Cass R. Sunstein is a prominent Law & Economics teacher (first at the University of Chicago, then at Harvard). Not only has he written reference handbooks on Regulation, he was also the one who inspired the Regulation policies of Obama. In his 2013 book Simpler, he expresses his stance: to be better, public policies need to be simpler.
In this essay, Sunstein explores how behavorial economics might lead to improve public decision-making processes. He bases its stances upon his experience as the Administrator, from 2009 to 2012, of the US Office of Information and Regulatory Affairs; that is why anyone who cares about Regulation should read it and ask themselves if simplicity, as the author states, may or may not be an actual leading principle for an effective government.
The OIRA, under the supervision of the Office of Management and Budget placed within the Executive Office, reviews the draft Regulations that are prepared by the cabinets of various rulemaking agencies. In this view, the OIRA can be regarded as a sort of custodian of the quality of Regulation throughout the US; conversely to the mainly consultative functions granted to the Conseil d'Etat in France, the OIRA's opinions are binding. Hence, a draft project shall not be issued nor be enforced without its prior consent. Part of OIRA's defining mission is also to centralize all the information held by diverse people within the executive branch, as to enable its access and circulation between all the rulemaking agencies responsible for elaborating and producing binding regulations.
Simpler is dedicated to the detailed study of the main decisions taken under Sunstein's decisive influence by the OIRA in the Regulation field during Obama's first mandate (2009-2012). Before taking up government functions, Sunstein focused part of his academic work on the interactions that are the most likely to occur between behavioral economics, law and public policy. To him, "a general lesson is that small, inexpensive policy initiatives, informed by behavioral economics, can have big benefits" (p. 41). He namely provides that "without a massive reduction in its current functions, government can be far more effective, far less confusing, far less counterproductive, and far more helpful if it opts, wherever it can, for greater simplicity" (p. 11).
This reference to 'simplicity', from which the name of Sunstein's essay stems, aims at translating all the efforts done by public authorities, under the supervision of the OIRA, to issue rules that were clearer and more accessible than before and that provided their subjects (whether they are citizens, companies, or federal administrations) a greater freedom in the choices they were able to make.
Throughout his book and with a little help from the various situations he had to face during his term at the OIRA, Sunstein shows that there is a virtuous relationship between a better information of the agents (whether they are the authors or the subjects of the norms at stake), a greater simplicity in public decision-making process and a better quality of the regulations meilleure qualité de la réglementation in force in a State. This paper hence aims to sum up the main points of the essay (I.), before making a few comments about it (II.).
I. What's the essay about: Better inform to better regulate- a causal chain inspired by behavioral economics
The author intends to demonstrate that public decision makers have to use the results of the state of research in behavioral economics to elaborate, improve or streamline regulations. Sunstein bases these claims on the psychologist and Nobel prize-winning author Daniel Kahneman, who establishes in his essay Thinking Fast and Slow a link between the cognitive biases of economic agents, which arise from the coexistence of two competing cognitive systems within the human brain: a fast, more impulsive System 1, which is more likely to react instinctively when facing a simple and intuitive information; and a more rational System 2, which, conversely, usually tends to slow down decision making processes. This theory provides the framework Sunstein analyses and evaluates the state of Regulation in the US with.
In this view, the author uses the core concept of nudge, which should be defined in an introductory remarks before presenting its effects on the subjects (A.) and authors (B.) of the regulations at stake.
Cass Sunstein wrote a series of essays
A. Nudge and the subjects of the norm: on the impact of choice architecture on public policy making and agents behavior
Nudges applies to every public policies which choose as the main instrument to inform their agents of the likely consequences of the choices they are free to made, as to influence them without directly incentivizing them to opt for a behavior rather than another.
Cass Sunstein suggests that there are two main categories of nudges aiming at influencing agents: disclosure of information (1.) and automatic enrollment (2.).
1. (Smart) disclosure of information
Sunsteins develops two examples drawn from his experience at the OIRA: the USDA Food Plate and the United States Environmental Protection Agency fuel economy label. In both cases, minimalist graphic representations inform the consumer by providing him further reference for its own individual choices (his food habits or fuel consumption); none of them aim to lure him into opting for a defined nutritional menu or a specific car, nor do they reward him for the choice he'll make eventually. Instead, they focus on drawing his attention on a given information by making it clear and accessible- in a word, 'salient'.
