By relying on experimental psychology work, behavioral economics today calls into question the famous hypotheses of rationality of homo oeconomicus. However, Gilles Saint-Paul warns against the risk of paternalism which could derive from these theoretical advances.
With his work The Tyranny of Utility, Gilles Saint-Paul, professor of economics and member of the Toulouse school of economics, offers an original perspective on the most recent developments in behavioral economics (behavioral economics) by associating them with the rise of paternalistic measures taken by public authorities in the United States and Europe. These measures aim to regulate individual choices in a more or less intrusive and coercive manner, with the stated aim of ensuring that individuals act in their own interest. Through a philosophical argument, the author warns against the threat that economic science poses to individual freedoms.
The fall of thehomo economicus
The first part of the work presents how developments in behavioral economics have considerably weakened the standard hypothesis in economics of the rationality of the individual, to on the contrary favor the emergence of a conception of the individual with personalities multiple (multiple selves) and inconsistent.
As Saint-Paul indicates, economic science was until recently the last refuge of the rationalist conception of the individual inherited from the philosophers of the Enlightenment. This conception has been historically maintained by economists through the famous figure of thehomo economicus. In this regard, one of the virtues of this work is to perfectly summarize what the concept of rationality contains for an economist: the rationality of an individual is defined by the possession of preferences on a set of results and by the fact that these preferences are coherent (the axiom of transitivity). This definition of rationality, which was mathematically formalized in the 1940s and 1950s, assumes that the behavior of any individual can be described by a single utility function through the principle of revealed preferences : by hypothesis, a rational individual’s choices reflect his preferences, such that it is by definition true that he always acts in such a way as to maximize his utility.
The author rightly emphasizes that these postulates on individual rationality have never had empirical foundations. On the contrary, the behavioral hypotheses posed by economists from the beginning of the XXe century first had a justification methodological (p. 21). This becomes evident by the link that the author makes between the principle of rationality and the two fundamental theorems of welfare economics. In essence, these theorems establish that for any social welfare function aggregating the preferences of individuals in a given way, a) any allocation of resources corresponding to an equilibrium situation is Pareto-optimal and b) any allocation Pareto- optimal can be obtained as a market equilibrium. In this theoretical framework, state intervention in the economy is then narrowly defined: it can only be justified in the event of market failures and more particularly externalities (ie when the decisions of an agent have an impact on the situation of another agent despite the absence of transaction between them) and redistributive objectives (a Pareto-optimal situation can be very unequal).
However, the results from behavioral economics over the past twenty years have considerably weakened the rationalist conception of the individual, calling into question in the process the definition of the economic role of the State. Behavioral economics indicates that individual choices in the context of more or less recurring economic decisions are affected by several systematic biases: cognitive dissonance, inconsistency of inter-temporal choices, substitution between intrinsic motivation and extrinsic motivation, effect of context on the decision, etc. One of the main consequences of these results is to call into question the conception of a unified individual in favor of a conception in terms of multiple personalities (multiple selves): the individual is then akin to a set of personalities succeeding one another over time, each of which can be described by a utility function, without however coherence between the choices of these different personalities being guaranteed. In this context, the principle of revealed preferences is no longer operational since there is no indication that the choices of a personality reflect the preferences of a future or alternative personality. Consequently, along with the traditional conception of rationality, the foundations of utilitarian limits to state intervention in the economy are crumbling, opening the way to paternalism.
The rise of paternalism
The second part of the work is dedicated to showing how the results of behavioral economics justify the very rapid increase in paternalistic measures taken by public authorities in the United States and Europe: multiplication of prohibitions on the sale or consumption of alcohol or tobacco, introduction of messages of “ prevention » relating to the consumption of certain types of products or the adoption of so-called “ at risk », establishment of compulsory retirement savings plans, etc. This second part develops a warning message in the face of these developments: by scientifically justifying ever more intrusive interventions by the State in the lives of citizens, modern economic science threatens to undermine the fundamental principle of freedom on which societies are built. Western countries for more than two centuries.
