Sludge and Ordeals

Abstract

In 2015, the United States government imposed 9.78 billion hours of paperwork burdens on the American people. Many of these hours are best categorized as “sludge,” reducing access to important licenses, programs, and benefits. Because of the sheer costs of sludge, rational people are effectively denied life-changing goods and services; the problem is compounded by the existence of behavioral biases, including inertia, present bias, and unrealistic optimism. In principle, a serious deregulatory effort should be undertaken to reduce sludge, through automatic enrollment, greatly simplified forms, and reminders. At the same time, sludge can promote legitimate goals. First, it can protect program integrity, which means that policymakers might have to make difficult tradeoffs between (1) granting benefits to people who are not entitled to them and (2) denying benefits to people who are entitled to them. Second, it can overcome impulsivity, recklessness, and self-control problems. Third, it can prevent intrusions on privacy. Fourth, it can serve as a rationing device, ensuring that benefits go to people who most need them. In most cases, these defenses of sludge turn out to be more attractive in principle than in practice. For sludge, a form of cost-benefit analysis is essential, and it will often argue in favor of a neglected form of deregulation: sludge reduction. For both public and private institutions,“Sludge Audits” should become routine. Various suggestions are offered for new action by the Office of Information and Regulatory Affairs, which oversees the Paperwork Reduction Act; for courts; and for Congress.