Endogenous preferences: a challenge to constitutional political economy’s normative foundation?

Abstract This paper starts with the observation from behavioral economics that preferences are endogenous, i.e., they are unstable, context-dependent, and open to processes of adaptation. It then asks whether welfare analysis and normative economics are still possible in a world populated by people with endogenous preferences. In particular, it looks at recent proposals by Viktor Vanberg and Carl Christian von Weizsäcker. In highlighting an institutional perspective, both can be seen as proponents of modern ordoliberalism and both claim that their approaches can deal with the issue of endogenous preferences in a more coherent way than approaches that remain within the mind frame of traditional welfare economics. The paper argues that in mainly highlighting the importance of information provision for individual autonomy, Vanberg’s approach of constitutional political economy (CPE) underestimates the complexity of preference endogeneity. While von Weizsäcker’s approach is a refinement of the CPE framework, the paper argues that it focuses too much on external structural conditions (viz., competition among interpersonal influences) and neglects a discussion of the necessary internal agentic capabilities for individual autonomy. The paper argues that a more intricate discussion of decision autonomy leads to a twin concern for outcome and process freedom in normative economics. Outcome freedom allows individuals to satisfy their evolving preferences and process freedom enables them to critically reflect upon their preferences and surroundings.