Maximin

38 Pages Posted: 29 Oct 2019

See all articles by Cass R. Sunstein

Cass R. Sunstein

Harvard Law School; Harvard University - Harvard Kennedy School (HKS)

Date Written: October 19, 2019

Abstract

For regulation, some people argue in favor of the maximin rule, by which public officials seek to eliminate the worst worst-cases. The maximin rule has not played a formal role in regulatory policy in the Unites States, but in the context of climate change or new and emerging technologies, regulators who are unable to conduct standard cost-benefit analysis might be drawn to it. In general, the maximin rule is a terrible idea for regulatory policy, because it is likely to reduce rather than to increase well-being. But under four imaginable conditions, that rule is attractive.

(1) The worst-cases are very bad, and not improbable, so that it may make sense to eliminate them under conventional cost-benefit analysis.

(2) The worst-case outcomes are highly improbable, but they are so bad that even in terms of expected value, it may make sense to eliminate them under conventional cost-benefit analysis.

(3) The probability distributions may include “fat tails,” in which very bad outcomes are more probable than merely bad outcomes; it may make sense to eliminate those outcomes for that reason.

(4) In circumstances of Knightian uncertainty, where observers (including regulators) cannot assign probabilities to imaginable outcomes, the maximin rule may make sense. (It may be possible to combine (3) and (4).) With respect to (3) and (4), the challenges arise when eliminating dangers also threatens to impose very high costs or to eliminate very large gains. There are also reasons to be cautious about imposing regulation when technology offers the promise of “moonshots,” or “miracles,” offering a low probability or an uncertain probability of extraordinarily high payoffs. Miracles may present a mirror-image of worst-case scenarios.

Suggested Citation

Sunstein, Cass R., Maximin (October 19, 2019). Available at SSRN: https://ssrn.com/abstract=3476250

Cass R. Sunstein (Contact Author)

Harvard Law School ( email )

1575 Massachusetts Ave
Areeda Hall 225
Cambridge, MA 02138
United States
617-496-2291 (Phone)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
58
Abstract Views
535
rank
368,641
PlumX Metrics