which individuals could rationally consent to them. Consent refers to a moral requirement that a behavioral public policy should respect what I call a person’s value autonomy and conception of the good. Behavioral public policies can take many forms. Based on a social choice framework, I argue that fully paternalistic and prudential behavioral public policies are unlikely to trigger (...) a hypothetical form of rational consent. Non-fully paternalistic behavioral public policies with partially non-prudential motivations are less problematic in this perspective. In any case, a public deliberative stage preceding the implementation of policies seems to be the best democratic way to justify them. (shrink)

A principal source of interest in behavioral economics has been its advertised contributions to policies aimed at ‘nudging’ people away from allegedly natural but self-defeating behavior toward patterns of response thought more likely to improve their welfare. This has occasioned controversies among economists and philosophers around the normative limits of paternalism, especially by technical policy advisors. One recent suggestion has been that ‘boosting,’ in which interventions aim to enhance people’s general cognitive skills and representational repertoires instead of manipulating their choice (...) environments behind their backs, avoids the main normative challenges. A limitation in most of this literature is that it has focused on relatively sweeping policy recommendations and consequently on strong polar alternatives of general paternalism and strict laissez faire. We review a real instance, drawn from a consulting project we conducted for an investment bank, of a proposed intervention that is more typical of the kind that economists are more often actually called upon to offer. In this example, the sophistication of current tools for preference attribution, combined with philosophical externalism about the semantics of preferences that makes it less plausible to attribute their literal self-conscious representation to people as propositional attitude content becomes more tightly refined, blocks applicability of the distinction between nudging and boosting. This seems to call for irreducible, context-specific ethical judgment in assessing the appropriateness of the forms of paternalism that economists must actually wrestle with in going about their everyday business. (shrink)

Behavioral welfare economics assigns different roles to preferences than either non-behavioral forms of welfare economics or theories outside of the domain of welfare economics. In particular...

Despite their popularity, dual process accounts of human reasoning and decision-making have come under intense scrutiny in recent years. Cognitive scientists and philosophers alike have come to question the theoretical foundations of the ‘standard view’ of dual process theory and have challenged the validity and relevance of evidence in support of it. Moreover, attempts to modify and refine dual process theory in light of these challenges have generated additional concerns about its applicability and refutability as a scientific theory. With these (...) concerns in mind, this paper provides a critical review of dual process theory in economics, focusing on its role as a psychological framework for decision modeling in behavioral economics and neuroeconomics. I argue that the influx of criticisms against dual process theory challenge the descriptive accuracy of dualistic decision models in economics. In fact, the case can be made that the popularity of dual process theory in economics has less to do with the empirical success of dualistic decision models, and more to do with the convenience that the dual process narrative provides economists looking to explain-away decision anomalies. This leaves behavioral economists and neuroeconomists with something of a dilemma: either they stick to their purported ambitions to give a realistic description of human decision-making and give up the narrative, or they revise and restate their scientific ambitions. (shrink)

Normative welfare economics commonly assumes that individuals’ preferences can be reliably inferred from their choices and relies on preference satisfaction as the normative standard for welfare. In recent years, several authors have criticized welfare economists’ reliance on preference satisfaction as the normative standard for welfare and have advocated grounding normative welfare economics on opportunities rather than preferences. In this paper, I argue that although preference-based approaches to normative welfare economics face significant conceptual and practical challenges, opportunity-based approaches fail to provide (...) a more reliable and informative foundation for normative welfare economics than preference-based approaches. I then identify and rebut various influential calls to ground normative welfare economics on opportunities rather than preferences to support my qualified defence of preference-based approaches. (shrink)

Recently several authors have proposed proxies of welfare that equate some (as opposed to all) choices with welfare. In this paper, I first distinguish between two prominent proxies: one based oncontext-independent choicesand the other based onreason-based choices. I then propose an original proxy based on choices that individuals state they would want themselves to repeat at the time of the welfare/policy evaluation (confirmed choices). I articulate three complementary arguments that, I claim, support confirmed choices as a more reliable proxy of (...) welfare than context-independent and reason-based choices. Finally, I discuss the implications of these arguments fornudgesandboosts. (shrink)

Determining the precise nature of the connection between preference, choice, and welfare has arguably been the central project in the field of welfare economics, which aims to offer a proper guide for economists in the making of policy decisions that affect people’s welfare. The two leading approaches here historically – the revealed preference and latent preference approaches – seem equally incapable of so guiding economists. I argue that the deadlock here is due to welfare economists’ failure to recognize a crucial (...) distinction between two senses of “preference.” I analyze and defend these senses of “preference,” and argue that each shares a close connection with just one of choice and welfare. This analysis reveals how economists should conceive of both the connections between “preference,” choice, and welfare, and the proper roles of these concepts in welfare economics. I conclude by showing this analysis to best explain the plausibility of two leading alternative approaches from Hausman and Sugden. (shrink)

What should be the ‘informational base’ of welfare economics if one takes the insights from behavioral economics seriously? Sugden proposes individuals’ sets of opportunities. This paper discusses...

