Latest / The Capitalism and Freedom in the Twenty-First Century Podcast / Harvard Law's Cass Sunstein on Nudges, Behavioral Economics, Constitutional Law, and Liberalism | Hoover Institution
Transcript
- 0:00[MUSIC]
- 0:09>> Jon Hartley: This is the Capitalism and Freedom in the 21st Century podcast,
- 0:11an official podcast with Hoover Institution Economic Policy Working Group
- 0:15where we talk about economics, markets, and public policy.
- 0:18I'm Jon Hartley, your host today.
- 0:20My guest is Cass Sunstein,
- 0:21who's one of the most cited legal scholars of the 20th and 21st centuries.
- 0:24He's a longtime professor at the Harvard Law School, where He's been since 2008 and
- 0:28previously was at the University of Chicago law School since 1981.
- 0:31Cass also served as the administrator of OIRA, which is the Office of
- 0:35Information Regulatory affairs during the Obama administration.
- 0:40He's also a prolific author of over 50 books, including Nudge with Richard Thaler
- 0:45and Noise A Flaw in Human Judgment with Daniel Kahneman and Oliver Siboney.
- 0:50He's also the author of several famous law textbooks on constitutional law and
- 0:54administrative law.
- 0:56Welcome, Cass.
- 0:57>> Cass Sunstein: Thank you.
- 0:57Great pleasure to be here.
- 0:59>> Jon Hartley: So I want to just start by getting into your early life.
- 1:02Where did you grow up and how did you get interested in law and
- 1:05behavioral economics?
- 1:07>> Cass Sunstein: I grew up in Wabin, Massachusetts and
- 1:10I was a literature major in college.
- 1:13I got interested in law really my senior year in college, where I thought being
- 1:18a graduate student in English literature would be extremely interesting, but
- 1:22maybe too passive.
- 1:24And law, I thought you could have lots of flexibility and be more in the world.
- 1:28That's what my young self thought.
- 1:32When I came to the University of Chicago a few years later in teaching,
- 1:36I was surrounded by rational choice types with Gary Becker and
- 1:41George Stigler leading the charge and Richard Posner and
- 1:45Bill Landis at the law school being the formidable giants who were surrounded me.
- 1:50I felt like I was 3 foot tall and they were all 9ft tall.
- 1:54I was a little person trying to understand.
- 1:58They were so high in the clouds I could barely hear their voices,
- 2:01though they were booming.
- 2:03But I was a literature major and I thought that their conception of
- 2:07humanity was not the same as what I had learned from James Joyce and
- 2:12William Shakespeare and William Butler Yates and John Keats.
- 2:16And so I was skeptical, kind of cluelessly skeptical.
- 2:21I learned something about behavioral economics from Jan Elster,
- 2:25who was a Norwegian political scientist philosopher who came to the University of
- 2:30Chicago.
- 2:31He introduced me to notions about pre commitment strategies and
- 2:35about adaptive preferences.
- 2:37That kind of was an inroad into the behavioral stuff.
- 2:40And I started writing material that drew on Thaler and Kahneman Tversky,
- 2:46and it was, I think, primitive, was law professor primitive.
- 2:52But Thaler came to the University of Chicago at a time
- 2:56when I was immersed in behavioral stuff and that kind of Accelerated.
- 3:01We became great friends.
- 3:02That's kind of accelerated my focus on behavioral economics and
- 3:07its relationship to law.
- 3:09>> Jon Hartley: Fantastic, so I want to sort of, I guess, for
- 3:12the moment just focus on behavioral economics.
- 3:15We'll get to law and political philosophy later.
- 3:19So you co-authored the seminal book, Nudge, cast on scene in 2008.
- 3:25I remember it as a pretty, I think, seminal moment for behavioral economics.
- 3:32And it really, I think, increased the popularity of behavioral economics.
- 3:36I mean, at the same time you sort of had the global financial crisis was sort of
- 3:40around the same time.
- 3:41But I just remember, you know, that really the, you know, late 2000s and.
- 3:46And 2010s was a very, very a popular time for behavioral economics.
- 3:51He also wrote a book more recently, Noise, with Daniel Kahneman and Oliver Sibony.
- 3:57Daniel Kahneman being the famous Kahneman Tversky.
- 4:03I'm curious what you think about the state of behavioral economics is now
- 4:08following what I think has been just as sort of, I see it, I think,
- 4:12maybe a more challenging time for behavioral economics.
- 4:17We've had some recent controversies, a lot of controversy,
- 4:21particularly in the field of psychology.
- 4:24A massive fraction of studies there aren't replicable.