These two examples provide illustrative guidance of what Sunstein calls 'smart disclosure', which he defines as "the timely release of complex information and data in standardized, machine-readable formats in ways that enable consumers to make more informed decisions". The challenge for the public decision maker is to define the type of information it shall disclose to influence the parameters upon which agents make decisions: e.g., Sunstein considers that the most salient information in the fuel economy label case is the saving in US$ over five years that an agent is likely to make shall it opt for a lesser-consuming vehicle.
2. Automatic enrollment
Automatic enrollment somehow is a generalization of the principle that silence is consent: it seeks indeed to assign to an agent who does not manifest his will on a subject (e.g., choosing a savings, retirement or health care plan; the willingness or not to give its organs) a default choice meant to reflect what an individual rational and informed would be likely to choose. Once again, the agent remains free: it can indeed give up on the benefit of this default choice at anytime and opt for another regime than that in which it was automatically enrolled into.
Sunstein believes that there are three contributing factors to the effectiveness of default rules. First, the frequent inertia and procrastination of the poeple who rarely question the choice that they were pre-enrolled in. Second, the fact that some of these same agents will come to consider that the default has been allocated for a reason, and thus see no reason to abandon it. Third, the fact that default choice establishes the reference point for their future decisions, which will be affected, depending on loss aversion of the agent, by the idea of a potential loss of the gain in case agents decide to waive the benefit of this automatic enrollment
B. Nudge and authors of the norm: the contribution of the cost-benefit analysis in the development and the monitoring of regulations
« Just as ordinary people can benefit from a nudge, so too can government » (p. 150): nudge is not indeed limited to the sole impact it can have on citizens. Cass Sunstein considers that it si appropriate to nudge the state itself by systematizing the use by policy makers of cost-benefit analysis both during the developmental phase of regulations (1.) and as part of the monitoring of their implementation (2.).
1. Cost-benefit analysis and designing the norm: on Regulatory Moneyball
The elaboration of regulations shall not be solely driven by considerations of political expediency: instead, Sunstein promotes the systematic use, before the making of any public decision, to a cost-benefit analysis of the proposed measures. The author calls this analytical approach 'Regulatory Moneyball'
The cost-benefit analysis is based around the notion of information: the success of such an exercise and its relevance as a tool to decision making supposes that a full access to ex ante useful information is granted, as to aggregate it and to eventually produce the information needed to assess whether or not the regulation at stake should be designed or enforced. Cass Sunstein considers that the OIRA is the best fit to fulfill this duty, because of its historic mission of centralizing information between different federal agencies, and of its discretionary power to allow the enforcement of regulations that public administrations submit.
2. Cost-benefit analysis et monitoring the norm: on Regulatory Lookback
Cost-benefit analysis is also touted by the author to follow regulations enacted to, if necessary, modify or eliminate those that would be considered inefficient. Cass Sunstein refers to the mechanism by the expression "Regulatory Lookback" which aims to "see whether specific regulations should be revised, simplified, enhanced or eliminated in light of their practical effect" (p. 177).
Cass Sunstein promotes this Regulatory Lookback as being integral to a more general development of some "culture of retrospective analysis" (p 184) he would like to see to last beyond its mandate of four years at the OIRA, as to eventually become a reference tool for public policy analysis in the United States.
The author relies on the fact that Michael Greenstone (former chief economist of the Economic Council of the US Presidency) shares this view and believes that 'The single greatest problem with the current system is that most regulations are subject to a cost-benefit analysis only in advance of their implementation. This is the point where the least is known and any analysis must rest on many unverifiable and potentially controversial assumptions'
II. Why the essay matters: on economic analysis of law and its relevance in economic systems of continental law
As it promotes a public decision-making based on apolitical elements, rational and attached to the consideration of the economic effects that law causes, Simpler is a vivid illustration of the influence of the value and, ultimately, the legitimacy conferred to the economic analysis of law in the United States (A.). Nevertheless, the fact that most of the concepts Sunstein uses are actually difficult to translate into French tend to reflects the differences between the stance of the author and the French conception of public decision making (B.).