Given the endowment effect, the role of attention in decision-making, and the framing effect, most behavioral economists agree that it would be a mistake to accept the satisfaction of revealed preferences as the normative criterion of choice. Some have suggested that what makes agents better off is not the satisfaction of revealed preferences, but ‘true’ preferences, which may not always be observed through choice. While such preferences may appear to be an improvement over revealed preferences, some philosophers of economics have (...) argued that they face insurmountable epistemological, normative, and methodological challenges. This article introduces a new kind of true preference – values-based preferences – that blunts these challenges. Agents express values-based preferences when they choose in a manner that is compatible with a consumption plan grounded in a value commitment that is normative, affective, and stable for the agent who has one. Agents who choose according to their plans are resolute choosers. My claim is that while values-based preferences do not apply to every choice situation, this kind of preference provides a rigorous way for thinking about classic choice situations that have long interested behavioral economists and philosophers of economics, such as ‘Joe-in-the-cafeteria.’. (shrink)

An effective method to increase the number of potential cadaveric organ donors is to make people donors by default with the option to opt out. This non-coercive public policy tool to influence people’s choices is often justified on the basis of the as-judged-by-themselves principle: people are nudged into choosing what they themselves truly want. We review three often hypothesized reasons for why defaults work and argue that the as-judged-by-themselves principle may hold only in two of these cases. We specify further (...) conditions for when the principle can hold in these cases and show that whether those conditions are met is often unclear. We recommend ways to expand nationwide surveys to identify the actual reasons for why defaults work and discuss mandated choice policy as a viable solution to many arising conundrums. (shrink)

Heterogeneous beliefs and decision processes generate positive externalities for social and economic systems, analogous to biodiversity in biological systems. Although some aspects of biodiversity (e.g., pests, parasites and bacteria) can lead to ecological and economic problems, biodiversity provides flows of beneficial ecological services and is widely regarded as a valuable natural resource and informational asset, whose value increases as we learn more and science progresses (Wilson in Bioscience 35(11):700–706, 1985). Heterogeneous beliefs and decision processes (and heterogeneous behaviors they generate) similarly (...) provide flows of beneficial economic services. Behavioral diversity should therefore be seen as a natural resource and informational asset likely to improve human wellbeing in surprising ways in the future. Paternalistic policies motivated by the goal of “correcting” allegedly suboptimal beliefs and behavior that diverge from expert recommendations jeopardize behavioral diversity at a substantial cost to social welfare. The risk of encroaching on this beneficial behavioral heterogeneity with policies that aim to induce behavioral and belief monocultures should be included explicitly as costs when evaluating nudges and other paternalistic policies. (shrink)

Scholars disagree about the plausibility of preference purification. Some see it as a familiar phenomenon. Others denounce it as conceptually incoherent, postulating that it relies on the psychologically implausible assumption of an inner rational agent. I argue that different notions of rationality can be leveraged to advance the debate: procedural rationality and structural rationality. I explicate how structural rationality, in contrast to procedural rationality, allows us to offer an account of the guiding idea behind preference purification that avoids inner rational (...) agents. Afterward, I address two pressing challenges against preference purification that emerge under the structural rationality account. (shrink)

This is a comprehensive anthology of works concerning the nature of economics as a science, including classic texts and essays exploring specific branches and schools of economics. Apart from the classics, most of the selections in the third edition are new, as are the introduction and bibliography. No other anthology spans the whole field and offers a comprehensive introduction to questions about economic methodology.

Several authors have recently advocated a so-called new case for paternalism, according to which empirical findings from distinct decision sciences provide compelling reasons in favour of paternalistic interference. In their view, the available behavioural and neuro-psychological findings enable paternalists to address traditional anti-paternalistic objections and reliably enhance the well-being of their target agents. In this paper, I combine insights from decision-making research, moral philosophy and evidence-based policy evaluation to assess the merits of this case. In particular, I articulate and defend (...) three complementary arguments that, I claim, challenge even the best available calls for such case. In doing so, I identify the main justificatory challenges faced by the new paternalists and explicate the implications of these challenges for the ongoing philosophical debate about the justifiability of paternalistic interference. (shrink)

One of the conceptual limitations of the orthodox game theory is its inability to offer definitive theoretical predictions concerning the outcomes of noncooperative games with multiple rationalizable outcomes. This prompted the emergence of goal-directed theories of reasoning – the team reasoning theory and the theory of hypothetical bargaining. Both theories suggest that people resolve non-cooperative games by using a reasoning algorithm which allows them to identify mutually advantageous solutions of non-cooperative games. The primary aim of this thesis is to enrich (...) the current debate on goaldirected reasoning theories by studying the extent to which the principles of the bargaining theory can be used to formally characterize the concept of mutual advantage in a way which is compatible with some of the conceptually compelling principles of orthodox game theory, such as individual rationality, incentive compatibility, and non-comparability of decision-makers’ personal payoffs. I discuss two formal characterizations of the concept of mutual advantage derived from the aforementioned goal-directed reasoning theories: A measure of mutual advantage developed in collaboration with Jurgis Karpus, which is broadly in line with the notion of mutual advantage suggested by Sugden, and the benefit-equilibrating bargaining solution function, which is broadly in line with the principles underlying Conley and Wilkie’s solution for Pareto optimal point selection problems with finite choice sets. I discuss the formal properties of each solution, as well as its theoretical predictions in a number of games. I also explore each solution concept’s compatibility with orthodox game theory. I also discuss the limitations of the aforementioned goal-directed reasoning theories. I argue that each theory offers a compelling explanation of how a certain type of decision-maker identifies the mutually advantageous solutions of non-cooperative games, but neither of them offers a definitive answer to the question of how people coordinate their actions in non-cooperative social interactions. (shrink)