Last week Obama announced that he’d be appointing Harvard Law professor (and prolific public intellectual) Cass Sunstein as head of the Office of Information and Regulatory Affairs.
You could be forgiven for reacting to that news with a large yawn. But it’s important!
First of all, OIRA is a big deal—the conduit through which the entire suite of federal regulations passes. It can be used, as it was under Reagan and Bush, to stifle such regulations, or—as will hopefully be the case under Obama—to make them smarter and more effective. Ezra Klein has a great rundown on OIRA here, explaining its history and significance.
Some progressives are worried by the appointment because Sunstein is an outspoken proponent of cost-benefit analysis (CBA), which has been the death of many a progressive reg. Over on The New Republic, NYU Law professor Michael Livermore makes the case that Sunstein is a good choice because CBA needs to be reformed rather than scrapped. (It’s a case he and his colleague Richard Revesz have made on Grist more than once.)
Others are not so sanguine. See, for instance, "Professor Sunstein’s Fuzzy Math," by Thomas McGarity in the Georgetown Law Journal. It’s a long but enlightening discussion of the kind of "expertism" (I made that word up) and fetishism of the quantitative that hampers CBA. See also Frank O’Donnell’s withering post on Wonk Room, which runs down some of Sunstein’s past efforts to block or weaken regulations, and Rena Steinzor’s equally critical take at the Center for Progressive Reform.
However! CBA is not what interests me about Sunstein. Rather, what I find interesting is the subject of his latest book Nudge, namely, regulations that take account of behavioral economics. Behavioral economics is the hot new school of economics that advocates taking into account how people actually behave. (Yes, that banal proposition is controversial in academic economics.) Sunstein argues that government regulators ought to take into account the insights of behavioral economics when crafting policy. (Also banal, but apparently revolutionary.) Rather than mandating a particular behavior, regulations would alter the decision context in small but meaningful ways to “nudge” people toward the healthier (or greener or more economical) choice. The result would be what Sunstein calls “libertarian paternalism.”
The example always offered regards 401K plans. Turns out when a company makes participation in 401Ks opt-out (check a box not to participate) rather than opt-in, you get a lot more people in the program.
Fair enough. But that’s the only example I ever hear—and I swear I’ve heard it a jillion times (see, e.g., here for the latest). Where are the other examples? Guess I should read the book.
One green example: it’d be nice to see utilities’ green power programs—whereby ratepayers agree to a modest rate increase to buy renewable power—be opt-out rather than opt-in.
Surely there are other examples, though, that have nothing to do with opt-outs. What other unobtrusive-but-effective green policy tweaks could be made to nudge people toward greener behavior?
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Comments
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Easterbunny Posted 1:44 am
13 Jan 2009
http://www.nytimes.com/2008/03/25/science/25tier.html
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biodiversivist Posted 4:04 am
13 Jan 2009
We'll reform our behavior strikingly to conform with social norms. We'll even make astute cost-benefit judgments if we get simple, clear feedback -- that's why cars come with idiot lights.
Another gadget, the Wattson, which changes colors depending upon how much electricity a house is using, collects data that can be displayed on a Web site. Clive Thompson, a columnist for Wired, has suggested that people start displaying the Wattson data on their Facebook pages, an excellent idea that I'd like to take a little further.
Why not reward devout conservationists by letting them display their virtue?
Besides putting the enthusiasm of greens to practical use, this fashion statement might also inject some realism into the debate about global warming. Once you start keeping track of all the energy you use, you begin to see the difficulties of making drastic reductions -- and the difference between effective actions and ritual displays.
Status has no value if it can't be displayed. How much would it cost to run high quality ads promoting energy efficiency in all its forms and would those ads create new fashion statements and ways to display them? If so, would the impact of a few billion dollars worth of ads dwarf the impact of boondoggles like corn and soy biofuels?
In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
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Curtis Moore Posted 7:42 am
14 Jan 2009
For cost benefit analysis to work, both the benefits and costs must be monetized and most often this is impossible. In some cases, it can be said with fair certainty that this many lives will be saved and that many illnesses avoided, resulting in a decrease in the number of missed work and school days, for example. It's not easy, but it can be done. Very often, however, the benefits can be described in only the most general terms: reducing carbon dioxide emissions will slow global warming, for example. Projecting what might happen next, what economic benefits will flow from a cooler planet, is simply beyond the analytical capacity of humanity.
But even if such a calculation can be made, should it? The United States is founded squarely on the principle that all persons have equal rights, and certain of these can be neither taken nor given away, as expressed in the Declaration of Independence:
"We hold these truths to be self-evident, that all men are created equal; that they are endowed by their Creator with inherent and inalienable rights; that among these, are life, liberty, and the pursuit of happiness; that to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed; that whenever any form of government becomes destructive of these ends, it is the right of the people to alter or abolish it, and to institute new government, laying its foundation on such principles, and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness." --Declaration of Independence as originally written by Thomas Jefferson, 1776. ME 1:29, Papers 1:315
Yet the essence of cost-benefit analysis in the context of laws and regulations to protect life and health is directly antithetical to the principle of inalienable rights: if the cost of avoiding a death exceeds the monetary value of the life, then the life is taken. The two simply cannot be reconciled.
Setting aside this fundamental conflict, however, there is another supremely practical problem. Proponents of cost-benefit analysis assert, and many people accept without challenge, that the costs of complying with environmental requirements can be calculated fairly easily. Experience, however, has demonstrated that this is simply wrong.
Meeting the emission requirements for cars proposed in the 1970 Clean Air Act, and subsequently enacted, was "technologically impossible," according to the president of General Motors. When Corporate Average Fuel Economy (CAFÉ) were proposed a few years later, the Detroit car companies sad they would "outlaw full sized sedan and station wagons." A ban on CFCs, the industrial chemicals that destroy stratospheric ozone, would increase energy consumption by an amount equal to 43 percent of the oil production of the Alaskan North Slope. None of these proved to be true.
My personal conclusion is that industry executives who make such statements are either incompetent or out and out liars. But the reality is that they will continue to make such statements and continue to be believed by some who exercise power. Where Cass Sunstein will land is an open question. He clearly believes cost-benefit analysis can be a useful tool. I disagree, but perhaps he is right.
The gravest threat, however, is not that cost-benefit analysis will continue to be applied to relatively routine regulatory initiatives like new drinking water standards or emission limits for factories. However fervently one supports cost benefit analysis, there is a subset of decisions to which it should not under any circumstances be applied: climate tipping points, a small change that can trigger sudden, catastrophic and irreversible change.
The rule in nature is for change to be stepwise: static electricity builds a tiny bit at a time, then suddenly there's a lightning bolt. Snow collects by minute amounts, triggering without warning a massive avalanche. Or, an example that I was once told was in bad taste but I continue to use precisely because it makes a vivid impression: the Twin Towers stand, stand, stand then collapse on themselves.
That can happen with global warming, and no action that might prevent reaching a tipping point should be subjected to cost benefit analysis. Some risks are so immense that they should not be taken under any circumstances, even if the probability of their occurring is minuscule. Some of the tipping points that are known to exist are discussed in my book, Saving Ourselves: How We Can and Why We're Not: The Roles of Corporate America and the Republican Party in Perpetuating Global Warming at saving-ourselves.com.
It is here that Cass Sunstein could do the nation and the world a great service by fencing such decisions off against not just cost-benefit analysis, but any economic review whatsoever. Congress could do the nation and the world a great service by extracting such a commitment from him.
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