The Tyranny of Utility: Behavioral Social Science and the Rise of Paternalism

Citation

Lane, J. (2012), "The Tyranny of Utility: Behavioral Social Science and the Rise of Paternalism", International Journal of Social Economics, Vol. 39 No. 8, pp. 642-643. https://doi.org/10.1108/03068291211238473

Saint‐Paul is an economics professor at the University of Toulouse – an institution that has delivered a number of high powered theoreticians in economic fields like public regulation and principal‐agent modeling. He has written a philosophical essay on the relationship between the key ideas in the new behavioral economics (micro), coming out of experimental economics, and recently emerging public policy paternalism (macro). This topic deserves close scrutiny, as it challenges heralded beliefs among both welfare economists and welfare state protagonists.

Saint‐Paul argues that the present micro revolution in economic theory, from the neo‐classical decision model (expected utility) to the new economic psychology is closely intermeshed with new kinds of public policy‐making with a paternalistic bias: precaution, risk avoidance, consumer protection, and complicated redistribution of resources.

One may debate whether the association between the new ideas about prospect decision‐making on the one hand and aggressive state intervention, on the other hand, is a necessary one – the logical argument that Saint‐Paul would no doubt adhere to. But he is right in emphasizing that the new economics of imperfect decision‐making, risk aversion and asymmetric information must have some implications for the classical theory of public policy, as laid down in welfare economics and elaborated in the 1930s. What are the policy lessons to be drawn if the framework of revealed preferences and the ordinal Pareto criterion (as the basis for micro theory) are abandoned?

Saint‐Paul interprets the recent innovations in public policy as expression of a paternalistic philosophy, from the macro perspective. He shares, more or less, Hayek's negative view upon state intervention. Thus, he regards many of the new policies towards risk as well as the redistribution of resources – money or in‐kind – as infringements upon the freedom of the individual. This is an absolute value to him.

This book contains a lot of interesting analyses of both the micro – how do individuals decide in day‐to‐day economic matters – and on the macro levels – the new forms of state intervention in the market economy. It is highly original in making the link between the imperfections of behavioral economics and the sometimes excessive or aggressive state interferences recently made in the advanced capitalist democracies. Saint‐Paul writes in a most provocative style, failing to acknowledge that it could make sense for government to require owners of small private pools to fence them in, for instance.

In relation to the effort today to replace the revealed preference approach with happiness, measured somehow, either by means of surveys or through brain nodes, he expresses a scepticism that one would be inclined to share.

For those who are interested in economic philosophy this book is essential reading. It covers both new micro and macro ideas – foundations of individual choice as well as foundations of public policies or social choice. Having learned a lot from Saint‐Paul, I am, at the end of the day, not entirely convinced that the association between behavioral economics and precautionary policy‐making is so strong that it amounts to a logical relationship.

However, this is a most urgent debate, as the implications of the new economic psychology have to be spelled out for both the micro and macro levels. Saint‐Paul has delivered a truly interesting contribution to this discussion.