Behavioral Public Economics
Through the lens of neoclassical economics, the role of government is to provide public goods, correct externalities, provide information, and address other market failures. In practice, however, some public policies are motivated by the concern that people do not act in their own best interest. For example, many countries ban drugs, tax cigarettes, alcohol, and sugary drinks, or subsidize retirement savings and energy-efficient appliances, all largely on the grounds that consumers would be better off consuming more or less than they do.
Standard approaches to policy analysis rely on revealed preference assumptions to measure an agent’s welfare. Under these assumptions, the direct effect of any policy that changes choices is to reduce consumer welfare. However, empirical evidence from behavioral economics in a variety of domains suggests that people sometimes do make systematic mistakes. The field of behavioral public economics extends the theoretical and empirical tools of public economics to incorporate the possibility of consumer mistakes into questions about policy evaluation and design.
This is a PhD-level mini-course in behavioral public economics. In this course, we’ll consider questions like the following:
- How can we do welfare analysis if choice does not necessarily identify utility?
- How do we empirically measure consumer biases?
- How do we set socially optimal policies in settings when consumers may not act in their own best interest?
- Nudges change behavior at low cost. Does that mean they are a good idea?
- What are the costs and benefits of tax complexity?
Click here for the syllabus.
There are four lectures, available from the Lectures tab.
There are two problem sets, available from the Problem Sets tab.
Lecture videos are available from the Lecture Videos tab.