by Christopher Koopman, Nita Ghei
August 28, 2013
Regulatory agencies have traditionally focused on mitigating the harm imposed on individuals by market failures, that is, harm caused by such things as pollution, misleading advertising, and unsafe products. In the past few years a new framework has arisen focused on attempting to mitigate the harm individuals cause themselves as a result of what the agencies view as “irrational” behavior. Government increasingly began to intervene to “nudge” consumers toward “better” choices through regulation, arguing this improves consumer welfare. The restriction of consumer choices is then counted as a benefit rather than a cost of regulation. As much of the research highlighted in this paper shows, this approach is dubious.