TY  - JOUR
AU  - Glaeser,Edward L.
TI  - Paternalism and Psychology
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11789
PY  - 2005
Y2  - November 2005
UR  - http://www.nber.org/papers/w11789
L1  - http://www.nber.org/papers/w11789.pdf
N1  - Author contact info:
Edward L. Glaeser
Department of Economics
315A Littauer Center
Harvard University
Cambridge, MA 02138
Tel: 617/495-0575
Fax: 617/495-7730
E-Mail: eglaeser@harvard.edu
AB  - 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.
ER  -