NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Paternalism and Psychology

Edward L. Glaeser

NBER Working Paper No. 11789
Issued in November 2005
NBER Program(s):   EFG   LE   PE

Does bounded rationality make paternalism more attractive? This Essay argues that errors will be larger when suppliers have stronger incentives or lower costs of persuasion and when consumers have weaker incentives to learn the truth. These comparative statics suggest that bounded rationality will often increase the costs of government decisionmaking relative to private decisionmaking, because consumers have better incentives to overcome errors than government decisionmakers, consumers have stronger incentives to choose well when they are purchasing than when they are voting and it is more costly to change the beliefs of millions of consumers than a handful of bureaucrats. As such, recognizing the limits of human cognition may strengthen the case for limited government.

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Document Object Identifier (DOI): 10.3386/w11789

Published: Glaeser, Edward. “Paternalism and Psychology.” The University of Chicago Law Review 73, 1 (2006): 133-156.

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