In his recent works, Sunstein aims to articulate the notion of “behavioral market failures” in order to both make sense and justify the use of nudges within his “libertarian paternalism” framework. Sunstein thinks we need to move beyond this classical understanding of market failures by theorizing behavioral market failures, “understood as market failures that complement the standard economic account and that stem from the human propensity to err”. This is why he introduces the First Law of Behavioral Informed Regulation: in the face of behavioral market failures, nudges are usually the best answer, at least when there is no harm to others.
I will attempt to scrutinize the notion of BMF, its normative content and practical implications. I will argue that attempts to correct and regulate BMF, correctly understood, are not paternalistic and that such attempts are not libertarian since they lead us in the direction of broadly “pro-regulation” agenda.
