I read with interest the conclusion of the paper, “Behavioral public choice: The behavioral paradox of government policy“,
In recent years, there has been a shift in the traditional economics approach of justifying government interventions based on the existence of market failures such as externalities, public goods, asymmetric information, and market power. Influenced by psychological studies that find systematic biases in how individuals make decisions, the field of behavioural economics has led to recommendations for government policies. These recommendations frequently come in the form of soft regulations or “nudges,” to correct behavioural shortfalls that lead individuals to make decisions that cause themselves harm.
Given that government policy making is not immune to behavioural failures, we suggest a more cautious approach, one that incorporates the insights of behavioural economics in a way that is less dismissive of the merits of individual choice. Rather than assuming that any class of behavioural anomalies constitutes a sufficient rationale for overriding consumer preferences, government agencies should assess the empirical prevalence and magnitude of the behavioural failings as they specifically pertain to the policy context. If there are apparent anomalies, there should also be an exploration of whether these deviations from economics norms stem from legitimate differences in preferences or are in fact errors that, if corrected, would enhance welfare.
Thus, in the design of subsequent interventions, there should be increased recognition of the legitimate differences in consumer preferences that may account for purported behavioural failings. Policy makers should also recognize the behavioural failings likely to be incorporated in their policy responses due to public pressure or the behavioural failures of policy makers. Fundamental behavioural failures are often embedded in the current policy strategies. Any critical review of private behavioural failures should be accompanied by a comparable assessment of government failures.
And thus suddenly, we are reminded that policy makers are not just a group of faceless suits, but people who embed their biases into the policies.
A paragraph from Rose and Miller,
But the political vocabulary structured by oppositions between state and civil society, public and private, government and market, coercion and consent, sovereignty and autonomy, and the like, does not adequately characterise the diverse ways in which rule is exercised in advanced liberal democracies. Political power is exercised today through a profusion of shifting alliances between diverse authorities in projects to govern a multitude of facets of economic activity, social life and individual conduct. Power is not so much a matter of imposing constraints upon citizens as of ‘making up’ citizens capable of bearing a kind of regulated freedom. Personal autonomy is not the antithesis of political power, but a key term in its exercise, the more so because most individuals are not merely the subjects of power but play a part in its operations.
The activities of policy makers encompassing the economic, legal, spiritual, medical, technical and other areas of our lives assume the possession of a degree of knowledge including know-how by those very policy makers. Lately, with the rise in the influence of behavioural economics, we begin to realise that we also desire a certain level of awareness by the policy makers of behavioural failures in the mechanisms of policy making itself.
Knowledge and wisdom are not the same, and perhaps this study points us to the fact that policy making not only requires knowledge but also demands the right usage of knowledge, or as Charles Spurgeon called it, ‘wisdom’.