Abstract
In diverse areas – from retirement savings, to fuel economy, to prescription drugs, to consumer credit, to food and beverage consumption – government makes personal decisions for us or helps us make what it sees as better decisions. In other words, government serves as our agent. Understood in light of Principal-Agent Theory (PAT) and Behavioral Principal-Agent Theory (BPAT), a great deal of modern regulation can be helpfully evaluated as a hypothetical delegation. Shifting from personal decisions to public goods problems, we introduce the idea of reverse delegation, with the government as principal and the individuals as agents.
Highlights
In diverse areas – from retirement savings, to fuel economy, to prescription drugs, to consumer credit, to food and beverage consumption – government makes personal decisions for us or helps us make what it sees as better decisions
We are thinking about personal decisions – decisions whose primary effect is on a single principal, an individual.[2]
Our central claim here is that read in light of Principal-Agent Theory (PAT), a great deal of modern regulation can be understood and evaluated as a hypothetical delegation, through which sensible principals delegate authority to those who can make decisions on their behalf
Summary
We are not thinking about an actual, affirmative act of delegation between an individual principal and a government agent. To see the case for regulation as delegation, consider a sophisticated principal who would want to delegate a decision to a government agent. Regulation that implements such a delegation can be viewed as tracking the principal’s informed preferences. We offer survey evidence suggesting that, in many cases, individuals would like to delegate to a government agent (Bar-Gill and Sunstein 2015; see Sunstein 2015a) While this evidence does not demonstrate actual delegation, it does bolster the normative case for regulation
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