Hostname: page-component-8448b6f56d-mp689 Total loading time: 0 Render date: 2024-04-16T01:49:20.369Z Has data issue: false hasContentIssue false
  • English
  • Français

Hayekian behavioral economics

Published online by Cambridge University Press:  19 March 2021

Cass R. Sunstein
Cass R. Sunstein*
Affiliation:
Harvard Law School, Cambridge, MA, USA
*
*Correspondence to: E-mail: csunstei@law.harvard.edu
Get access Rights & Permissions [Opens in a new window]

Abstract

One of Friedrich Hayek's most important arguments pointed to the epistemic advantages of the price system, regarded as an institution. As Hayek showed, the price system incorporates the information held by numerous, dispersed people. Like John Stuart Mill, Hayek also offered an epistemic argument on behalf of freedom of choice. A contemporary challenge to that epistemic argument comes from behavioral economics, which has uncovered an assortment of reasons why choosers err, and also pointed to possible distortions in the price system. But, even if those findings are accepted, what should public institutions do? How should they proceed? A neo-Hayekian approach would seek to reduce the knowledge problem by asking what individual choosers actually do under epistemically favorable conditions. In practice, that question can be disciplined by asking five subsidiary questions: (1) What do consistent choosers, unaffected by self-evidently irrelevant factors, end up choosing? (2) What do informed choosers choose? (3) What do active choosers choose? (4) When people are free of behavioral biases, including (say) present bias or unrealistic optimism, what do they choose? (5) What do people choose when their viewscreen is broad, and they do not suffer from limited attention? These questions are illustrated with reference to the intense controversy over fuel economy standards.