A. The promotion of a normative approach to economic analysis of law
Sunstein promotes an 'imperative' use of economic analysis of law in public decision making processes (1.). According to him, this economic analysis is not limited to the use of statistics, but also incorporates lessons from behavioral economics (2.)
1. Two competing conceptions of economic analysis of law
The economic analysis of law is defined, somehow in a tautological way, as the analysis of the law in its economic effects.
People usually consider that it can be used in two ways by the public decision maker: either it takes into account the results of the analysis of the economic effects produced by the regulation at stake, in which case it retains a "descriptive" design analysis economic law; or, conversely, he is bound by the conclusions of such an analysis, in which case it adopts a "normative" design of the economic analysis of law, which thus becomes an imperative tool for public decision making.
2. The detour operated by behavioral economics to justify the adoption of a normative conception of the economic analysis of law
Cass Sunstein is one of the spokesmen of this second understanding of economic analysis of law. Such a vision is eminently technocratic, which Sunstein does not hide: he recognizes himself indeed that " if our goal is the regulatory Moneyball, the regulation must not be designed in a referendum" (p. 216).
The main originality of Simpler lies within the fact that it promotes the use of behavioral economics as a way of analyzing the impact of the different nudge strategies: on the one hand, smart disclosure would best stimulate System 1 as it allows individuals to take their fast an informed decision on the basis of 'intuitive elements, in reality they were carefully chosen by the public authorities; on the other hand, some other strategies aiming policy makers tend to stimulate their System 2 by requiring them to conduct a comprehensive analysis of the consequences of their decisions, so that they would make their final decision on the most rational and effective basis.
This design has had a significant impact on the choices made by the OIRA in regulatory matters between 2009 and 2012. The adoption in January 2011 of the decree on improving the regulation and monitoring (Executive Order we Improving Regulation and Regulatory Review) annexed Simpler is particularly salient in this regards
One could then ask themselves: should the European or French legislator copy-paste academic solutions deemed as "best pratice"? Assuming that psychology has universal elements, should we infer that Sunstein's theory and the method he proposes are alike?
This is, however, exactly where the problem lies.
B. On the ambiguities arising from the translation into French of Sunstein's main concepts: reflecting the reluctance of France with regards to economic analysis of law?
The understanding of Regulation that Cass Sunstein outlines is quite far from the French conception of normativity. These differences are noticeable in light of the translation difficulties that the book raises (1.) as to the principles that these concepts bear (2.).
1. « Ce qui se conçoit bien s’exprime clairement – Et les mots pour le dire arrivent aisément »
An indirect way of perceiving is to count the number of concepts that are not satisfactorily translated into French and yet structure the work of Cass Sunstein, or are essential to understanding the mind of the author. Some concepts are even untranslatable, such as nudge, or Regulatory Moneyball. Others require the use of paraphrasing in order to translate the essence, as choice architecture, smart disclosure or the notion of salience (and, to some extent, that of automatic enrollment).
In addition, reading Sunstein's essays with a French eye reveals the ambiguity of the term regulation in English, which is alternatively translated into French by "régulation" (defined as a set of mechanisms, rules, institutions, decisions and principles that allow certain sectors of the economy to grow and maintain equilibriums that they could not establish solely via their own economic strength) or "réglementation" (i.e., executive orders passed on by the French government or its ministries). Sunstein, for its part, accepts a much broader definition, which encompasses the decrees issued by the President of the United States (the Executive Order), as well as technical regulations issued by federal agencies, or even laws passed by the US Congress. Should we then conclude that the Simpler theory would, if applied in France, aims to influence the development of the régulation? the règlementations in particular? of all laws?
2. On reluctance in principle to welcome economic analysis of law in France
These translation difficulties draw attention on an underlying difference: the French legal tradition seems to prefer a political, even moral, decision making process to a more technocratic one. This is in part the meaning of Article 6 of the Déclaration des Droits de l'Homme et du Citoyen, which states that "the law is the expression of the general will." This conception of law as a collective decision expressed by the State therefore collides with a more "economical" vision of the legislative process, which would involve subjecting the fate of the law to statistical analyzes to assess the "net benefit" it is likely or not to release, or to behavioral analysis that as to predict their effect.
