No, Nudge Was Not on Trial

Josh Wright —  28 January 2011

Slate’s David Weigel ran an otherwise informative piece on Cass Sunstein’s testimony, as head of OIRA, at a recent House Energy and Commerce Committee.  The headline?  Nudge on Trial: Cass Sunstein Defends the White House Against a Republican Attack.  From Weigel’s description of the hearing, there was some general hand wringing about whether there is too much or too little regulation, whether the number of regulations is higher or lower under the Obama administration than during the George W. Bush administration, some run-of-the-mill posturing from questioners.  Weigel concludes the hearing ended “with Sunstein having done no obvious harm to his mission.”

All fine.  And like I said — the article was informative with regard to the hearing.  But its a pretty sloppy and misleading headline.   There are, I think, some interesting issues concerning whether the Obama administration has retreated from behavioral economics a la Nudge, whether (as Ezra Klein contends) Republicans hate behavioral economics, and the role of behavioral economics in administrative agencies and regulation.   Unfortunately, the article really wasn’t about Nudging or behavioral-economics based regulation at all.  If Nudge is going to have its trial — it will be another day.

In the meantime, you can start here for some good background reading on the topic.

3 responses to No, Nudge Was Not on Trial

  1. 

    The trouble with regulatory reform proponents, much like the trouble with “starve the beast” public spending cutters, is that there is no meaningful effort to single out particular instances in which a regulation does more harm than good (just as there is little effort to identify particular spending items that need to be cut because they aren’t worth the marginal tax cost they induce).

    Nobody doubts that there are regulations that are bad, just as there are statutes that are bad. But, studies like the one by Nicole V. Crain and W. Mark Crain that proponents of regulatory reform often cite have deep flaws which I disccsused at: http://washparkprophet.blogspot.com/2010/09/small-business-regulation-cost-study.html That study took particularly aim at air pollution regulations and misallocated them to small businesses when it is in fact a regulation highly specific to the automotive and utility industries, and utterly failed to consider the well documented benefits of that set of regulations. Their study made absurd conclusions such as a finding that firms of fewer than 20 employees in the “other sector” comprised largely of small construction firms, are incurring $13,760 per employee of environmental regulation compliance costs, which powerfully drives the purported environmental costs and regulatory costs of small firms generally.

    There are bad regulations and they need to be pruned, sometimes dramatically. But, the appropriate way to look at the issue is one regulatory regime at a time, not in the aggregate.

  2. 

    Heh.

  3. 

    As one of my friends put it, cross-examining Prof. Sunstein on administrative agency law is like attacking Neo in the Matrix.