Keywords

internalitiespresent biasloss aversionHayek
Type
Perspective
Information
Behavioural Public Policy , Volume 7 , Issue 1 , January 2023 , pp. 170 - 188
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ackerman, B. and Stewart, R. B. (1987), ‘Reforming environmental law’, Columbia Journal of Environmental Law, 13(1): 171–199.Google Scholar
Adusumalli, S., Westover, J. E., Jacoby, D. S., Small, D. S., VanZandbergen, C., Chen, J., Cavella, A. M., Pepe, R., Rareshide, C. A. L., Snider, C. K., Volpp, K. G., Asch, D. A. and Patel, M. S. (2020), ‘Effect of passive choice and active choice interventions in the electronic health record to cardiologists on statin prescribing: A cluster randomized clinical trial’, JAMA Cardiology, 6(1): 40–48.Google Scholar
Akerlof, G. A. and Dickens, W. (1982), ‘The economic consequences of cognitive dissonance’, The American Economic Review, 72(2): 307–319.Google Scholar
Akerlof, G. A. and Shiller, R. J. (2015), Phishing for phools: The economics of manipulation and deception. Princeton: Princeton University Press.Google Scholar
Allcott, H. (2016), ‘Paternalism and energy efficiency: An overview’, Annual Review of Economics, 8(1): 145–176.CrossRefGoogle Scholar
Allcott, H. and Greenstone, M. (2012), ‘Is there an energy efficiency gap?’ Journal of Economic Perspectives, 26(1): 3–28.Google Scholar
Allcott, H. and Knittel, C. (2019), ‘Are consumers poorly informed about fuel economy? Evidence from two experiments’, American Economic Journal: Economic Policy, 11(1): 1–37.Google Scholar
Allcott, H. and Sunstein, C. R. (2015), ‘Regulating internalities’, Journal of Policy Analysis and Management, 34(3): 698–705.Google Scholar
Allcott, H. and Taubinsky, D. (2015), ‘Evaluating behaviorally motivated policy: Experimental evidence from the lightbulb market’, American Economic Review, 105(8): 2501–2538.Google Scholar
Allcott, H., Lockwood, B. B. and Taubinsky, D. (2019), ‘Should we tax sugar-sweetened beverages? An overview of theory and evidence’, Journal of Economic Perspectives, 33(3): 202–227.CrossRefGoogle Scholar
Bar-Gill, O. (2012), Seduction by contract: Law, economics, and psychology in consumer markets (First Edition). Oxford: Oxford University Press.CrossRefGoogle Scholar
Bento, A. M., Jacobsen, M. R., Knittel, C. R. and van Benthem, A. A. (2019), Estimating the costs and benefits of fuel-economy standards. National Bureau of Economic Research, No. c14288. Retrieved from: https://www.nber.org/books-and-chapters/environmental-and-energy-policy-and-economy-volume-1/estimating-costs-and-benefits-fuel-economy-standardsCrossRefGoogle Scholar
Bergh, A. (2020), ‘Hayekian welfare states: Explaining the coexistence of economic freedom and big government’, Journal of Institutional Economics, 16(1): 1–12.CrossRefGoogle Scholar
Bernheim, B. D. (2016), ‘The good, the bad, and the ugly: A unified approach to behavioral welfare economics’, Journal of Benefit-Cost Analysis, 7(1): 12–68.CrossRefGoogle Scholar
Bernheim, B. D. and Rangel, A. (2007), ‘Toward choice-theoretic foundations for behavioral welfare economics’, American Economic Review, 97(2): 464–470.CrossRefGoogle Scholar
Bernheim, B. D. and Rangel, A. (2009), ‘Beyond revealed preference: Choice-theoretic foundations for behavioral welfare economics’, Quarterly Journal of Economics, 124(1): 51–104.CrossRefGoogle Scholar
Bernheim, B. D. and Taubinsky, D. (2018), ‘Behavioral public economics’, in Bernheim, B. D., DellaVigna, S. and Laibson, D. (eds), Handbook of behavioral economics: Applications and foundations, 381–516, Amsterdam: North-Holland.Google Scholar
Boettke, P. J. (2018), F. A. Hayek: Economics, political economy and social philosophy. London: Palgrave Macmillan.CrossRefGoogle Scholar
Bohnet, I. (2016), What works: Gender equality by design. Cambridge: The Belknap Press of Harvard University Press.Google Scholar
Bubb, R. and Pildes, R. (2014), ‘How behavioral economics trims its sails and why’, Harvard Law Review, 127(6): 1593–1678.Google Scholar
