Behavioral paternalism rejects the view that individuals always do the best for themselves, by their own lights and given their constraints. A large number of systematic mistakes called biases allegedly prevent individuals from enhancing their own welfare. This general position supports an array of policy prescriptions designed to correct their decision-making. Ideal decisions are those neoclassical agents would make if they were not plagued by biases. These are the decisions of a model construct (a “puppet”). We review the leading paternalist policy proposals and their behavioral rationales. We then preview some of our criticisms and summarize the contents of subsequent chapters.

Behavioral paternalists accept the neoclassical standard of rationality for normative purposes, even while questioning its descriptive accuracy. However, these standards do not have a strong normative justification. There are many perfectly reasonable ways the neoclassical norms can be violated without hurting the interests of individuals. Redescribing preferences or actions to fit the well-behaved mold is essentially arbitrary and without, in itself, any normative significance. Even demonstrating that individuals have inconsistent preferences does not tell us which preferences are better or represent “true preferences.” Behavioral paternalists commit a non sequitur when they use inconsistency to justify privileging some preferences over others.

The evidence for preference biases is very often flawed, incomplete, or misinterpreted. For example, inconsistent rates of time discount are largely eliminated when considered relative to the individual’s perception of time. Preference reversals in real time from patient to impatient behavior occur only in a minority of cases. Time inconsistency, when it occurs, need not be associated with actual harms to decision-makers. Evidence for the existence of endowment effects is problematic. Gaps between willingness to pay and willingness to accept have no normative significance. The evidence for impact bias is confused and weak, and to the extent that it occurs, its function has eluded most analysts. In addition to these concerns, we find that the preferences typically treated as normatively superior by behavioral paternalists are often implicated by biases as well.

Behavioral paternalists often distinguish their views from harder forms of paternalism by emphasizing the moderate character of their proposals. Insights from the academic literature on slippery slopes suggest that behavioral paternalist policies are particularly vulnerable to expansion, which makes the claim to moderation unsustainable. This is true even if policymakers are rational (in the neoclassical sense), but the slippery-slope threat is even greater if policymakers share the behavioral and cognitive biases attributed to the people their policies are supposed to help. Rational slope mechanisms include altered incentive slopes, authority and simplification slopes, and expanding justification slopes. Behavioral slope mechanisms include action bias, overconfidence, confirmation bias, present bias, availability and salience effects, framing and extremeness aversion, and affect and prototype heuristics. The theoretical and empirical vagueness of behavioral paternalism creates gradients that encourage the gradual expansion of policies. Finally, the particular way in which leading behavioral paternalists have framed the issue of paternalism gives rise to an inherently expansionist dynamic, which we call the paternalism-generating framework.

Rational beliefs need not be truth-tracking nor adhere strictly to basic logical or statistical-inference principles. They must simply be appropriate to the attainment of the individual’s purposes in specific contexts. We analyze various “errors” that behavioral economists have supposedly discovered in belief formation. Specifically, we examine supposed errors related to imperfect logical deduction, the conjunction fallacy (including the famous “Linda problem”), availability bias, overconfidence bias, and distorted salience. In each case we show that the standard behavioral analysis is too simple and that many of their behaviors qualify as inclusively rational. The fundamental error of behavioral analysts is to expect that universal, abstract methods of belief formation will be appropriate for guiding all concrete choices.

The standard neoclassical conception of rationality is narrow. It was created mainly for technical purposes such as making economic models internally consistent and mathematically tractable. We advocate a broader notion, especially for normative purposes, of “inclusive rationality.” This rationality concept is consistent with many of the choices and behaviors attributed to cognitive biases by behavioral economists. In fact, these biases can even be useful in helping people achieve their purposes. Although a narrow form of rationality may be more easily falsified, the broader form is the normatively relevant one.

Paternalist policymakers face a severe knowledge problem that is analogous to the knowledge problem faced by central planners. They do not and often cannot possess the kind of local and tacit knowledge needed to craft policy interventions that reliably improve human welfare. We provide a taxonomy of types of knowledge that paternalist planners need but typically do not have: true preferences, extent of bias, self-debiasing and small-group debiasing, dynamic impacts on self-regulation, counteracting behaviors, bias interactions, and population heterogeneity. We also critique two leading efforts to surmount knowledge problems of behavioral paternalism: the augmented revelatory frame approach and unified behavioral revealed preference.