Welfare economics and bounded rationality: the case for model-based approaches

Paola Manzini*, Marco Mariotti

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

16 Citations (Scopus)

Abstract

In this paper, we examine the problems facing a policy maker who observes inconsistent choices made by agents who are boundedly rational. We contrast a model-less and a model-based approach to welfare economics. We make the case for the model-based approach and examine its advantages as well as some problematic issues associated with it.

Original languageEnglish
Pages (from-to)343-360
Number of pages18
JournalJournal of Economic Methodology
Volume21
Issue number4
DOIs
Publication statusPublished - 2 Oct 2014

Bibliographical note

Funding Information:
We have greatly benefitted from exchanges with Douglas Bernheim and the comments of the Editors, for which we are grateful. We also thank the audience at the San Sebastian Summer School in Welfare Economics at which we vented some preliminary ideas contained in this paper. Mariotti gratefully acknowledges financial support through a Leverhulme Fellowship. Both authors acknowledge financial support from the ESRC through grant RES-000-22-3474.

Publisher Copyright:
© 2014, © 2014 Taylor & Francis.

Copyright:
Copyright 2014 Elsevier B.V., All rights reserved.

Keywords

  • bounded rationality
  • choice theory
  • welfare

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