Tuesday, September 4, 2012

Cass Sunstein on the regulator as market designer

Here's his essay: Empirically Informed Regulation
It was written while Sunstein was Administrator, Office of Information and Regulatory Affairs, Office of Management and Budget, Executive Office of the President. It focuses on what he sees as the lessons from behavioral economics.

"In recent years, a number of social scientists have been incorporating empirical findings about human behavior into economic models. These findings offer useful insights for thinking about regulation and its likely consequences. They also offer some suggestions about the appropriate design of effective, low-cost, choice-preserving approaches to regulatory problems, including disclosure requirements, default rules, and simplification.

"A general lesson is that small, inexpensive policy initiatives can have large and highly beneficial effects.  The purpose of this Essay is to explore relevant evidence, to catalogue recent practices and reforms, and to discuss some implications for regulatory policy. And while the primary focus is on small, inexpensive regulatory initiatives, there is a still more general theme, which involves the importance of ensuring that regulations have strong empirical foundations, both through careful analysis in advance and through retrospective review of what works and what does not."

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