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Using Disclosure as a Smokescreen: How Behavioral Economics Can Deflect Regulationby Daniel FarberCross-posted from Legal Planet. A key figure in behavioral economics recently issued a warning about over-reliance on its findings. In a NY Times op. ed, Dr. George Lowenstein raised questions about some uses of behavioral economics by government policymakers:
“Very interesting,” you might think, “But what does this have to do with environmental law?” Just this: Greenwire recently reported that the Obama Administration is about to give up on the effort to reformulate the rules for regulatory impact analysis (a/k/a cost-benefit analysis). The only thing to show for the effort is an important new guidance document from OMB. Guess what? The new guidance document applies behavioral economics to mandate that agencies give more attention to disclosure as a regulatory tool. This is not too surprising, because the guidance document was penned by Cass Sunstein, a leading contributor to behavioral economics. Indeed, disclosure may well be useful — consider green labeling rules. But as Lowenstein’s op. ed. makes clear, we should not expect too much of disclosure as a substitute for more muscular forms of regulation. Let’s hope that the Sunstein memo functions to alert agencies to the potential uses of disclosure without pressuring them to use disclosure as a cure-all.
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