A couple items recently came across my desk that were somewhat critical (at least in parts) of the use of behavioral economics in public policy making - in particular the idea that government can use insights from behavioral economists to nudge us into making the "right" decisions.
The first item is this new paper by Viscusi and Gayer for the Brookings Institute. They reasonably ask why behavioral economists haven't spent nearly as much time studying the irrationality of bureaucrats, politicians, and policy makers as they have studying the irrationality of consumers. Here's an extended quote (footnotes omitted) from their discussion on the propensity of government officials to suffer from a phenomenon called ambiguity aversion:
“Ambiguity aversion is a form of irrational behavior and should not be confused with risk aversion in which people are averse to the risk of incurring a large loss . . .
Government policies frequently reflect this ambiguity aversion with novel risks. For example, court rulings tend to demonstrate a bias against innovation and the attendant uncertainties
of novel drug products. In situations where there are adverse health effects from new drugs, the courts are more likely to levy sanctions against the producer. This bias on behalf of the public is also reflected in product liability case experiments using a sample of judges participating in a legal education program. The judges considered hypothetical cases involving novel drugs and their associated liability risks. When given a choice between a new drug posing an uncertain risk or another drug with a higher known risk, most of the judges recommend that the company market the latter drug.
Another instance of ambiguity aversion involves genetically modified organisms (GMOs) . . . GMOs have come under fire and are increasingly subject to potential regulation throughout the world. . . Critics have characterized GMO foods as being very risky products of biotechnology, labeling them “Frankenfoods.” The policy trade-off involved is that GMOs may pose uncertain risks that currently are believed to be low in magnitude, but they reduce the cost of producing agricultural products, which in turn lowers food prices and promotes better nutrition. ”
They go on to hint at the idea (though never come right out and say it) that the precautionary principle is a behavioral bias.
The other item was an article in the The Guardian that asks whether all the cutesy messages by companies and governments encouraging us to "do the right thing" are really all that helpful or more effective than traditional policies. The conclusion:
“And another lesson, not mentioned by the team, but by other economists , is that it is very important to question whether the choices of the behaviourists, whether in government or in ad agencies where nudging opens up a yet more glorious prospect, are invariably wise and good. What, for instance, made the Highways Agency think that a made-up kiddie quote indebted to the Pret school of copywriting condescension (“a little girl asked us why we didn’t make gingerbread men”) might be preferable to speed cameras that build up points for offending drivers, as opposed to irritation in the law-abiding? Or preferable, indeed, to nothing? Maybe a little girl was involved.”