Munro Bounded Rationality and Public Policy

A Perspective from Behavioural Economics
2009
ISBN: 978-1-4020-9473-6
Verlag: Springer Netherlands
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, Band 12, 304 Seiten

Reihe: The Economics of Non-Market Goods and Resources

This book is about bounded rationality and public policy. It is written from the p- spective of someone trained in public economics who has encountered the enormous literature on experiments in decision-making and wonders what implications it has for the normative aspects of public policy. Though there are a few new results or models, to a large degree the book is synthetic in tone, bringing together disparate literatures and seeking some accommodation between them. It has had a long genesis. It began with a draft of a few chapters in 2000, but has expanded in scope and size as the literature on behavioural economics has grown. At some point I realised that the geometric growth of behavioural - search and the arithmetic growth of my writing were inconsistent with an am- tion to be exhaustive. As such therefore I have concentrated on particular areas of behavioural economics and bounded rationality. The resulting book is laid out as follows: Chapter 1 provides an overview of the rest of the book, goes through some basic de?nitions and identi?es themes.

Autoren/Hrsg.

Munro, Alistair

Inhaltsverzeichnis

1;Preface;7
2;Contents;10
3;List of Tables;14
4;List of Figures;15
5;1 Introduction ;17
5.1; Merit Wants;19
5.1.1; The Link Between Bounded Rationality and Merit Wants ;19
5.1.2; Other-Regarding Behaviour and Expressive Preferences;20
5.2; Definitions;21
5.2.1; Frames ;22
5.2.2; Frames and Welfare ;24
5.2.3; Uncertainty and Information Processing;26
5.2.4; Merit Goods ;27
5.3; Main Points;29
6;2 Anomalies ;33
6.1; Introduction;33
6.2; The Reliability of the Evidence;34
6.3; Reference Dependent Preferences ;38
6.3.1; Organising the Evidence;48
6.3.2; Prospect Theory -- Cumulative and Riskless;49
6.4; Mental Accounting;55
6.5; Preference Reversal;60
6.6; Conclusions;63
7;3 Information, Learning and Markets ;65
7.1; Introduction;65
7.2; Probabilities, Information Processing and Bayes' Theorem ;66
7.2.1; Representativeness and Availability Biases;66
7.2.2; Adjustment and Anchoring ;67
7.2.3; Confirmation Biases;70
7.3; Ambiguity Aversion and the Ellsberg Paradox ;72
7.3.1; Summing Up Bayes' Theorem ;74
7.4; How Markets Might Lead to Individually Rational Behaviour;74
7.4.1; Summing Up Market Learning;80
7.5; Learning;81
7.5.1; Melioration ;85
7.6; Conclusions;89
8;4 Markets and Reference Dependent Preferences ;90
8.1; Introduction;90
8.2; Partial Competitive Equilibrium;91
8.3; Imperfect Competition;95
8.4; General Equilibrium ;98
8.5; Reference Dependent Preferences;100
8.5.1; Equilibrium and General Equilibrium ;102
8.5.2; Discussion;105
8.6; Conclusions;106
9;5 Welfare ;108
9.1; Introduction;108
9.2; Frames and Paretian Welfare Economics;110
9.3; Responses to the Evidence;115
9.3.1; Switch Theories;115
9.3.2; Allow Individual Welfare to be Frame Dependent;116
9.3.3; No Ordering;117
9.4; Optimal or Golden Frames;118
9.4.1; Markets and Referenda as Optimal Frames;120
9.5; Information Aggregation;123
9.5.1; Extra-Preference Information -- Relaxing WEF;126
9.5.2; Bayesian;127
9.6; Paternalism;129
9.6.1; The Justification of Paternalistic Intervention;129
9.6.2; Paternalism: The Contractarian View;136
9.6.3; Summing Up;137
9.6.4; Ranking Frames Using Consent and Other Arguments from Paternalism;138
9.6.5; Hypothetical Rational Consent;142
9.6.6; Contractarian Consent;143
9.7; Conclusions;145
10;6 Public Policy and Bounded Rationality ;147
10.1; Introduction;147
10.1.1; Bounded Rationality: Identification and Valued Added;147
10.2; Market Failure;152
10.2.1; Asymmetric Information;153
10.2.2; Near-Optimality;153
10.2.3; The Boundaries of the State;156
10.3; Voting for the Nanny State: Regulation of Markets by Self Aware Consumers;162
10.4; Political Economy -- An Illustration;165
10.4.1; Efficiency and Bias;166
10.4.2; Term Limits;169
10.4.3; Candidacy;170
10.5; Conclusions: Possible Worlds;173
10.6; Appendix;174
11;7 Standard Fiscal Policy and Merit Wants ;176
11.1; Introduction;176
11.2; Individualistic Welfare Functions, Private Failure;177
11.2.1; Individualistic Welfare Functions, Public Failure;180
11.2.2; Two Spurious Categories of Merit Wants;181
11.2.3; Non-individualistic Welfare Functions;182
11.3; Objective Functions;183
11.3.1; Risk and Uncertainty;185
11.4; Optimal Policies;185
11.4.1; Wrong Information Models;192
11.4.2; Limits of the Literature;192
11.5; The Value of Information;193
11.5.1; The Value of Misinformation;196
11.6; Conclusion;198
12;8 Agency and Dependency ;200
12.1; Introduction;200
12.2; Dependency Relationships: Children;202
12.2.1; The Child's Development of Economic Ideas;203
12.3; The Role of the State;204
12.3.1; Relief from Duty;205
12.3.2; Information Asymmetry;206
12.4; Regulating Care with Asymmetric Information;208
13;9 Tax Policy ;220
13.1; Introduction;220
13.2; Monotonicity;220
13.3; Technical Efficiency -- Marketed Goods;221
13.3.1; Technical Efficiency -- Non-Marketed Goods;224
13.3.2; Cost Minimization;224
13.3.3; Summary;226
13.4; Tax Reform Issues and Loss Aversion;226
13.4.1; The Problems Created by Reference Dependent Preferences;226
13.4.2; Extensions to Consumer Theory;229
13.4.3; Implications of the Theory for Welfare Economics;231
13.4.4; Implications of the Theory for Tax Reform Models;233
13.4.5; Optimal Taxation ;234
13.4.6; Final Thoughts;236
13.5; Conclusions;237
14;10 Framing Matters: Non-Standard Fiscal Policy ;240
14.1; Introduction;240
14.2; Creating Mental Accounts ;241
14.2.1; Theory;242
14.3; Intertemporal Issues: Pensions and Savings Policy;249
14.3.1; Intertemporal Choice and Self-Control ;250
14.4; Regulating the Framing of Savings and Pensions Choices;255
14.4.1; Planning Ahead;258
14.5; The Framing of Tax Policies;262
14.5.1; Tax Evasion ;264
14.5.2; Labour Supply and Tax Framing ;265
14.6; Conclusion;269
15;11 Stated Preference and Non-Market Decisions ;271
15.1; Introduction;271
15.2; A Formal Approach to Optimal Decisions;275
15.2.1; Part-Whole and Scope Effects ;277
15.2.2; Elicitation Effects ;279
15.2.3; Responding to Anomalies;282
15.3; Formal Comparison;287
15.3.1; Example 1: WTA Versus WTP;290
15.3.2; Example 2: Elicitation Methods;293
15.4; Summing Up;294
16;References;296
17;Index;324