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Social Theory and Practice

Volume 41, Issue 4, October 2015

Preference, Choice, and (Libertarian) Paternalism

Robert Sugden
Pages 579-598

Looking for a Psychology for the Inner Rational Agent

Research in psychology and behavioral economics shows that individuals’ choices often depend on “irrelevant” contextual factors. This presents problems for normative economics, which has traditionally used preference-satisfaction as its criterion. A common response is to claim that individuals have context-independent latent preferences which are “distorted” by psychological factors, and that latent preferences should be respected. This response implicitly uses a model of human action in which each human being has an “inner rational agent.” I argue that this model is psychologically ungrounded. Although references to latent preferences appear in psychologically based explanations of context-dependent choice, latent preferences serve no explanatory purpose.