When—if ever—is state control of individual decisions better than self-control?
In the rational consumer model, the answer is never. That paradigm assumes that consumers
know their own preferences, possess all relevant information, process that information correctly,
and make consistent decisions over time. Government interference with individual choices—the
substitution of state control for self-control—can therefore only harm individuals, who would
make optimal decisions on their own.
The rational model has a long history. Many economists still view that model as one useful
approach to positive and normative questions. Other economists and non-economists, however,
believe many consumers are not fully rational. Their alternative assessment arises both from
casual observation of human behavior and from experimental research in behavioral economics
and psychology that appears to challenge the rational consumer model.1
If consumers are not fully rational, the case for self-control rather than state control might seem
less compelling. Government interference would not automatically reduce the well-being of nonrational consumers, since those non-rational consumers might be making sub-optimal decisions
on their own behalf.
I argue, however, that consumer irrationality strengthens, rather than weakens, the case for
self-control. I make that argument in the context of the “War on Drugs”—the US government’s
century-long attempt to eliminate marijuana, cocaine, heroin, and other intoxicating or mindaltering substances. If consumers are rational about drug use, prohibition makes them worse off.
If consumers are not necessarily rational, prohibition might prevent some “bad” decisions to use
drugs unnecessarily, so prohibition may seem worth considering.
As I will explain, however, the War on Drugs is still bad policy — indeed, it’s an even worse policy
if some consumers are non-rational. Prohibition might deter some ill-advised drug use, but its
overall consequences harm irrational consumers more than rational consumers. Self-control as
the approach to drugs might not be perfect, but state control is almost certainly worse.