The Tyranny of Utility

The Tyranny of Utility: Behavioral Social Science and the Rise of Paternalism

Gilles Saint-Paul
Copyright Date: 2011
Pages: 174
  • Cite this Item
  • Book Info
    The Tyranny of Utility
    Book Description:

    The general assumption that social policy should be utilitarian--that society should be organized to yield the greatest level of welfare--leads inexorably to increased government interventions. Historically, however, the science of economics has advocated limits to these interventions for utilitarian reasons and because of the assumption that people know what is best for themselves. But more recently, behavioral economics has focused on biases and inconsistencies in individual behavior. Based on these developments, governments now prescribe the foods we eat, the apartments we rent, and the composition of our financial portfolios.The Tyranny of Utilitytakes on this rise of paternalism and its dangers for individual freedoms, and examines how developments in economics and the social sciences are leading to greater government intrusion in our private lives.

    Gilles Saint-Paul posits that the utilitarian foundations of individual freedom promoted by traditional economics are fundamentally flawed. When combined with developments in social science that view the individual as incapable of making rational and responsible choices, utilitarianism seems to logically call for greater governmental intervention in our lives. Arguing that this cannot be defended on purely instrumental grounds, Saint-Paul calls for individual liberty to be restored as a central value in our society.

    Exploring how behavioral economics is contributing to the excessive rise of paternalistic interventions,The Tyranny of Utilitypresents a controversial challenge to the prevailing currents in economic and political discourse.

    eISBN: 978-1-4008-3889-9
    Subjects: Economics, Political Science

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Acknowledgments
    (pp. vii-x)
  4. Introduction
    (pp. 1-4)

    In the movieRoman Holiday,some of the most delightful scenes involve Gregory Peck and Audrey Hepburn riding an old scooter through the streets of Rome, and they seem to enjoy it thoroughly. We are all familiar with those images that have been reproduced and diffused to the point of becoming contemporary icons. Yet were the movie remade today, to remain realistic both protagonists would need to wear a helmet or else soon be arrested and fined by the police. As a result, the characters’ scooter rides would be boring to them, and presumably even more so to the public....

  5. I The Demise of the Unitary Individual
    • 1 Political Organization and the Conception of Man
      (pp. 7-13)

      Westerners are proud of their political institutions. They associate them with a high material standard of living, a great variety of individual choices, freedom of speech, and checks and balances that prevent governments from drifting toward despotism. Because these institutions are so satisfying, they are tempted to believe that they are universal. That means that they are not inherent to the West and could be adopted by any culture, without that culture being changed. It is such a view, for example, that underlines the (now somewhat discredited) neoconservative agenda of spreading democracy to the Middle East. Some people disagree with...

    • 2 The Challenge to the Unitary Individual in Western Thought
      (pp. 14-18)

      In the nineteenth century various strands of thought started challenging the hypothesis of a rational unitary individual and eventually achieved considerable influence. One prominent critic was Nietzsche. For Nietszche, the individual’s attempt to develop a consistent self and to make sense of and conceptualize objective reality is a miserable lie that is socially constructed by weaker individuals in order to rationalize their lack of vitality. One can be connected with reality, if it exists, only through instinct, intuition, and the senses, and that experience can transcend its pure animal nature only to the extent that it can be turned into...

    • 3 Economics: The Last Bastion of Rationality
      (pp. 19-40)

      Many people traditionally think of economists as advocates of laissez-faire, that is, letting the free operation of markets determine how resources are allocated throughout society. Where does this presumption come from? It comes from some central results of economic theory which predict that, in some sense, free markets lead to desirable outcomes from the point of view of global efficiency.

      Essentially these results come from two observations. First, competitive markets allow all voluntary transactions to take place. Second, all voluntary transactions are mutually advantageous and therefore increase the welfare of both parties. A competitive equilibrium is a situation where, given...

    • 4 Economics Goes Behavioral
      (pp. 41-50)

      In recent years economic theory has moved away from its foundations based on the assumptions of rational individuals and on the central role of revealed preferences. The driving forces behind that evolution are threefold. First, the unitary paradigm appeared inconsistent with some empirical regularities of human behavior. Second, and relatedly, there was dissatisfaction with the methodological rather than empirical basis for economics’ depiction of individual choices; it makes sense to construct economic theory on what students of individual behavior—psychologists—have uncovered rather than on the modeler’s introspection. Third, the standard paradigm was getting close to exhaustion in terms of...

    • 5 From Utility to Happiness
      (pp. 51-60)

      From the observation that, because revealed preferences fail, actions cannot be used as the basis of a theory of individual welfare, it is natural to propose, as an alternative, that one should use some direct measure of individual well-being, such as happiness. The recent literature on behavioral economics includes a growing research on its determinants. In general, proponents of this approach claim that they are measuring the relevant utility, that is, the flow of an individual’s well-being, in a direct way. Some authors see a superiority over revealed preferences even independently of the psychological phenomena discussed in the preceding chapter,...

