Regulation in the Behavioral Era

69 Pages Posted: 9 Feb 2011

See all articles by Michael P. Vandenbergh

Michael P. Vandenbergh

Vanderbilt University - Law School

Amanda R. Carrico

Vanderbilt Institute for Energy and Environment

Lisa Schultz Bressman

Vanderbilt University - Law School

Date Written: February 1, 2011

Abstract

Administrative agencies have long proceeded on the assumption that individuals respond to regulations in ways that are consistent with traditional rational actor theory, but that is beginning to change. Agencies are now relying on behavioral economics to develop regulations that account for responses that depart from common sense and common wisdom, reflecting predictable cognitive anomalies. Furthermore, political officials have now called for behavioral economics to play an explicit role in White House review of agency regulations. This is a significant development for the regulatory process, yet our understanding of how behavioral insights should alter regulatory analysis is incomplete. To account for behavioral anomalies, regulators will need to draw on behavioral and social science insights beyond behavioral economics, and they will need an analytic framework to ensure that regulatory decisions reflect a comprehensive examination of the numerous, seemingly haphazard behavioral insights. Although behavioral research has demonstrated the limits of rational action, it does not provide a framework for considering extra-rational action. Nor have legal scholars developed such a framework, despite excellent theoretical work in the area. In this Article, we take an initial step. We provide a framework to facilitate agency consideration of extra-rational action and extend that framework to include a lesson from behavioral research that academics have noted but not adequately explored: that individuals are concerned with social outcomes (e.g., social status or inclusion) as well as monetary outcomes (e.g., wealth) and that they seek to maximize utility in both rational and extra-rational ways. After sketching our framework, we offer concrete applications in the energy use context. Our framework does not resolve all issues that may arise in the behavioral era, but it provides a means to move forward.

Keywords: Regulation, behavioral sciences, social sciences, regulatory review, administrative law, environmental law, energy, electric cars

Suggested Citation

Vandenbergh, Michael P. and Carrico, Amanda R. and Bressman, Lisa Schultz, Regulation in the Behavioral Era (February 1, 2011). Minnesota Law Review, Vol. 95, 2011; Vanderbilt Public Law Research Paper No. 11-8; Vanderbilt Law and Economics Research Paper No. 11-4. Available at SSRN: https://ssrn.com/abstract=1753869 or http://dx.doi.org/10.2139/ssrn.1753869

Michael P. Vandenbergh (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States

Amanda R. Carrico

Vanderbilt Institute for Energy and Environment ( email )

2301 Vanderbilt Place
Nashville, TN 37240

Lisa Schultz Bressman

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States
615-343-6132 (Phone)
615-322-6631 (Fax)

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