I opened the book with a big question on my mind: how can a smart person—and Sunstein obviously is—who had an up-close look at regulation during the first four years of Obama’s presidency, make a case for simpler regulation? Isn’t he aware that the Affordable Care Act, better known as Obamacare, ran to 2,400 pages and that the regulations to implement the act are now in the thousands of pages? Isn’t he familiar with the fact that the Dodd-Frank financial regulation law was 848 pages long and that it creates about 400 new regulations, many of them yet to be decided on? How can Sunstein both (1) make the case for simpler regulation and (2) justify those two sets of Obama administration regulations?
I won’t leave you in suspense. Sunstein more or less achieves goal 1, while he makes a half-hearted attempt—which ultimately fails—at achieving goal 2. I’ll highlight some of the book’s good aspects below. But he would have been much more credible had he not even tried to defend Obamacare and Dodd-Frank.
Nudges | In the book, Sunstein, who has been a strong proponent of “libertarian paternalism” by government, advocates measures that are more akin to straight coercion. Many libertarians have feared that some of the “nudges” libertarian paternalists advocate would turn out to be simple coercion. I was an early, though cautious, defender of Sunstein and co-author Richard Thaler’s advocacy of nudges in their book, Nudge. (See “A Less Oppressive Paternalism,” Summer 2008.) But based on this new book, I must conclude that many of the libertarian critics’ fears have turned out to be justified.
Sunstein’s argument for much of the regulation he favors will be familiar to those who have read Nudge. He argues that people often make bad decisions because they use “System 1” thinking. That is, people often follow their initial intuitions when facing an important question, rather than employ “System 2” thinking, which is more deliberative and reflective.
Based on evidence from Daniel Kahneman’s book Thinking, Fast and Slow, I can’t dispute this. That is to say, I can’t dispute the problem of System 1 thinking and the idea that carefully crafted government rules could help people make better decisions. One example of such rules is the government’s redesign, partly influenced by Sunstein, of the way auto companies report fuel economy on new cars’ window stickers. He points out that when the companies report miles per gallon, many potential car buyers see this as a linear measure. So, for example, they would regard 20 miles per gallon as 33 percent better than 15 mpg and they see 25 mpg as 25 percent better than 20 mpg. A little reflection on the fact that gallons are in the denominator, not the numerator, would show this to be false. But reflection is exactly what many people lack. His fix was to show the five-year fuel savings in dollars when comparing a given car to the average new vehicle (assuming, of course, a specific price of gasoline.)
Sensible policy | To his credit, Sunstein also shows himself to have been, at times, a deregulator. Unfortunately, in one of the best cases he cites of his proposed deregulation, he lost the policy argument. The Bush administration had banned Primatene Mist for asthmatics, but had scheduled the ban to begin on January 1, 2012. Primatene Mist contained chlorofluorocarbons (CFCs), which hurt the ozone layer. Sunstein pointed out that the ban would have left two to three million people without an over-the-counter substitute—the available substitutes all require a prescription and all are expensive. He noted that the CFC emissions from Primatene Mist were “small, even trivial.” So, he argued, the policy issue came down to a tradeoff between two health risks: the “small, even trivial” health risk to the world’s population from slightly more ozone, and the more substantial risk and expense to many American asthmatics. On that basis, he argued for extending the deadline. The Food and Drug Administration decided otherwise.
Sunstein also brings some sense to the hot-button issues of genetically modified organisms in food and the pesticide DDT. He points out that genetic modification “holds out the possibility of producing food that is both cheaper and healthier.” And banning DDT, he notes, “eliminates what appears to be the most effective way of combating malaria and may significantly compromise public health.” In discussing those topics, Sunstein shows what is wrong with the so-called “precautionary principle,” according to which people should not be allowed to go forward with an activity or product unless they can show that it is safe. The principle, he notes, is incoherent because it ignores tradeoffs: sure, DDT might be risky for some, but banning it is even riskier for poor Africans.
Coercion | Sunstein is keenly aware of his awkward position as a defender of simplifying regulations and as a defender of the Obama administration. His defense of Obama is feeble. He writes, “How can a former Obama administration official presume, or dare, to write a book about simplification?” He then writes, “To provide an answer, we need to make a distinction.” The distinction, he explains, is between simplification, which he favors, and reducing government’s functions, which he doesn’t. That’s an important distinction, but he never uses it to answer the question he himself asks. The reader is left thinking that, for Sunstein, simplification takes a back seat to expanding the federal government’s role in people’s lives.
“Libertarian paternalism,” which Sunstein generally advocates, is government choosing regulations that people can easily avoid by just saying no. So, for example, if the government requires an employer to enroll workers in a pension plan but allows the workers to opt out of the plan using a simple process, that would be an instance of libertarian paternalism. The government would be “nudging” people to join their employers’ pension plans. But if the government simply requires that people join pension plans, as it does with Social Security, that is not a nudge; that is outright, old-fashioned paternalistic coercion.
In at least three instances, Sunstein crosses the line from advocating nudges to advocating coercion: price controls, restrictions on the size of soda containers, and graphic warnings about smoking.
