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March 25, 2013

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Is it your contention that the biases described by Professor Conly don't exist? It certainly seems like the cornerstone of your argument.

Thanks for the question, Jonas--by all means, the cognitive biases and heuristics described by Kahneman, Tversky, and their colleagues do exist and are very relevant to both economic theory and policy decisions. As I write at the end of chapter 2 of my book, behavioral economics helped free economic modeling from the restrictively simplistic framework of constrained preference satisfaction (though I argue it did not go far enough).

My problem is with the normative use to which paternalists have put the results of behavioral economics. Cognitive dysfunctions cannot be used to justify paternalism because there is no way for policymakers to know when a particular decision is the result of a cognitive dysfunction. Furthermore, policymakers who focus on decision-making errors are likely to "see" such errors in decisions they judge to be poor--a clear case of confirmation bias on the part of policymakers--and there is no way to disprove this without having knowledge of persons' true interests.

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