[Ed. Note: On Friday, May 2 and Saturday, May 3, 2014, the Petrie-Flom Center hosted its 2014 annual conference: “Behavioral Economics, Law, and Health Policy.” This is an installment in our series of live blog posts from the event; video will be available later in the summer on our website.]
Today opened with a plenary talk by Russell Korobkin, who is the Richard C. Maxwell Professor of Law at UCLA School of Law. His talk was titled “The Choice Architecture Problem and Health Care Decisions.”
He began by suggesting that the fundamental problem that unites the conference is that efficient health care decisions are often too difficult for boundedly rational individual to make optimally. Classical economics suggests that revealed preferences match predicted hedonic experience. Behavioral economics shows us that this is not true, and provides insights into why. The million dollar question is what should policy makers do with these insights.
Yesterday, most of discussion oriented around the solution of libertarian paternalism. But as Korobkin notes, that is just one approach and it has several drawbacks that keep it from providing a complete solution. First, policy makers don’t always know what is best, so we don’t know which way to nudge. Second, the best choice is often heterogeneous. Third, the best choice for individuals is not necessarily socially optimal. With these limits in mind, Korokin’s central claim is that the menu of non-coercive responses to bounded rationality should be expanded. He proposes two additional choice architecture options: (1) simplification, and (2) libertarian welfarism.