Ana Santos writes, not-entirely-unsympathetically, about choice architecture and market design, based on her reading of Thaler and Sunstein's book "Nudge...," and my survey article "The Economist as Engineer..." Her remarks include a novel (to me) objection to creating institutions in which individual goals don't conflict with social welfare: in the absence of such conflict, your "ethical muscles" would grow lax from not needing to be used. (Really; see the end of this post...)
Ana C. Santos, "Behavioural and experimental economics: are they really transforming economics?," CAMBRIDGE JOURNAL OF ECONOMICS 35, 4, 705-728, JUL 2011
"The purpose of choice architecture is to prepare contexts of choice to help individuals make better choices, as judged by individuals themselves, or by society as a whole (Thaler and Sunstein, 2003, 2008). Design economics is in turn devoted to the conception of speciﬁc allocation mechanisms that aim at coordinating individual actions for the accomplishment of the goals set by the designer (Roth, 2002). Rather than assuming that markets emerge spontaneously and automatically generate efﬁcient allocations of resources, design economics puts at the forefront the complex social engineering processes involved in the building of markets and market-like allocation mechanisms that determine individual outcomes and the aggregate results that are obtained by having people interacting under those mechanisms."
"Not only do these proposals retain the fundamental principles of neoclassical economics—rationality and efﬁciency—they also continue to promote their expansion to various domains of social life. Through the architecture of contexts of choice and the design of market mechanisms, economists are putting their expertise at the service of individual rationality and economic efﬁciency, within and beyond the traditional domain of economics.
"Choice architecture and design economics promote a particular version of economics imperialism that goes beyond the mere export of its concepts to territories traditionally occupied by disciplines other than economics. They actually aim at inculcating economic calculus in human deliberation and introducing market-like forms of social interaction where they have been absent. In other words, what is at stake here is the deliberate attempt to make society more like its description in neoclassical economic theories, i.e. the performativity of economics (Mackenzie, 2006; Callon, 2007; Mackenzie et al., 2007). Whether or not they have succeeded in this endeavour is an empirical question that cannot be addressed here. For now, it is sufﬁce to note that while taking into account predictable behavioural irrationalities and the opportunistic behaviour of economic agents in their policy proposals, both choice architecture and design economics retain and promote the expansion of the neoclassical concepts of rationality and efﬁciency in their market-based solutions."
The article includes a novel argument against aligning individual incentives with social welfare:
"In markets people are less compelled to follow non-market norms and values. By aligning self-interest with the interests of others, market mechanisms moreover obviates the need for ethical reasoning; as a result, individuals no longer have the opportunity, as Steve Turnbull puts it, to ‘ﬂex their ethical muscles’ (Frohlich and Oppenheimer, 2003, p. 290). Individuals’ ability to behave in accordance with non-market norms and values, then, will be seriously compromised. On the contrary, living with the tension between the best strategy from a rational, self-interested point of view and the ethically best strategy keeps the ethic imperative active."