“Private Paternalism, the Commitment Puzzle, and Model-Free Equilibrium,” David Laibson, Harvard University

Event time: 
Thursday, March 1, 2018 - 12:00pm to 1:15pm
Institution for Social and Policy Studies (PROS077 ), A002 See map
77 Prospect Street
New Haven, CT 06511
Event description: 


Abstract: Paternalism is a policy that advances an individual’s interests by restricting his or her freedom. In a setting with present-biased agents, I characterize the scope of private paternalism - paternalism implemented by private institutions. Private paternalism arises from two channels: (i) agents who seek commitment because they hold sophisticated beliefs about their present bias, and (ii) agents (naive or sophisticated) who use model-free forecasts to choose organizations that have a history of generating high experiences utility flows for their members (O’Donoghue and Rabin 1999b). When naive consumers are common, private pate4rnalism will be shrouded, explaining why commitment mechanisms are typically shrouded in the labor market (the commitment puzzle). Private paternalism has greater traction when production occurs in the formal sector instead of the informal (household) sector, where monitors are not always present, able, or willing to implement socially efficient forcing mechanisms.

David Laibson is the Robert I. Goldman Professor of Economics and Chairman of the Department of Economics at Harvard University. He leads Harvard Universityʼs Foundations of Human Behavior Initiative. Laibsonʼs research focuses on the topic of behavioral economics, with emphasis on household finance, macroeconomics, aging, and intertemporal choice. Laibson is also a member of the National Bureau of Economic Research, where he co-directs the National Institute of Aging Roybal Center for Behavior Change in Health and Savings, and is a Research Associate in the Aging, Asset Pricing, and Economic Fluctuations Working Groups.

The Behavioral Sciences Workshop is an interdisciplinary seminar series featuring speakers of broad appeal in the behavioral sciences. The workshop is held jointly between the Yale departments of Economics, Political Science, Psychology, and the School of Management (SOM). The workshop is cosponsored by the Center for the Study of American Politics (CSAP) and the School of Management’s International Center for Finance and Whitebox Advisors fund. Lunch will be served.

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