Josh Wright on Behavioral Economics in the Obama Administration:

Josh Wright has an interesting comment on the WSJ’s article the other day on the apparent waning of the influence of behavioral economics in the Obama Administration.  In fact, Josh observes something that I noted about the article as well–the example given of the supposed influence of BE (the divergence of interests between landlords and tenants with respect to energy-saving appliances) actually has nothing to do with BE and in fact is a classic example of standard neoclassical analysis.

Josh also raises the key point behind all of this–what happens if the “nudge” provided by the government doesn’t actually get people to do what regulators want them to do?  Do we just nudge harder?  At what point does a nudge turn into a shove–or when do we just skip nudging and instead shove for people’s own good?

If it is possible to know what people “really” want to do, or what regulators think people should do for their own good, it isn’t clear why we wouldn’t just compel them to do it if they won’t do it themselves (the paternalistic slippery-slope observed by Rizzo and Whitman).

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