The standard economic approach to policy evaluation relies on the assumption of rational revealed preferences, which holds that people always choose what is best for them, that their choices do not depend on seemingly inconsequential frames, and that the preferences revealed by their choices are transitive and complete. Despite its centrality to modern Public Economics, this assumption may seem stringent from a psychological perspective. Indeed, the ostensible purpose of many important public policies is to address the concern that people do not always choose what is best for them, and that the determinants of consumer behavior extend beyond narrow self-interested optimization. For example, many countries have established government bureaus that offer consumer protection to guard against the possibility that firms may attempt to exploit unsophisticated buyers. A number of countries have also created “behavioral insights” teams, the role of which is to leverage findings from psychology and Behavioral Economics to formulate more effective government policies. Policy makers often justify otherwise standard policies such as “sin taxes” on cigarettes, alcohol, sugary drinks, and similar goods on the grounds that they discourage harmful behaviors. Arguments for mandatory retirement savings programs often reference consumer myopia.
The existence of such policies, as well as various empirical findings in Behavioral Economics, suggest that the standard approach in Public Economics to policy evaluation may yield misleading conclusions about the welfare effects of some policies, and is simply inapplicable to other policies that influence behavior through framing effects, such as those that determine salience. The rapidly expanding field of Behavioral Public Economics combines the methods and insights from Behavioral Economics and Public Economics to (i) supplement the Public-Economics toolbox with methods that allow for more robust evaluations of real-world policies, (ii) develop innovative policy tools, and (iii) explain why consumers’ responses to policy incentives are sometimes anomalous.
My recent work in this area involves applications of Behavioral Welfare Economics to specific policy issues. Some of the older papers listed below pre-date my work on Behavioral Welfare Economics, and consequently were not informed by the same set of tools. That work is what stimulated my interest the problem of policy evaluation with behavioral decision makers, and led me to develop a formal normative framework.
Publications
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Working Paper, March 2021
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Working Paper, May 2021
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Working Paper, December 2020
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Handbook of Behavioral Economics – Foundations and Applications 1, B. Douglas Bernheim, Stefano DellaVigna, and David Laibson (eds), Chapter 5, Elsevier, 2018, pp. 381-516
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American Economic Journal: Economic Policy 8(4), November 2016, 41-69
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Econometrica 83(5), 2015, 1877-1911
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American Economic Review 105(9), 2015, 2798-2837
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Behavioural and Experimental Economics, S. Durlauf and L. Blume (eds.), The New Palgrave Economics Collection, Palgrave Macmillan, 2009, 51-58.
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Behavioral Economics and its Applications, Peter Diamond and Hannu Vartianen (eds.),Princeton University Press, 2007, pp. 7-77
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Swedish Economic Policy Review, 12, 2005, 99-144
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American Economic Review, 94(5), 2004, 1558-1590
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Living with Defined Contribution Pensions, Olivia S. Mitchell and Sylvester J. Schieber (eds.), University of Pennsylvania Press, Pension Research Council, the Wharton School, University of Pennsylvania, 1998, 38-68
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1996 Proceedings of the Eighty-Ninth Annual Conference on Taxation, National Tax Association, Washington, DC, 1997, 28-36
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Facing the Age Wave, David Wise (ed.), Hoover Institution Press: Stanford, CA, 1997, 30-56
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American Economic Review, 86(3), 1996, 349-373
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Tax Policy and Economic Growth, Washington, DC: American Council for Capital Formation, 1995, 1-30
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Tax Policy for Economic Growth in the 1990s, Washington, DC: American Council for Capital Formation, 1994, 53-78
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Retirement in the 21st Century: Ready or Not? Employee Benefit Research Institute, 1994, 73-81
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Federal Reserve Bank of Philadelphia Business Review, September/October 1993, 3-20
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Tax Policy and the Economy, 7, 1993, 73-110
Collaborators
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Assistant Professor, Questrom School of Business, Boston University
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Professor Emeritus, Columbia Business School
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University Professor of Economics & Accountancy, and Academic Director, Global Financial Literacy Excellence Center (GFLEC), George Washington University
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Professor, Texas A&M University
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Student, Stanford
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Visting Assistant Professor, Pamona College
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Chief Economist, Apartment List
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Bing Professor of Neuroscience, Behavioral Biology and Economics at the California Institute of Technology
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Julius Silver Professor, NYU
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Professor and Provost, University of Wisconsin-Madison
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Assistant Professor, UC Berkeley
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Professor of Business Administration, University of Rochester