The Political Economy of Paternalism

The study analyzes and predicts how individual preferences and majoritarian political decisions about the extent of paternalism in a society depend on the distribution of genuine preferences for economic activities, the distribution of information about these preferences, and the distribution of capabilities for individual decision-making. The theory explains the observed heterogeneity of preferences and suggests that citizens whose tastes differ from the mean of the population and those with high decision-making abilities favor a libertarian regime. To the extent that decision-making ability is a learnable activity, a feed-back loop emerges between anticipated majority decisions about paternalism and individual investments in citizensown decision-making abilities, leading to a multiplicity of majoritarian political equilibria