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Critical Book Symposium on Robert Sugden’s The Community of Advantage: A Behavioural Economist's Defence of the Market

Panel Session

Saturday, Jan. 5, 2019 12:30 PM - 2:15 PM

Hilton Atlanta, 309-310-311

Hosted By: International Network for Economic Method

Chair: Don Ross, University College Cork, University of Cape Town and Georgia State University

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Abstract

Sugden’s new book challenges the popular family of behavioral economic policy applications that travel under the label of ‘nudging’. It is not, however, skeptical about either the significance of empirical discoveries about behaviour or about the importance of applied welfare economics. Sugden’s critical analysis goes to the foundations, asking how economists should do normative analysis in general. Such analysis has usually focused on satisfying individuals' estimated preferences. Its conclusions have supported a long- standing liberal tradition that values economic freedom and views markets favorably. However, behavioral research shows that individuals' preferences, as revealed in choices, are often unstable, and vary according to contextual factors that seem irrelevant for welfare. Sugden proposes a reformulation of normative economics that is compatible with what is now known about the psychology of choice. The growing consensus in favor of paternalistic nudging is based on a very different way of reconciling normative economics with behavioral findings. This is to assume that people have stable 'latent' preferences which, because of psychologically induced errors, are not always revealed in actual choices. The economist's job is then to reconstruct latent preferences and to design policies to satisfy them. Challenging this consensus, The Community of Advantage argues that latent preference and error are psychologically ungrounded concepts, and that economics needs to be more radical in giving up traditional rationality assumptions. Sugden advocates a normative economics that does not use the concept of preference. Its recommendations are addressed not to an imagined 'social planner' but to citizens, viewed as potential parties to mutually beneficial agreements. Its normative criterion is the provision of opportunities for individuals to participate in voluntary transactions. Using this approach, Sugden reconstructs many of the normative conclusions of the liberal tradition. He argues that a well-functioning market economy is an institution that individuals have reason to value.

Panelist(s)

Robert Sugden

University of East Anglia

B. Douglas Bernehim

Stanford University

Don Ross

University College Cork, University of Cape Town and Georgia State University

JEL Classifications

B4 - Economic Methodology
D6 - Welfare Economics

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Critical Book Symposium on Robert Sugden’s The Community of Advantage: A Behavioural Economist's Defence of the Market

Saturday, Jan. 5, 2019 12:30 PM - 2:15 PM

Abstract

Panelist(s)

JEL Classifications