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Quotation of the Day…

… is from page 208 of Richard Epstein’s wisdom-packed 2003 book, Skepticism and Freedom:

If irrational decisions hurt overall performance, who is likely to pick them up sooner?  On this point, one is hard pressed to think of a form of government regulation that could outperform good management sense.  The only practical application of behavioral economics is to strengthen the case for private institutions.

Some neoclassical economists have indeed greatly overstated the degree to which individual human actors in markets are textbook-rational and generously informed.  And theories and models built on such overstated assumptions are often mistaken as being the chief bases for trusting markets to generate acceptable outcomes.  But, it seems to me, the typical behavioral economist greatly overstates the degree to which individual human actors in government are textbook rational and generously informed.  It is an error – rich in irony – to use theories and models built on such overstated, if always implicit, assumptions about the superhuman cognitive capacities of government officials to justify government regulation of private behaviors and markets.


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