There was a New York Times op-ed last week entitled Economics Behaving Badly which argues that politicians are becoming over-reliant on behavioral economics to solve problems it was never meant to solve.

While I agree with the broader points of the article, I'm amazed to see the two professors (one of economics and psychology) write -- and the New York times publish -- a piece with blatant inaccuracies.

  
From the article:

As policymakers use it to devise programs, it’s becoming clear that behavioral economics is being asked to solve problems it wasn’t meant to address. Indeed, it seems in some cases that behavioral economics is being used as a political expedient, allowing policymakers to avoid painful but more effective solutions rooted in traditional economics.

Take, for example, our nation’s obesity epidemic. The fashionable response, based on the belief that better information can lead to better behavior, is to influence consumers through things like calorie labeling — for instance, there’s a mandate in the health care reform act requiring restaurant chains to post the number of calories in their dishes.

Calorie labeling is a good thing; dieters should know more about the foods they are eating. But studies of New York City’s attempt at calorie posting have found that it has had little impact on dieters’ choices.
 
So, here's what's so incredible about this.  A mandate requiring restaurant chains to post calories is not a behavioral economics solution. It's a traditional economics solution.  Even more incredibly, the reason that studies have found that calorie posting has little impact on dieters choices is, I would bet money on it, largely due to behavioral factors.

Let me explain.  Calorie labeling is rooted in the belief that people don't understand the health implications of their decisions.  They need more information.  This is what economists call an information asymmetry.  It's a market failure. Calorie labeling addresses the information asymmetry.  Information campaigns are a traditional tool to address a market failure.

Now why don't dieters make different decisions when given this information?  Surely the price differential between healthy and unhealthy food is part of the answer.  But, the diet and fitness industry is enormous.  People are clearly willing to pay money to slim down.  So, why don't they do it up front in their diet choices?  Why do we continually make New Year's resolutions to lose weight, and fail do to so?  These questions are rooted squarely in behavioral economics.  

Which is to say, the reason that calorie posting (a traditional economics intervention) had little impact on dieter's choices is almost certainly attributable in part to the fact that the intervention did not take behavioral economic into account. 

Ironic.