AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
Rationalizations and Mistakes: Optimal Policy with Normative Ambiguity
AEA Papers and Proceedings
vol. 108,
May 2018
(pp. 98–102)
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.Citation
Goldin, Jacob, and Daniel Reck. 2018. "Rationalizations and Mistakes: Optimal Policy with Normative Ambiguity." AEA Papers and Proceedings, 108: 98–102. DOI: 10.1257/pandp.20181042Additional Materials
JEL Classification
- D11 Consumer Economics: Theory
- D81 Criteria for Decision-Making under Risk and Uncertainty
- D90 Micro-Based Behavioral Economics: General
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- I13 Health Insurance, Public and Private