Tacking in Shifting Winds: A Short Response to Bubb and Pildes
UVA Law Faculty Affiliations
Professors Bubb and Pildes raise a seeming paradox: how is it that the recognition of limits on human rationality associated with behavioral economics has led to the nudge-like policy prescriptions of behavioral law and economics (BLE), which appear doomed in light of those very limits? The authors hypothesize that BLE scholars “trim their sails,” limiting their policy prescriptions to choice-preserving interventions, based on an ideological predisposition toward libertarian policies or a preoccupation with political feasibility.
Although there may be instances of sail trimming, we believe that this explanation is incomplete. In this short piece, we present two additional accounts of this seeming paradox. First, we show how Bubb and Pildes’s leading example may simply reflect the full-throated application of a model that overlooks important behavioral biases. This example represents not sail trimming, but sailing in the wrong direction — a risk inherent in any exercise of model-informed policymaking. Second, we argue that an inclination toward incorporating choicepreserving approaches into policymaking may reflect the recognition of uncertainty about the accuracy of behavioral models. If this is sail trimming, it reflects a rationally cautious approach to navigating unknown and potentially treacherous policymaking seas, not internally imposed ideological or political constraints. Our first account, then, provides an explanation for the existence of choice-preserving policies in the BLE literature; our second account provides both an explanation and a justification of those policies.
Not only do our two accounts help explain the sail-trimming paradox; they also apply to policymaking informed by conventional neoclassical economic models, an approach with its own ideological predispositions. Indeed, the living memory of the limitations of the neoclassical paradigm could explain why BLE scholars might be averse to pushing their new models too far and too fast. In our view, How Behavioral Economics Trims Its Sails and Why most clearly points to the need for policymaking to be rigorously evidence-based, whether it is informed by neoclassical, psychological, or old-fashioned intuitive models.