Wednesday, July 15, 2015

Behavioral Public Choice

In a number of blog posts, (here ) I've complained about the lack of behavioral public choice theory, and highlighted some efforts in that direction.

Much behavioral economics documents that people do stupid things, and then jumps to the conclusion that parternalistic government can do things for us better. But wait, those government functionaries are also human, also behavioral, and placed in group and social settings that psychology as well as economics warns us are particularly prone to bad outcomes.

Marginal revolution highlights an interesting new paper that breaks in to this field, Behavioral public choice: The behavioral paradox of government policy by Ted Gayer and W. Kip Viscusi. A quote:
In this article we examine a wide range of behavioral failures, such as those linked to misperception of risks, unwarranted aversion to risk ambiguity, inordinate aversion to losses, and inconsistencies in the tradeoffs reflected in individual decisions. Although such shortcomings have been documented in the behavioral literature, they are also reflected in government policies, both because policymakers are also human and because public pressures incorporate these biases. The result is that government policies often institutionalize rather than overcome behavioral anomalies.
I haven't read it, but it seems interesting, and the field seems wide open. The defense of freedom never was that freedom is perfect, merely that government control is worse.

I am interested that behavioral economics seems so focused on mistakes of individual decision making, as nicely summarized in the quote. In fact the most obvious thing about humans is that we are social animals, not that we are poor individual decision-makers. I would think that behavioralists would be bringing social psychology more than individual decision making to economics. But maybe this just reveals how little I know about either.


  1. See Cass Sunstein & Reid Hastie "Wiser: Getting Beyond Groupthink to Make Groups Smarter" for a popularized discussion of behaviorial psych sources of systematic failure in group decision making. Focuses on small groups, including eg corporate decision makers.

  2. In a more recent post you complain about "hold" capital rather than issue.

    "Public Choice" is a bigger word issue, and should be "Government Choice". The difference is really significant: Gov't is the group of people who can legally use force. They are a subset of the public.

    James Buchanan and other creators of "Public" rather than "Government" Choice made a word choice that has been, and remains, misleading. Most of the Public does not see, hear, nor understand either Public Choice, nor that their is a problem with Gov't incentives.

    And I think your focus on how the market is not perfect, but BETTER than the gov't, is the key argument. The Big Gov't folk, like Noah Smith (in another of your posts), seldom compare real gov't results vs real market results, rather an assumed ideal gov't results vs real market (even when the "market" is highly distorted).

  3. "The defense of freedom never was that freedom is perfect, merely that government control is worse."



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