Resistance to this form of technocracy are for example those of Alain Supiot, which rejects what he calls the Governance by the numbers ('Gouvernance par les nombres'), which matches what is touted by Sunstein. Alain Supiot considers indeed that "the overthrow of the rule of law in favor of governance by the numbers is in the long history of the dream of harmony by calculating [...]. These imaginary cybernetics leads to believe normativity not anymore in terms of legislation, but in terms of programming. We no longer expect men to act freely within the bounds that their fixed law, but to react in real time to the multiple signals that reach them to achieve the goals that their assigned "(p. 23) (le renversement du règne de la loi au profit de la gouvernance par les nombres s’inscrit dans l’histoire longue du rêve de l’harmonie par le calcul […]. Cet imaginaire cybernétique conduit à penser la normativité non plus en termes de législations mais en termes de programmation. On n’attend plus des hommes qu’ils agissent librement dans le cadre des bornes que la loi leur fixe, mais qu’ils réagissent en temps réel aux multiples signaux qui leur parviennent pour atteindre les objectifs qui leurs sont assignés »).
One would thus find Sunstein's structuring concepts (which are to him, as seen above, perfectly compatible with the preservation of the autonomy of agents) in what Alain Supiot castigates and calls a "form of normativity based on the denial of which specifies the human being: his ability to think and act with his own ideas in mind." ("forme de normativité fondée sur la dénégation de ce qui spécifie l’être humain : sa capacité à penser et à agir avec ses propres idées en tête"). Thus, where Cass Sunstein sees an efficiency factor, the opponents to the economic analysis of law seem to perceive a decay of the fundamental principles underlying the legal dynamics.
As of now, France does not seem that reluctant to integrate economic analysis of law in the process of preparing and monitoring the norm: see for instance the requirement inserted by an organic law of April 15, 2009 to subject draft bills to an impact study, or the generalization of such studies for all draft ordinances, decrees or orders. As for Regulation, the French administrative judge recently made it clear that soft law acts whose object or effect is to cause 'economics effects' could be brought before him for annulment.
C. R. Sunstein, Why Nudge? The Politics of a Libertarian Paternalism, Yale University Press, 2014 ; C. R. Sunstein, R. H. Thaler, Nudge: Improving Decisions About Health, Wealth, and Happiness, Yale University Press, 2008.
« There appears to be three contributing factors. The first involves inertia and procrastination (…). In view of the power of inertia and the tendency to procrastinate, people may simply continue with the status quo. The second factor involves what people might see as an implicit endorsement of the default rule (…). Many people think that the default was chosen by someone sensible and for a good reason. They believe that they should not depart from it unless they have information that would justify a change. The third factor is that the default establishes the reference point for decisions”
This is a reference to Michael Lewis's very popular book in the US, Moneyball: The Art of Winning an Unfair Game. Published in 2003, this book describes how a statistical analysis of the game of a baseball team in financial difficulties allowed it to acquire the best performing players and thus make it very competitive again (the work has also been the subject of a film adaptation in 2011).
« Our regulatory system must protect public health, welfare, security, and our environment while promoting economic growth, innovation, competitiveness, and job creation. It must be based on the best available science. It must allow for public participation and open exchange of ideas. It must promote predictability and reduce uncertainty. It must identify and use the best, most innovative, and least burdensome tools for achieving regulatory ends. It must take into account benefits and costs, both quantitative and qualitative. It must ensure that regulations are accessible, consistent, written in plain language, and easy to understand. It must measure, and seek to improve, the actual results of regulatory requirements ». L’on peut traduire ce passage de la façon suivante : « Notre système réglementaire doit protéger la santé publique, le bien-être, la sécurité et notre environnement tout en promouvant la croissance économique, l’innovation, la compétitivité et la création d’emplois. Il doit être basé sur les meilleures données scientifiques. Il doit permettre la participation du public et le libre échange des idées. Il doit être prévisible et réduire l’incertitude. Il doit identifier et utiliser les outils les meilleurs, les plus innovants et les moins contraignants pour atteindre les objectifs de réglementation. Il doit prendre en compte les coûts et bénéfices, à la fois quantitatifs et qualitatifs. Il doit s’assurer que les réglementations sont accessibles, cohérentes, accessibles et facile à comprendre. Il doit mesurer, et continuellement tenter d’améliorer, les résultats atteints par les réglementations considérées ».
Nicolas Boileau, L’Art Poétique, 1674.