On the 'cashing out' hypothesis and 'soft' and 'hard' policies

In the literature on paternalism that has grown out of the behavioural economics 'revolution', a distinction is drawn between 'hard' and 'soft' policies. Although this hard/soft distinction seems to be motivated by the thought that the two policy types might have different implications for individual liberty, there is a claim that 'hard' policies are normatively superior to 'soft' for 'efficiency' reasons. We show, by appeal to an esteem-based model of 'soft' policy that this claim is not valid in general. We also expose a number of conceptual mistakes in what many seem to have identified as the normative implications of behavioural economics.

Research highlights►Show in an esteem model that 'hard' are not necessarily superior to 'soft' policies. ►Expose a number of conceptual mistakes in normative behavioural economics. ►Argue that when it comes to welfare analysis, the correct model matters.