Take price controls. (Please.) One of the worst regulations he favors is price controls on health insurance. Sunstein, who is obviously economically literate, doesn’t seem to feel the need to justify this policy, despite the fact that opposition to price controls and the distortions they cause is one of the things that the vast majority of economists agree on.
Or consider New York City mayor Michael Bloomberg’s move in 2012 to limit the size of soda containers to 16 ounces. Sunstein points out an obvious fact: that limit would not have allowed people to choose a larger size. Yet, in discussing comedian Jon Stewart’s negative reaction to Bloomberg’s ban on larger containers, Sunstein writes, “Stewart is capturing a pervasive and general skepticism about paternalism in general and nudges in particular.” Here, Sunstein himself is incoherent. As he had admitted a few lines earlier, Bloomberg’s regulation was a ban, not a nudge. Sunstein might argue that it is a nudge because one can always buy multiple containers, but that is costly. Moreover, what if someone wants 20 ounces of soda? It’s hard to buy a 4‑ounce drink. Sunstein seems to be illustrating precisely what many libertarian critics had feared: one of the primary advocates of nudges and libertarian paternalism seems quite comfortable with coercive paternalism.
Or, finally, consider the graphic warnings that the FDA wants to require on cigarette packs. Such warnings include disgusting pictures of people with bad health as a result of smoking. Sunstein claims that such warnings “are a distinctive kind of nudge.” “However graphic,” he writes, “the warnings maintain freedom of choice.” It is true that, with the graphic warnings in place, people would still be able to choose to buy cigarettes. But there’s more than one choice involved. Another choice is the kind of package people buy their cigarettes in. The FDA regulation that Sunstein supports would substantially limit people’s choice. Call it a hunch, but I think most smokers would rather not buy their cigarettes in such packages. My guess is that the reason Sunstein is oblivious to that lack of choice is that he’s not in the market for cigarettes. I wonder how he would feel if, when he ordered a fattening dessert in a fancy restaurant, the server was required to serve it with pictures of people who are in poor health because of overeating such desserts.
Moreover, whether the issue is cigarettes, cars, drugs, or any other good, Sunstein consistently puts a zero weight on the freedom of producers. In discussing the various examples he cites, Sunstein devotes not a sentence of concern for their freedom—or lack thereof.
His indifference to producers’ freedom becomes explicit in his discussion of regulations on advertising airline fees. In 2011, he notes, the Department of Transportation introduced a regulation to require “airlines to disclose prominently all potential fees on their web sites.” “Even better,” he writes, “airlines have to include all government taxes and fees in every advertised price.” He observes that some airlines sued to invalidate the regulation, “complaining especially about the requirement to include taxes and fees and invoking the First Amendment, no less, to say that the requirement was unconstitutional.” In writing this, he misconstrues what the airlines were protesting. The airlines that sued in Spirit Airlines Inc. v. Department of Transportation were willing to tell consumers about the taxes and fees, but wanted to call consumers’ attention to those costs by printing them on the ticket in a font size as large as the font for the overall price. The regulation prohibits them from doing so. So passengers won’t be as aware of the government’s role in high airfares as of the fares themselves. That sounds like a First Amendment case to me. You would think that Sunstein would understand that. After all, his own book is a commercial product and he left out this important piece of information. In that sense, he’s like an airline that leaves out information about high baggage fees. Yet I bet he would object to a law requiring him to tell the reader the whole story.
To his credit, Sunstein earlier rejected his own tentative proposal for a “fairness doctrine” for the Internet; he had toyed with the idea of legally requiring bloggers to link to contrary views. That he even seriously considered that idea, though, suggests that on the issue of free speech, he has a tin ear.
Government gorilla | In a fascinating chapter, “Invisible Gorillas and Human Herds,” Sunstein describes an experiment in which people were asked to watch a video of a basketball game and count the number of times that players passed the ball. In the video, a person dressed in a gorilla costume roamed among the players, yet many of the test subjects totally missed seeing the gorilla because they were so focused on the ball. The lesson for businesses, individuals, and governments, Sunstein writes, is “that we are all at risk of missing a lot that is happening in the background (and possibly even the foreground) of our lives.” Indeed.
That brings me to the 800-pound gorilla in the room—government—and a large irony in Simpler that Sunstein seems unaware of. In one passage, he notes that he delayed getting vaccinated for the dangerous influenza strain H1N1. That delay shows that even Sunstein, the Obama administration’s former chief regulatory official, is subject to the Style‑1 thinking that he wants the government to “nudge,” or outright coerce, us out of. He admits, just four pages earlier, that for many people, “including those who work in government, what may matter most is today, tomorrow, and next week.” Yet, he wants us to trust these self-same government officials to make major decisions—about drugs, medical care, cars, and cigarettes, to name only a few—for us. If those government officials can’t be trusted to take the long view when their own well-being is at stake, why would Sunstein think that we can trust them to do so for a nation of strangers?
I admit to having many of the human failings that Sunstein writes about. But given the choice between having a government of people with such failings make my decisions for me, and my being free to choose for myself, I choose freedom.
