The Community of Advantage asks how economists should do normative analysis. The growing consensus in favour of paternalism and 'nudging' has urged normative analysis towards the satisfaction of individual's preferences. Its conclusions have supported a long-standing liberal tradition of economics that values economic freedom and views markets favourably. However, behavioural research shows that individuals' preferences, as revealed in choices, are often unstable, and vary according to contextual factors that seem irrelevant for welfare. Robert Sugden proposes a reformulation of normative economics that is compatible with what is now known about the psychology of choice. Reformulations that assume that people have well-defined 'latent' preferences which, because of psychologically-induced errors, are not always revealed in actual choices. According to these reformulations, the economist's job is to reconstruct latent preferences and to design policies to satisfy them. Challenging the controversial idea of using behavioural insights to guide public policy The Community of Advantage argues that latent preference and error are psychologically ungrounded concepts, and that economics needs to be more radical in giving up rationality assumptions. Sugden advocates a kind of normative economics that does not use the concept of preference. Its recommendations are addressed, not to an imagined 'social planner', but to citizens, viewed as potential parties to mutually beneficial agreements. Its normative criterion is the provision of opportunities for individuals to participate in voluntary transactions. Using this approach, Sugden reconstructs many of the normative conclusions of the liberal tradition. He argues that a well-functioning market economy is an institution that individuals have reason to value, whether or not their preferences satisfy conventional axioms of rationality, and that individuals' motivations in such an economy can be cooperative rather than self-interested. "Sugden presents a thought-provoking, cogent, and important analysis of behavioural economics and its policy prescriptions." -- Michelle Baddeley, Economic Record "wide-ranging, intriguing and sophisticated ... this book is essential reading to anyone who wants to get a grip on the role of markets in the age of behavioural economics." -- Bart Engelen, Economics and Philosophy "Robert Sugden is one of the world's most brilliant and deepest thinkers. A philosopher and an economist, he gets to the very core of the liberal tradition - and he offers bold new perspectives on freedom, the role of the state, and the limits of paternalism. This is, I think, his best work, and one of the very few most important explorations of liberty in the last half-century." - Cass R. Sunstein, Robert Walmsley University Professor, Harvard University, and author of The Ethics of Influence "In this book, behavioural economics insider Robert Sugden levels a powerful and erudite argument against the use of behavioural economics to justify paternalism. Adopting the âcontractarianâ perspective proposed by James Buchanan, Sugden draws on philosophy, historic and contemporary economics and political science to burnish the age-old idea that people should be given the freedom to chart their own course, and engage in free exchange with others who wish to do so. Even to readers who neither embrace Sugden's arguments nor accept his conclusions - a group among which I classify myself - this book is critical reading for those wishing to gain an understanding of the vigorous and vibrant debate taking place over the ethical and policy implication of behavioural economics." - George Loewenstein, Carnegie Mellon University "Robert Sugden's The Community of Advantage is a daring response to the findings of behavioural economics that show that preferences that people reveal in their choices cannot serve as a foundation for normative economics. Instead of conjuring up rational preferences that supposedly hide beneath the flawed ones we observe, Sugden proposes a radical transformation of normative economics which assesses policies by the freedom they offer interacting individuals. Sugden's arguments are a serious challenge to normative economics as we know it, and his proposals offer a fascinating unexplored path toward a replacement." - Daniel M. Hausman, Herbert A. Simon and Hilldale Professor, Department of Philosophy, University of Winconsin-Madison, US "For many years Robert Sugden has opened new pathways in economics and philosophy. This highly original monograph finally weaves together his views on rational decision, paternalism, freedom, and markets. Sugden's contractarian approach provides a much-needed alternative to libertarian paternalism, demonstrating that classic liberalism can be brought up-to-date with the latest research in behavioural economics. The Community of Advantage will become a compulsory reading for all philosophers and social scientists in