I had the great fortune to attend a bootcamp ran by David Sevigny and Marcel Chiasson at the Institute on Governance this past Spring. Prior to this, I had been following the interesting behavioural economics implementations of our colleagues across the pond in the UK and the success they had been seeing. During the talk, Cass Sunstein, the former director of the US Office of Information and Regulatory Affairs (OIRA) came up. During his time as director of OIRA, he became the champion for behavioural or “nudge” economics within the regulatory regime of the United States. At this point, I had already read “Nudge: Improving Decisions about Health, Wealth, and Happiness” which Sunstein wrote with Richard Thaler, but hadn’t really delved into any practical examples of the applications in regulatory development.
“Simpler: The Future of Government” is part autobiography, part theory, and part success stories. If you’ve read Nudge, then a good half of the book will seem repetitive as it lays out the basics of behavioural economics. Sunstein’s work on choice architecture (covered broadly in both books) is further discussed in his interesting paper “Impersonal Default Rules vs. Active Choices vs. Personalized Default Rules: A Triptych” for anyone wanting a more in-depth look.
The book lays out how Sunstein was tasked by President Barack Obama to bring this modern thinking to the American regulatory regime to increase the effectiveness of regulatory initiatives with alternative and, often much lower-cost, options. The push to using choice architecture and “nudges” in place of mandates, penalties, and fines lead in many cases (with examples listed in the book) to effective regulatory compliance at much lower cost.
Sunstein is also a huge proponent (as are most modern economists and regulators) in cost-benefit analysis as a mandatory component of modern regulatory design.
“In the Obama administration, we placed a great deal of emphasis both on cost-benefit analysis and on maximizing net benefits. Indeed the net benefits of our regulations, through the first three years, were more than twenty-five times those in the comparable period in the Bush administration, and more than six times more that those in the comparable period in the Clinton administration.” (33)
In Canada, the Cabinet Directive on Regulatory Management mandates the investigation of costs and benefits (qualitative and quantitative (including non-monetary)) with varying levels of rigour dependent on the impact of the regulatory proposal. I think this emphasis on ensuring that practical cost-benefit analysis outranks any dogmatic or politically driven goals is the standard by which a modern regulatory regime should be based.
I would highly recommend this book for people with very little understanding of behavioural economics and/or the regulatory regime of the United States. The book provides a great overview of the regulatory system, the changes implemented by Mr. Sunstein, and the general principals of behavioural economics in good regulatory design. If you’ve read Nudge, I would say about half the content of the book is covered (and sometimes more clearly) in Nudge. Also, a portion of the book deals with the political difficulties Cass Sunstain faced during his appointment as Director of OIRA and really doesn’t add a lot of value to the book.
What I did enjoy thoroughly were the great examples of success stories where behavioural economics has achieved policy objectives with greater benefit, lower cost, or, in many cases, both. These are really easily digestible success stories and help to invigorate discussion about how more of these techniques could be used within Canada’s regulatory system.
If you’d like to borrow my copy, please do not hesitate to contact me, I’d be happy to lend it to you.