Are we relying too much on behavioral economics?

George Loewenstein and Peter Ubel say yes.  Often there is no nudge-based free lunch and we need a straightforward relative price shift:

Behavioral economics should complement, not substitute for, more substantive economic interventions. If traditional economics suggests that we should have a larger price difference between sugar-free and sugared drinks, behavioral economics could suggest whether consumers would respond better to a subsidy on unsweetened drinks or a tax on sugary drinks.

But that’s the most it can do. For all of its insights, behavioral economics alone is not a viable alternative to the kinds of far-reaching policies we need to tackle our nation’s challenges.

There is much more here, hat tip to Mark Thoma.  Loewenstein, of course, is one of the pioneers of…behavioral economics.  (If you're wondering, I don't agree with a number of their examples, but I do agree with their overall point.)


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