Kiesling on Sunstein, OIRA and Nudging

Josh Wright —  16 January 2009

A post that everybody should read over at Knowledge Problem in which Lynne Kiesling moves from behavioral economics to the design of fixed price default contracts in electricity markets to a Hayekian critique of the Sunstein-Thaler libertarian paternalist program to the following closing paragraph:

In devising OIRA policy I’d like to hear Sunstein invoke another of his former Chicago colleagues, Ronald Coase, and state that in promoting and facilitating open, transparent markets, the most important role of economic regulatory policy is to reduce the transaction costs that prevent private parties from engaging in mutually-beneficial exchange. That means using OIRA to evaluate the entry barriers and other transaction costs that federal regulation can create. OIRA does cover other areas of regulatory policy where the ideas of transaction costs are not as strictly relevant, but thinking in terms of reciprocal benefit, reducing transaction costs, and the alignment of, for example, environmental and economic incentives through the reduction of transaction costs and better-defined property rights transcends economic regulation.

Its a great post with a ton of food for thought.  Go read it.