Busse, M. R., Knittel, C. R. and Zettelmeyer, F. (2013), ‘Are consumers myopic? Evidence from new and used car purchases’, American Economic Review, 103(1): 220–256.CrossRefGoogle Scholar
Caldwell, B. (2008), ‘Hayek on mill’, History of Political Economy, 40(4): 689–704.CrossRefGoogle Scholar
Conly, S. (2013), Against autonomy: Justifying coercive paternalism. Cambridge: Cambridge University Press.Google ScholarPubMed
Davis, L. W. and Knittel, C. R. (2019), ‘Are fuel economy standards regressive?’ Journal of the Association of Environmental and Resource Economists, 6(S1): S37–S63.CrossRefGoogle Scholar
Duncan, D., Ku, A. L., Julian, A., Carley, S., Siddiki, S., Zirogiannis, N. and Graham, J. D. (2019), ‘Most consumers don't buy hybrids: Is rational choice a sufficient explanation?’ Journal of Benefit-Cost Analysis, 10(1): 1–38.CrossRefGoogle Scholar
Dworkin, R. (1985), Law's empire. Cambridge: Harvard University Press.Google Scholar
Ebeling, F. and Lotz, S. (2015), ‘Domestic uptake of green energy promoted by opt-out tariffs’, Nature Climate Change, 5(9): 868–871.Google Scholar
Environmental Protection Agency (EPA) (2010), Light-duty vehicle greenhouse gas emission standards and corporate average fuel economy standards. Retrieved from: https://www.govinfo.gov/content/pkg/FR-2010-05-07/pdf/2010-8159.pdfGoogle Scholar
EPA (2015), Learn about the fuel economy label. Retrieved from: https://www.epa.gov/greenvehicles/learn-about-fuel-economy-labelGoogle Scholar
Frantz, R. (2020), Before Kahneman and Tversky, there was Friedrich Hayek. Retrieved from: https://cosmosandtaxis.files.wordpress.com/2020/02/frantz_ct_vol7_iss5_6-2.pdfGoogle Scholar
Frantz, R. and Leeson, R. (2013), Hayek and behavioral economics. London: Palgrave Macmillan.CrossRefGoogle Scholar
Gabaix, X. (2017), Behavioral inattention. National Bureau of Economic Research, No. w24096. Retrieved from: https://www.nber.org/papers/w24096CrossRefGoogle Scholar
Gabaix, X. and Laibson, D. (2006), ‘Shrouded attributes, consumer myopia, and information suppression in competitive markets’, The Quarterly Journal of Economics, 121(2): 505–540.Google Scholar
Gayer, T. and Viscusi, W. K. (2013), ‘Overriding consumer preferences with energy regulations’, Journal of Regulatory Economics, 43(3): 248–264.Google Scholar
Gillingham, K., Houde, S. and Benthem, A. v. (2019), Consumer myopia in vehicle purchases: Evidence from a natural experiment. National Bureau of Economic Research, No. w25845. Retrieved from: https://www.nber.org/papers/w25845CrossRefGoogle Scholar
Glaeser, E. (2006), ‘Paternalism and psychology’, University of Chicago Law Review, 73(1): 133–156.Google Scholar
Goldin, J. (2015), ‘Which way to nudge? Uncovering preferences in the behavioral age’, Yale Law Journal, 125(1): 226–270.Google Scholar
Goldin, J. (2017), ‘Libertarian quasi-paternalism’, Missouri Law Review, 82(3): 669–682.Google Scholar
Graham, J., Wiener, J. B. and Robinson, L. A. (2019), Co-benefits, countervailing risks, and cost-benefit analysis. Retrieved from: https://cdn1.sph.harvard.edu/wp-content/uploads/sites/1273/2019/09/Graham-Wiener-Robinson-2019.pdfGoogle Scholar
Greenstone, M., Sunstein, C. R. and Ori, S. (2020), ‘Fuel Economy 2.0’, Harvard Environmental Law Review, 44(1): 1–42.Google Scholar
Hayek, F. A. (1945), ‘The use of knowledge in society’, American Economic Review, 35: 519–530.Google Scholar
Hayek, F. A. (2001), ‘The road to serfdom’, in Purdy, M. and Banks, D. (eds), The sociology and politics of health, 21–27, London: Routledge.Google Scholar
Hayek, F. A. (2007), The collected works of F. A. Hayek: The road to serfdom, 71, Chicago: The University of Chicago Press.Google Scholar
Hayek, F. A. (2011), The collected works of F. A. Hayek: The constitution of liberty, Chicago: The University of Chicago Press.CrossRefGoogle Scholar
Hayek, F. A. (2014a), The sensory order: An inquiry into the foundations of theoretical psychology. Chicago: The University of Chicago Press.Google Scholar
