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We review the problem of reconciling normative and behavioural economics. In conventional welfare economics, individuals' preferences are assumed to be coherent, and the satisfaction of those preferences is the normative criterion; but this approach breaks down if preferences are incoherent. Traditionally, the preference-satisfaction criterion has been interpreted in three conceptually different ways, emphasising respectively the normative value of happiness, self-assessed well-being, and freedom. If individuals' preferences are incoherent, these interpretations diverge, leading to fundamentally different strategies for dealing with the reconciliation problem, and new questions are raised about whether normative economics should be addressed to governments or individuals.For at least the last three quarters of a century, both descriptive and normative economics have been based on assumptions about individual rationality. In descriptive economics, economic agents have been assumed to act as if seeking to satisfy preferences that are coherent-that is, stable, consistent and context-independent. In normative analysis, economic institutions, projects or policies have been treated as justified to the extent that their outcomes are ranked highly in the preference orderings that agents have been assumed to possess. From the early 1980s, however, there have been increasingly evident signs that economics might be changing direction, towards what has come to be called the behavioural approach. There has been an accumulation of work which tests rationality assumptions at the individual level, often in controlled experiments, and finds systematic 'anomalies' (that is, deviations from received theory). There has been growing interest in developing psychologically-based theories to explain

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This paper responds to the ‘soft paternalist’ argument that the findings of behavioural economics make traditional objections to paternalism incoherent. We show that there is a normatively significant sense in which, even if individuals lack coherent preferences, competitive markets are efficient in providing them with opportunities to get what they want. Extending earlier analysis by Sugden, we model a multi-period ‘storage economy’ and explore the implications of dynamically inconsistent preferences. We show that, despite apparent conflicts of judgement between an individual’s ‘selves’, competitive markets provide maximal opportunity, and that they do so by facilitating voluntary exchanges between selves