Document Type



Harvard Law Review, Vol. 127, 2014


This article argues that the preference of behavioral law and economics (BLE) for regulatory approaches that preserve “freedom of choice” has led to incomplete policy analysis and ineffective policy. BLE has been broadly regarded as among the most promising new developments in public policymaking theory and practice. As social science, BLE offers hope that better understanding of actual human behavior will provide a sounder foundation for the design of regulation. As politics, BLE offers a possible political consensus built around minimalist forms of government action commonly known as nudges that preserve freedom of choice. But these two seductive dimensions of BLE are in much deeper tension than previously recognized. Put simply, it would be surprising if the main policy implications of evidence documenting the failure of individual choice were a turn toward regulatory instruments that preserve individual choice.

More specifically, taking the implications of behavioral social science fully into account suggests at least three routes that BLE does not adequately pursue. First, the “choice preserving” policies in which BLE is so heavily invested are not likely to be effective enough in important policy contexts – ironically, for reasons BLE itself identifies. Second, the default rules so central to BLE are often better viewed as preserving the illusion of choice. In practice, they effectively function as implicit mandates. This illusion affects policymakers as well: the view that people can always opt out has led policymakers to set these defaults at the wrong levels. Third, BLE has neglected the ways in which behavioral market failures interact with traditional market failures. In areas like green energy, fuel economy, and environmental regulation, BLE has missed the implications of this interaction for policy design. A more complete framework generates policy prescriptions beyond both nudges and neoclassical economic prescriptions.

We illustrate the limits of BLE’s commitment to freedom of choice by analyzing three of the most important areas for current policy: retirement savings, consumer credit, and environmental protection.

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