Nudge Regulation and Innovation Policy

37 Pages Posted: 5 Mar 2020

See all articles by Nissim Cohen

Nissim Cohen

University of Haifa - Department of Public Policy and Administration

Hadar Yoana Jabotinsky

Tel Aviv University - Cegla Center for Interdisciplinary Research of the Law

Date Written: January 22, 2020

Abstract

Whilst there is widespread agreement among decision makers that fostering innovation should be a priority, there is far less consensus on how to achieve this objective. Given the fact that the effects of new technologies are often unknown, in the early stages of technological development, there might be insufficient information for conducting a cost-benefit analysis. Under uncertainty, using strict regulatory measures might kill the innovation before the market matures, resulting in inefficiency. Moreover, strict regulation can infringe on entrepreneurs' right to conduct a business. In addition, using strict regulation without fully understanding the technology and the harm it might cause consumers might not provide them with the needed protection. We argue that when regulating new technologies, the use of nudges is a desirable policy tool, superior to most other policy tools available to regulators. Nudging leaves room for technological developments while allowing the regulators to rely on the Wisdom of the Crowd to move regulation in the most efficient direction.

Keywords: New Technologies, Regulation, Nudge, Uncertainty

JEL Classification: K23, O31, O38

Suggested Citation

Cohen, Nissim and Jabotinsky, Hadar Yoana, Nudge Regulation and Innovation Policy (January 22, 2020). Available at SSRN: https://ssrn.com/abstract=3523910 or http://dx.doi.org/10.2139/ssrn.3523910

Nissim Cohen

University of Haifa - Department of Public Policy and Administration ( email )

Haifa
Israel

Hadar Yoana Jabotinsky (Contact Author)

Tel Aviv University - Cegla Center for Interdisciplinary Research of the Law ( email )

Ramat Aviv
Tel Aviv, IL
Israel

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