The thesis developed by Saint-Paul can be simply summarized by the following equation: utilitarianism + behavioral economics = paternalism. The author argues that economic science has historically been built on utilitarian and consequentialist foundations: from the point of view of economic science, choices or moral principles (such as freedom) can only be judged according to of a cost/benefit calculation and have no intrinsic justification. If economics has generally recommended limited state intervention in the economy, it is not on the basis of moral or fundamental principles but because theoretical results such as those of welfare economics demonstrated that this intervention was not desirable. Behavioral economics precisely calls into question this utilitarian conclusion: by demonstrating the non-rationality of individuals, behavioral economics indicates that, from a consequentialist and utilitarian point of view, state intervention must extend . However, this is no longer an intervention aimed at correcting inequalities or remedying externalities but rather an intervention aimed at protecting individuals from the negative effects of their decisions on themselves. This is indeed the fundamental characteristic of any form of paternalistic policy: a third party knowing the “ true » an individual’s preferences (or, alternatively, knowing what makes them “ really » happy) will put in place more or less coercive measures so that this individual acts in his true interest.
From this point of view, the standard framework of economic analysis is completely compatible with one form or another of paternalism, as long as it is scientifically proven that such paternalism is socially efficient. We then see what the author calls the “ post-utilitarian paradigm » (p. 65): an attempt to reconstruct social preferences when behavioral biases have been identified. This post-utilitarian paradigm opens the way to a multitude of more or less intrusive interventions: restrictions on choices, taxation sometimes reaching quasi-prohibitive levels, internalization of pseudo-externalities such as envy, manipulation of preferences and beliefs ( possibly by the disclosure of false information as was the case in France during the Chernobyl nuclear accident). The author sets out to show to what extremes this logic has already led: to the extent that an individual can no longer be held totally responsible for his actions (since he is made up of multiple personalities), the traditional incentive schemes of the economist are no longer operational. More or less coercive preventive measures are then recommended. In other cases, it will be economically efficient to transfer responsibility for the actions of a non-rational individual to a rational individual, for example by making the owner of a bar responsible for the acts committed by his customers under the influence alcohol, including outside its establishment.
A philosophical argument
The philosophical nature of the argument is fully assumed by the author: on several occasions, in fact, he indicates that it is useless to seek to discuss the results of behavioral economics on the scientific ground. This is an original and also welcome position. The originality of the approach comes from the fact that it is traditionally on the technical and scientific level that the results of behavioral economics are discussed. A lively debate is currently running through the discipline on the “ external validity » results established within the framework of very specific experiments. Going against the grain of these discussions, the author takes the contributions of behavioral economics as given. This is a risky but welcome decision because it compensates for the almost complete absence of any philosophical and ethical reflection on the part of the supporters of behavioral economics.
The argument deployed by Saint-Paul presents some striking similarities with that developed by Friedrich Hayek in his work The road of servitude, particularly as to the underlying idea of the “ soapy slope “. Even if on the surface the paternalistic measures justified by modern economics are benign, they reflect a normalization of the intrusion of the State into the private lives of citizens which can only increase as economists, psychologists and neurologists will document ever more behavioral biases. This development can only ultimately contradict the fundamental liberal principle of the primary character of individual freedom (and the principle of responsibility that accompanies it). The problem with this approach, however, is obvious: the reader will only be convinced by Saint-Paul’s argument if he accepts his liberal premises according to which freedom is a fundamental value which does not suffer of none exception, whatever the circumstances. However, liberal and libertarian philosophy, like utilitarianism, suffers from its own problems of internal consistency and does not gain the support of the entire population. In this regard, Saint-Paul’s thesis could have relied on another aspect of Hayek’s work: the epistemological aspect, consisting of showing that despite the behavioral biases of individuals, the market remains the most effective institution. more effective in aggregating individual preferences. Robert Sugden (2008), for example, recently demonstrated that the fact that each individual has multiple personalities does not call into question the ability of the market to optimally satisfy the preferences of each personality at a given time. More generally, the economy experimental (which is distinguished from behavioral economics) convincingly shows that rationality “ ecological » of the market is not necessarily based on the rationality of individuals. Such a defense utilitarian » of the market does not replace Saint-Paul’s deontological critique of paternalism, but can probably complement it effectively.