Does Behavioral Economics Undermine the Welfare State?

That’s the title of a post by Mike Konczal, who answers it in the negative. The question comes from Karl Smith and is based on a paper by Bryan Caplan and Scott Beaulier. The paper argues that welfare programs expand the set of choices available to people; while that is all good according to traditional economics, if we think that people are inclined to make bad choices (“behavioral economics”), then welfare programs give people more opportunity to make bad choices and hurt themselves. This is particularly a problem because, they claim, “there are good empirical reasons to think that behavioral economics better describes the poor than it does the rest of the population” (p. 4). In other words, if poor people are more irrational, then giving them more choices will hurt them more than other people. To know more, see Does Behavioral Economics Undermine the Welfare State? « The Baseline Scenario.