Behavioral economics repackaged government intervention during the neoliberal era

Evidence

Yet, from its beginnings in the 1970s and 1980s, proponents of behavioral economics stressed the relevance of their research for policy-making—not the least to secure funding. In 1986, the editors of the first handbook of behavioral economics claimed that “several studies suggest a new rationale for government intervention in the economy, given the failure of markets to promote a classical optimization due to individual judgment bias.” The acknowledgment that markets might fail to provide for the common good because individuals were unable to act in accordance with the rules of economic logic and their own well-understood interests is remarkable in an age of deregulation when marketization and neoliberalism allegedly triumphed. Simultaneously, behavioral economists promised to offer the means to use and overcome people’s judgment biases by designing the choice architecture of the marketplace. Thus, at a time of increasing welfare costs and shrinking state financial capacities to conduct economic policy, they offered a low-cost and allegedly non-intrusive way to enlarge government intervention. Despite Thaler and Sunstein’s efforts to describe their political program as libertarian paternalism, not diminishing people’s freedom of choice but only rearranging the choice architecture and behavioral environment, to many neoliberals it smacks of old-school paternalism. Whereas for Hayek the limits to individual knowledge offered a reason to assume that only market interaction can produce a desirable outcome, behavioral economists generally accept the government’s capacity to define the desirable outcome and arrange the market accordingly. As P. W. Zuidhof describes the conflict, neoliberals want to secure and govern through markets, while behavioral economists try to offer means to govern markets by directly influencing the actors’ choices. — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 346

Categorization

• XREF: Directly fractures the crude caricature of a monolithic neoliberal era: nudge economics emerged as a rival policy project inside that same period, aligning with the reader’s goal of mapping internal varieties and debates within neoliberal thought. — connects to: The previous generation of conservative economists accepted broad government intervention — Angus Burgin, The Great Persuasion: Reinventing Free…, 466; Post-crisis behavioral economics reduced Keynes to irrationality that disrupts general equilibrium. — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 729; Behavioral economics offers the sensation of reform without reform — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 746 (+6 more)

Broader Connections

• Behavioral economics shares origins with, rather than refutes, neoliberal thought #corroborates (0.85) — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 39
• Behavioral economics serves neoliberal ends by defining the limits of state intervention. #expands (0.82) — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 347
• Neoliberal paternalism in welfare traces back to 1930s European neoliberals, not 1980s social conservatism #responds-to (0.75) — Jessica Whyte, The Morals of the Market, 216