Can a contractarian be a paternalist? The logic of James M. Buchanan’s system

A variation of the definition given by Dworkin (2002) in The Stanford Encyclopedia of Philosophy (Fall 2019 Edition).

Typically, behavioral welfare economics rests on the assumption that it is possible to classify particular types of choices as “decision mistakes”. Those are “decisions that [individuals] would not have made if they had paid full attention and possessed complete information, unlimited cognitive abilities, and complete self-control” (Thaler and Sunstein 2008, p. 5). It is assumed that decision mistakes drive a wedge between an agent’s choice and her underlying “true” or “intrinsic” preferences. In order to reconstruct the subset of “true” preferences, behavioral welfarists take preference consistency as the normative criterion for welfare-increasing choice (Berg and Gigerenzer 2010). In doing so, that “preference purification” approach rests on the assumption that each person has a rational agent with well-defined preferences deep within herself that is struggling to surface because she is impaired by psychological biases that trigger systematic judgment mistakes (Whitman and Rizzo 2015).

If the optimum is not unique, then an array of resource allocations will be available and an array of rules will be possible at the self-constitutional stage.

On Stickk.com users sign up to ‘commitment contracts’ in which they set their own goals at the outset, e.g., losing x pounds of weight or exercising y days per week. Users agree to donate a certain amount of money to friends or a charity of their choice if they fail to reach their goals.

For an in-depth discussion of Buchanan’s normative starting point, see Dold (2018a).

Hyperopia means farsightedness. In the context of choice, it means that individuals weigh future benefits more heavily than present ones, i.e., other things equal, hyperopic agents prefer the more distant of two equally large payoffs (Loewenstein 1987).

More technically, it is a recursive decision process. The individual predicts how his future selves will interpret a present decision not to apply the rule. Suppose that he predicts that they will interpret it as a violation or defection, then in recursive fashion the present self will incorporate that prediction into his present decision. Similarly, all of the n future selves will assume that the just prior (n − 1) self also will defect when it becomes a present self. As a result, the prospect of future benefits owing to self-constraining behavior is lost.

On the implications of Buchanan’s subjectivism for “true preference” paternalism, see Dold and Rizzo (2020, forthcoming) and Dold (2018b).

The simple, unbiased presentation of information about the options that individuals face in the case of complex choices is not at issue here. We are focusing on the ascertainment of “true” preferences. We do not consider the provision of information to be paternalistic since it does not direct the individual toward any particular decision (Hertwig and Grüne-Yanoff 2017). Rational individuals behind the veil could assign that task to government.

The payoffs in the matrix can be understood as numerical representations of the preferences of the two selves.