When behavioral biases have varying sizes, and the State seeks to correct behavior through compulsion, the question is how to design optimal compulsion. One argument is that the amount of compulsion should rise with the size of the bias to be “cured”. A contrary argument is that since...

This paper analyzes the welfare effects of trade liberalization when some individuals suffer from self-control problems and hence consume too much of goods which generate immediate benefits but entail future costs. Within a classic Ricardian model of trade, the welfare efects depend crucially on...

We propose a theory of optimal fiscal policy consistent with the observation that governments typically inherit their predecessors' plans and formulate their policies over a finite future horizon. We use this framework, which we call “Limited-Time Commitment" (LTC), to make two contributions....

Behavioral economists maintain that addictions such as alcoholism, smoking and over-eating represent examples of present-bias in decision making that is fundamentally irrational. In this article, we develop a model of present bias and apparently hyperbolic discounting that is fully consistent...