A Model of the Optimal Complexity of Rules

37 Pages Posted: 27 Dec 2006

See all articles by Louis Kaplow

Louis Kaplow

Harvard Law School; National Bureau of Economic Research (NBER)

Date Written: January 1992

Abstract

Rules often are complex in order to distinguish different types of behavior that may have different consequences. Greater complexity thus allows better control of behavior. But individuals may need to incur costs ex ante to determine how more complex rules apply to their contemplated conduct. Because of such costs, some individuals will choose not to learn complex rules. Also, applying more complex rules ex post to determine applicable rewards or penalties is costly. This article models the effects of complexity on individuals' decisions to acquire information, choices about whether to act, and reports of their actions to an enforcement authority. It considers how optimal sanctions depend on the complexity of rules and determines when more complex rules improve welfare.

Suggested Citation

Kaplow, Louis, A Model of the Optimal Complexity of Rules (January 1992). NBER Working Paper No. w3958. Available at SSRN: https://ssrn.com/abstract=476127

Louis Kaplow (Contact Author)

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