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Behavioral Economics: Implications For Regulatory Behavior, William E. Kovacic, James C. Cooper
Behavioral Economics: Implications For Regulatory Behavior, William E. Kovacic, James C. Cooper
GW Law Faculty Publications & Other Works
Behavioral economics (BE) examines the implications for decision-making when actors suffer from biases documented in the psychological literature. This article considers how such biases affect regulatory decisions. The article posits a simple model of a regulator who serves as an agent to a political overseer. The regulator chooses a policy that accounts for the rewards she receives from the political overseer — whose optimal policy is assumed to maximize short-run outputs that garner political support, rather than long-term welfare outcomes — and the weight the regulator puts on the optimal long run policy. Flawed heuristics and myopia are likely to …