Debiasing Advertising: Balancing Risk, Hope, and Social Welfare

Journal of Law & Policy, Vol. 19, 2011

71 Pages Posted: 1 Oct 2010 Last revised: 19 May 2011

Date Written: May 17, 2011

Abstract

This article explores the nuances of “debiasing through law,” a regulatory approach proposed by Christine Jolls and Cass Sunstein. Proponents have described advertising regulation as a form of debiasing through law. Debiasing approaches regulation through less paternalistic means using strategies that improve consumer decision making. Proponents believe that the improved decision making will gracefully lead to better choices. These debiasing strategies find some of their roots in addressing human cognitive biases and bounded rationality.

Although debiasing through law purports to offer an attractive alternative to pure paternalism, this Article demonstrates that the net social welfare effects of this approach can prove difficult to anticipate. An examination of the recent tightening of the regulation of consumer endorsements in advertising illuminates the challenges and nuances of the debiasing approach.

This Article attempts to answer a myriad of questions. Does removing the consumer endorsement tool from the marketing arsenal ensure that consumers will make better decisions? The truthful consumer endorsement can offer other consumers legitimate hope. When netted out, does taking hope off the market advance consumer welfare? Can regulators remove true information from the marketplace and expect to foster an improvement in social welfare? Can regulators preserve real choice while simultaneously improving decisions? Are regulators truly capable of harnessing cognitive and social science to engage in this sort of precision welfare engineering? Consumer endorsement regulation presents a live proxy for the analytical dissection of debiasing through law.

Some scholars have expressed a keen skepticism toward this approach to regulation and toward the whole of behavioral law and economics. This Article presents a cautionary tale about the unpredictability of the net outcomes from deploying debiasing through law.

Keywords: Consumer Law, Psychology and Law, Behavioral Law and Economics, Debiasing, Advertising, Marketing, Advertising Regulation, Consumer Protection, Social Welfare

JEL Classification: D60, D63, I18, K20, M30, M37

Suggested Citation

Friedman, David Adam, Debiasing Advertising: Balancing Risk, Hope, and Social Welfare (May 17, 2011). Journal of Law & Policy, Vol. 19, 2011 . Available at SSRN: https://ssrn.com/abstract=1684691

David Adam Friedman (Contact Author)

Willamette University College of Law ( email )

245 Winter St. SE
Salem, OR 97301
United States
503-370-6811 (Phone)
503-370-6375 (Fax)

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