Reconciling normative and behavioural economics: The problems to be solved

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Abstract

We review the problem of reconciling normative and behavioural economics. In conventional welfare economics, individuals’ preferences are assumed to be coherent, and the satisfaction of those preferences is the normative criterion; but this approach breaks down if preferences are incoherent. Traditionally, the preference-satisfaction criterion has been interpreted in three conceptually different ways, emphasising respectively the normative value of happiness, self-assessed well-being, and freedom. If individuals’ preferences are incoherent, these interpretations diverge, leading to fundamentally different strategies for dealing with the reconciliation problem, and new questions are raised about whether normative economics should be addressed to governments or individuals.
Original languageEnglish
Pages (from-to)553-567
Number of pages15
JournalSocial Choice and Welfare
Volume38
Issue number4
Early online date11 Dec 2011
DOIs
Publication statusPublished - Apr 2012

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