Cass R. Sunstein

Libertarian Paternalism Is Not An Oxymoron

The idea of libertarian paternalism might seem to be an oxymoron, but it is both possible and legitimate for private and public institutions to affect behavior while also respecting freedom of choice. Often peoples preferences are ill-formed, and their choices will inevitably be influenced by default rules, framing effects, and starting points. In these circumstances, a form of paternalism cannot be avoided. Equipped with an understanding of behavioral findings of bounded rationality and bounded self-control, libertarian paternalists should attempt to steer peoples choices in welfare-promoting directions without eliminating freedom of choice. It is also possible to show how a libertarian paternalist might select among the possible options and to assess how much choice to offer. Examples are given from many areas, including savings behavior, labor law, and consumer protection.

A Behavioral Approach to Law and Economics

Economic analysis of law usually proceeds under the assumptions of neoclassical economics. But empirical evidence gives much reason to doubt these assumptions; people exhibit bounded rationality, bounded self-interest, and bounded willpower. This article offers a broad vision of how law and economics analysis may be improved by increased attention to insights about actual human behavior. It considers specific topics in the economic analysis of law and proposes new models and approaches for addressing these topics. The analysis of the article is organized into three categories: positive, prescriptive, and normative. Positive analysis of law concerns how agents behave in response to legal rules and how legal rules are shaped. Prescriptive analysis concerns what rules should be adopted to advance specified ends. Normative analysis attempts to assess more broadly the ends of the legal system: Should the system always respect peoples choices? By drawing attention to cognitive and motivational problems of both citizens and government, behavioral law and economics offers answers distinct from those offered by the standard analysis.

Availability Cascades and Risk Regulation

An availability cascade is a self-reinforcing process of collective belief formation by which an expressed perception triggers a chain reaction that gives the perception of increasing plausibility through its rising availability in public discourse. The driving mechanism involves a combination of informational and reputational motives: Individuals endorse the perception partly by learning from the apparent beliefs of others and partly by distorting their public responses in the interest of maintaining social acceptance. Availability entrepreneurs - activists who manipulate the content of public discourse - strive to trigger availability cascades likely to advance their agendas. Their availability campaigns may yield social benefits, but sometimes they bring harm, which suggests a need for safeguards. Focusing on the role of mass pressures in the regulation of risks associated with production, consumption, and the environment, Professor Timur Kuran and Cass R. Sunstein analyze availability cascades and suggest reforms to alleviate their potential hazards. Their proposals include new governmental structures designed to give civil servants better insulation against mass demands for regulatory change and an easily accessible scientific database to reduce peoples dependence on popular (mis)perceptions.

Cost-Benefit Analysis and Relative Position

Current estimates of regulatory benefits are too low, and likely far too low, because they ignore a central point about valuation - namely, that people care not only about their absolute economic position, but also about their relative economic position. We show that where the government currently pegs the value of a statistical life at about

The Promise of Prediction Markets

4 million, it ought to employ a value between

Beyond the Republican Revival

4.7 million and

Shared Outrage and Erratic Awards: The Psychology of Punitive Damages

7 million. A conservative reading of the relevant evidence suggests that when government agencies are unsure how to value regulatory benefits along a reasonable range, they should make choices toward or at the upper end. We begin by showing that the nation is nearing the end of a first-generation debate about whether to do cost-benefit analysis, with a mounting victory for advocates of the cost-benefit approach. The second-generation debate, now underway, involves important issues about how to value costs and benefits. Conventional estimates tell us the amount of income an individual, acting in isolation, would be willing sacrifice in return for, say, an increase in safety on the job. But these estimates rest on the implicit, undefended, and crucial assumption that peoples well-being depends only on absolute income. This assumption is false. Considerable evidence suggests that relative income is also an important factor, suggesting that gains or losses in absolute income are of secondary importance unless they alter relative income. When a regulation requires all workers to purchase additional safety, each worker gives up the same amount of other goods, so no worker experiences a decline in relative living standards. The upshot is that an individual will value an across-the-board increase in safety much more highly than an increase in safety that he alone purchases. Regulatory decisions should be based on the former valuation rather than the latter. When the former valuation is used, dollar values should be increased substantially - conservatively, by 25 to 50 percent. Upward revisions of such magnitude clearly have important implications for a broad range of policy debates currently informed by cost-benefit analysis. We also show that an understanding of the importance of relative position suggests a rationale for various nonwaivable contractual terms in employment law, such as health care, parental leave, job security, and leisure. These terms, which have been attacked as welfare-reducing by many economists, give people important benefits with little or no impact on relative economic position. As with regulations that boost workplace safety, such contract terms may therefore be much more attractive when purchased by all than when purchased in isolation.

Dollars and Death

The ability of groups of people to make predictions is a potent research tool that should be freed of unnecessary government restrictions.

Cost-Benefit Analysis and the Environment

In this Article, Professor Sunstein describes those aspects of republicanism that have the strongest claim to contemporary support, outlines the role of republican thought in the founding period, and explores some of the implications of republicanism for modern public law. Sunstein claims that the basic republican commitments involve (1) deliberation in government; (2) political equality; (3) universality, or agreement as a regulative ideal; and (4) citizenship. Professor Sunstein contends that all of these commitments played an important role during the founding period, generating a distinctive conception of governance. In his view, the common opposition between liberalism and republicanism is a false one; the founders were liberal republicans-a position that, Sunstein argues, is superior to its principal competitors. Sunstein claims that republican ideas suggest reformation of a number of current areas of modern public law, encompassing such contexts as statutory construction, campaign finance regulation, federalism, and discrimination. Professor Sunstein concludes with a discussion of recent proposals for group or proportional representation, arguing that such proposals can be supported by reference to the republican belief in deliberative democracy.

Minimalism at War

An experimental study of punitive damage awards in personal injury cases was conducted, using jury-eligible respondents. There was substantial consensus on judgments of the outrageousness of a defendants actions and of the appropriate severity of punishment. Judgments of dollar awards made by individuals and synthetic juries were much more erratic. These results are familiar characteristics of judgments made on unbounded magnitude scales. The degree of harm suffered by the plaintiff and the size of the firm had a pronounced effect on awards. Some judgmental tasks are far easier than others for juries to perform, and reform possibilities should exploit this fact.