Rationalizations and mistakes: optimal policy with normative ambiguity

Goldin, Jacob and Reck, Daniel ORCID: 0000-0002-5732-4706 (2018) Rationalizations and mistakes: optimal policy with normative ambiguity. AEA Papers and Proceedings, 108. pp. 98-102. ISSN 2574-0768

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Abstract

Behavior that appears to violate neoclassical assumptions can often be rationalized by incorporating an optimization cost into decision-makers' utility functions. Depending on the setting, these costs may reflect either an actual welfare loss for the decision-maker who incurs them or a convenient (but welfare irrelevant) modeling device. We consider how the resolution of this normative ambiguity shapes optimal policy in a number of contexts, including default options, inertia in health plan selection, take-up of social programs, programs that encourage moving to a new neighborhood, and tax salience.

Item Type:	Article
Official URL:	https://www.aeaweb.org/journals/pandp
Additional Information:	© 2018 American Economic Association
Divisions:	Economics
Subjects:	H Social Sciences > HB Economic Theory
Date Deposited:	13 Jul 2018 09:27
Last Modified:	13 Sep 2024 13:19
URI:	http://eprints.lse.ac.uk/id/eprint/89237

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