The Constitutional Economics Network Working Papers 04-2016
In the light of irrational behaviour and decision biases leading people to commit systematic blunders, Thaler and Sunstein (2003) presented in their approach of libertarian paternalism the concept of choice architecture, to face the problem of wrong decisionmaking and resulting welfare losses by "Nudging" irrational agents. The debate about this approach focuses on its compatibility with libertarian principles, on its welfare-enhancing character and on the knowledge problem about peoples' true preferences. The goal of this paper is to show in part I that with recourse to contract theory, applied constitutional economics provides a justification of both the libertarian character and the profitability of libertarian paternalism. The use of libertarian paternalistic policies for environmental in particular to promote the acceptance and purchase of climate-friendly and sustainable LED bulbs can be justified as a selfbinding commitment induced by hierarchical preferences for sustainability. Referring to the Condorcet Jury Theorem, stating that 1) an expert jury is always more competent than a single expert and that 2) for large juries, group competence tends to infallibility with an increase in group size, libertarian paternalism for ecological goals can be defended against the knowledge problem. In part II an extension of the Condorcet Jury Theorem relaxing its restrictive assumptions of binary choice, homogeneous and independent voters, investigates its applicability and reliability for paternalistic interventions and allows a new perspective in the debate of choice framing paternalism, namely the concept of "social nudging" to promote social long-term goals. This paper provides an approach of effective choice framing by applying the CJT and implementing expert juries with the subsidiary principle. It investigates with regard to the support of sustainable "lightconsumption" how far institutions should go in shaping choice situations of consumers to promote their welfare.