4 - Preference Biases

Summary

The evidence for preference biases is very often flawed, incomplete, or misinterpreted. For example, inconsistent rates of time discount are largely eliminated when considered relative to the individual’s perception of time. Preference reversals in real time from patient to impatient behavior occur only in a minority of cases. Time inconsistency, when it occurs, need not be associated with actual harms to decision-makers. Evidence for the existence of endowment effects is problematic. Gaps between willingness to pay and willingness to accept have no normative significance. The evidence for impact bias is confused and weak, and to the extent that it occurs, its function has eluded most analysts. In addition to these concerns, we find that the preferences typically treated as normatively superior by behavioral paternalists are often implicated by biases as well.