  6. II The Rise of Paternalism
    • [Introduction to Part II]
      (pp. 61-64)

      The development of behavioral economics and happiness research undermines the “last bastion” of rationality. This is likely to lead to a new approach to social welfare and a new set of policy prescriptions. The following chapters analyze the logic of this new approach and its connection with the rise of paternalism and the curtailment of individual freedom. I highlight how the paternalistic policies are guided by utilitarian principles that are modified in order to take into account the pervasive view that individuals are not unitary and suffer from behavioral bias. I consider how behavioral economics, in particular, contributes to this...

    • 6 Post-Utilitarianism: Searching for a Collective Soul in the Behavioral Era
      (pp. 65-76)

      If, as behavioral economics and other social sciences contend, we cannot trust people to make responsible choices according to their own well-defined preferences, how can any policy advice be implemented? People who want to formulate advice need to reconstruct some notion of collective preferences. To date, there is no equivalent of the fundamental welfare theorems that would provide a scientific basis for defining the scope of government intervention, if one no longer assumes the validity of revealed preferences. Therefore, as we shall see, the policy prescriptions that stem from behavioral economics are piecemeal rather than principled. However, they obey at...

    • 7 The Policy Prescriptions of Behavioral Economics
      (pp. 77-96)

      Behavioral economics opens a whole new range of potential policy interventions and regulations. Traditional economics supports such regulations, as we have seen, provided there is a well-documented externality, or provided there are distributional concerns. In both cases, interventions should be as efficient as possible. This means using Pigovian taxes and subsidies for dealing with externalities, and transfers and income taxes for redistribution. In contrast, behavioral economics can justify restricting individual choices more directly, with the goal of preventing people from harming themselves, or harming others in a subjective way.

      It should be emphasized that the drift toward paternalism is entirely...

    • 8 The Modern Paternalistic State
      (pp. 97-114)

      The preceding chapters have discussed how policy prescriptions can be derived from the post-utilitarian view. The present chapter initiates a journey through modern paternalism. Through a number of examples, we shall investigate its logic, or lack thereof, and relate it to the intellectual apparatus we have analyzed. An important point here is that only a fraction of the paternalistic interventions that we observe are grounded on the intellectual apparatus described in the preceding chapters. Conversely, many proponents of behavioral economics are in favor of a moderate dose of paternalism and would not approve of all the policies that we shall...

    • 9 Responsibility Transfer
      (pp. 115-122)

      The examples discussed in the previous chapter illustrate how modern paternalism operates. For each individual action (e.g., taking the train), a chain of potential consequences is derived, and if one of them is harmful (the individual indulging in “improper touching”), then this justifies penalizing the action that initiates this chain of consequences in addition to the penalties put upon the illegal act at the end of the chain. The underlying logic is the mix between consequentialism and utilitarianism: all we care about is the average effect (in some statistical sense) on our social welfare function of the individual taking the...

    • 10 The Role of Science
      (pp. 123-133)

      The organization of the liberal society is based on the welfare theorems discussed in chapter 5. Although these theorems are “scientific” in that their results are rigorously derived from explicit assumptions that are themselves cast in mathematical language, their nature is rather logical and philosophical. They are not scientific in the sense of the natural sciences; they do not attempt to uncover any law of human behavior that could provide guidelines on what exactly the government should do.

      This is in sharp contrast to the paternalistic state. The paternalistic state needs precise information on the behavioral mechanisms underlying human actions;...

    • 11 Markets in a Paternalistic World
      (pp. 134-145)

      So far we have discussed how post-utilitarianism attempts to regulate individual actions and interactions with others. We now discuss how it is affecting the more impersonal and large-scale interactions that take place in markets.

      In a market we expect supply and demand to be equalized because prices adjust until that equilibrium point is reached. If there is oversupply initially, we think prices will fall. If there is an excess demand, they will rise. And we believe that the point where supply equals demand is the efficient one, because at that time the price reflectsboththe true cost of producing...

    • 12 Where to Go?
      (pp. 146-154)

      Our discussion has revolved around the following argument: utilitarian foundations for limited government are quite shaky because they rest on the assumption of unitary, responsible individuals. Empirical deviations from that assumptions are numerous and well documented. This observation has led to a new brand of economics—happiness research and behavioral economics—which ends up typically advocating far more government involvement in private matters than the preceding brands of economics. At the same time we do observe an explosion of preventive laws that constrain a growing share of perfectly legitimate individual choices. While behavioral economics does not necessarily endorse all those...

  7. References
    (pp. 155-160)
  8. Index
    (pp. 161-163)