Hayek, F. A. (2014b), The collected works of F. A. Hayek: The market and other orders, Chicago: The University of Chicago Press.Google Scholar
Hertwig, R. (2017), ‘When to consider boosting: Some rules for policy-makers’, Behavioural Public Policy, 1(2): 143–161.CrossRefGoogle Scholar
Karplus, V. J., Paltsev, S., Babiker, M. and Reilly, J. M. (2013), ‘Should a vehicle fuel economy standard be combined with an economy-wide greenhouse gas emissions constraint? Implications for energy and climate policy in the United States’, Energy Economics, 36: 322–333.CrossRefGoogle Scholar
Knittel, C. (2019), Diary of a wimpy carbon tax. Retrieved from: http://ceepr.mit.edu/files/papers/2019-013.pdfGoogle Scholar
Kotchen, M. J. (2018), ‘Which social cost of carbon? A theoretical perspective’, Journal of the Association of Environmental and Resource Economists, 5(3): 673–694.CrossRefGoogle Scholar
Larrick, R. P. and Soll, J. B. (2008), ‘Economics: The MPG illusion’, Science, 320(5883): 1593–1594.CrossRefGoogle ScholarPubMed
Mullainathan, S. and Shafir, E. (2013), Scarcity: Why having too little means so much. New York: Times Books.Google Scholar
National Highway Traffic Safety Administration (NHTSA) (2012), Final regulatory impact analysis: Corporate average fuel economy for MY 2017 – MY 2025 passenger cars and light trucks. Retrieved from: https://www.nhtsa.gov/sites/nhtsa.dot.gov/files/fria_2017-2025.pdfGoogle Scholar
Newell, R. G. and Siikamäki, J. (2015), ‘Individual time preferences and energy efficiency’, American Economic Review, 105(5): 196–200.CrossRefGoogle Scholar
Nordhaus, W. (2015), Climate change casino. New Haven: Yale University Press.Google Scholar
Peart, S. J. (2015), The collected works of F. A. Hayek: Hayek on mill. Chicago: The University of Chicago Press.Google Scholar
Pichert, D. and Katsikopoulos, K. V. (2008), ‘Green defaults: Information presentation and pro-environmental behaviour’, Journal of Environmental Psychology, 28(1): 63–73.CrossRefGoogle Scholar
Potts, J. (2018), ‘Governing the innovation commons’, Journal of Institutional Economics, 14(6): 1025–1047.CrossRefGoogle Scholar
Rizzo, M. J. and Whitman, G. (2019), Escaping paternalism: Rationality, behavioral economics, and public policy. Cambridge: Cambridge University Press.Google Scholar
Sallee, J. M., West, S. E. and Fan, W. (2016), ‘Do consumers recognize the value of fuel economy? Evidence from used car prices and gasoline price fluctuations’, Journal of Public Economics, 135: 61–73.Google Scholar
Sarin, N. (2019), ‘Making consumer finance work’, Columbia Law Review, 119(6): 1519–1596.Google Scholar
Scheall, S., Butos, W. and McQuade, T. (2019), ‘Social and scientific disorder as epistemic phenomena, or the consequences of government dietary guidelines’, Journal of Institutional Economics, 15(3): 431–447.Google Scholar
Schubert, C. (2017), ‘Exploring the (behavioural) political economy of nudging’, Journal of Institutional Economics, 13(3): 499–522.CrossRefGoogle Scholar
Stewart, R. B. and Wiener, J. B. (2003), Reconstructing climate policy: Beyond Kyoto. La Vergne: AEI Press.Google Scholar
Sugden, R. (2019), ‘The community of advantage’, Economic Affairs, 39(3): 417–423.Google Scholar
Sunstein, C. R. (2015), John & Harriet: Still mysterious. Retrieved from: https://www.nybooks.com/articles/2015/04/02/john-stuart-mill-harriet-taylor-hayek/Google Scholar
Sunstein, C. R. (2019), ‘Rear visibility and some unresolved problems for economic analysis’, Journal of Benefit-Cost Analysis, 10(3): 317–350.CrossRefGoogle Scholar
Sunstein, C. R. (2020), Voluntary agreements. SSRN. Retrieved from: https://papers.ssrn.com/abstract=3543475Google Scholar
Sunstein, C. R. and Reisch, L. A. (2014), ‘Automatically green: Behavioral economics and environmental protection’, Harvard Environmental Law Review, 38(1): 127–158.Google Scholar
Vanberg, V. (2017), ‘Editor's introduction’, in Vanberg, V. (ed.), The collected works of F. A. Hayek: The sensory order and other writings on the foundations of theoretical psychology, Chicago: The University of Chicago Press.Google Scholar