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The Behavioral Welfare Paradox: Practical, Ethical and Welfare Implications of Nudging

Abstract

With decades of behavioral economic research now achieving prominence, the last decade has seen the advent of behavioral policymaking. These efforts have been widely seen as successful in that they achieve policy goals without inducing backlash on the part of policy targets. Behavioral policies create a unique challenge to welfare analysis that has not been sufficiently addressed in the literature. The existence of behavioral effects creates a paradox, at once justifying the use of paternalistic policies and undermining the empirical foundations of welfare analysis. In this paper I explore the behavioral welfare paradox and its implications for economic policy prescription.

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Copyright
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited.
Corresponding author
Correspondence: David R. Just ■ 210C Warren HallCornell UniversityIthaca, NY 14853 ■ Phone 607.255.2086 ■ Email: djust@cornell.edu.
Footnotes
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This article was originally prepared for the 2016 “Outstanding Public Service through Economics” award lecture held at the annual meeting of the Northeastern Agricultural and Resource Economics Association in Bar Harbor, Maine.

The views expressed are the author's and do not necessarily represent the policies or views of any sponsoring agencies.

Footnotes
References
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Agricultural and Resource Economics Review
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