- 4:27I think there's been some very famous scandals within the behavioral
- 4:32economics world, think Dan Arielli, Francesca Gino, Francesca.
- 4:38You've been in several of their papers have been retracted,
- 4:43following the uncovering from the folks at Data Colada.
- 4:47And to me, I mean, it seems like behavioral economics maybe peaked
- 4:51around the times of the Richard Thaler Nobel and
- 4:55the Robert Shiller Nobel in sort of the mid 2010s.
- 4:58And maybe it's been on a bit of a decline.
- 5:00I mean, would you agree with that?
- 5:02Tell me why either that's wrong or
- 5:04where you think the state of behavioral economics is as we see it today in 2025.
- 5:10>> Cass Sunstein: Okay, thanks for that.
- 5:11I'll tell you a story and
- 5:12then we'll maybe talk about something in the vicinity of data.
- 5:17So the story is I had dinner not long ago with a behavioral economist.
- 5:22And he said it's terrible.
- 5:25And I said what's terrible?
- 5:27And he said it's so terrible.
- 5:29And I said what do you mean it's so terrible?
- 5:31And he said the demand for people doing behavioral economics
- 5:37is higher than it's ever been by far that people in
- 5:42the private sector, Silicon Valley and Saudi Arabia,
- 5:47in Germany, in France and Italy, are looking for
- 5:51people in the private sector who are trained in behavioral economics.
- 5:58Governments are keener than ever that we're seeing interest in hiring behavioral
- 6:04economists from people who are running behavioral insights teams or nudge units.
- 6:10The demand is off the charts and it's higher than ever.
- 6:15And I said, why is it terrible?
- 6:17That sounds amazing.
- 6:18He said, there aren't enough people.
- 6:20So the, the people are holding themselves out as behavioral economists or
- 6:25behavioral scientists to get jobs, but they're not trained.
- 6:30The field is flourishing with such, you know, kind of exuberance on the part
- 6:35of the people who are interested in it, and there just aren't enough people ready.
- 6:40And he said, you've got to get people at Harvard ready to go help
- 6:45people who are thinking about smoking, secession or road safety or
- 6:50how to get people to pay fines when they're not paying fines,
- 6:55how to get people to take up programs, how to deal with occupational licensing.
- 7:01So on the practitioner side, from government and
- 7:05the private sector, behavioral economics is incalculably
- 7:10better off than it was even six, seven years ago.
- 7:15On the academic side, the same is true.
- 7:18If you look at the leading economics journals,
- 7:21if there isn't at least one behavioral economics paper in the current issue,
- 7:27it's surprising if there isn't one the year before or the year after.
- 7:32I'm sorry, the issue before or the issue after a year is too much.
- 7:36There are too many papers in behavioral economics in the American Economic Review,
- 7:41in the Economic Journal, and the Quarterly Journal of Economics.
- 7:45And some of it is kind of normal science where loss aversion is used to
- 7:50explain something, and loss aversion is identified in a context
- 7:55that we didn't see something might be appearing on default.
- 7:59Default rules and their power.
- 8:02Benjamin Enki is doing work on complexity, which I find extremely interesting,
- 8:07and the role of complexity.
- 8:10There's a lot of work on cognitive scarcity.
- 8:14This is something that I'm keenly interested in from Malathan and Shafir,
- 8:18their work on scarcity and that has implications for
- 8:21when behavioral findings will be especially present and when they might
- 8:26fall apart because people are focusing on something and so they're not going to show
- 8:31loss aversion because if they do, they're going to lose a lot of money in a hurry.
- 8:36So that's very vivid.
- 8:39John List, of course,
- 8:40has done a ton of phenomenal papers in the domain of behavioral economics.
- 8:45And if we don't see a good John List paper in any four month period,
- 8:49that's a surprising four month period.
- 8:53There's keen interest in both economics and
- 8:57in other domains in manipulation and how to think about it.
- 9:03Sometimes it goes by specific names like dark patterns, or
- 9:07sometimes there's a specification of the exploitation of a behavioral bias.
- 9:13This also connects with work on algorithms and machine learning.
- 9:17So behavioral economics right now is both on the practice side and on
- 9:22the theoretical side in a better position, I'd say, by far, than it's ever been.
- 9:28There isn't explosive insight, period that we saw with early Kahneman and
- 9:34Tversky or Thaler, but we see much more in terms of insights and
- 9:40much more specificity and new insights coming that are often firmer,
- 9:46they might be consistent with, but firmer than anything we've observed
- 9:52before just because the techniques are better on replication.
- 9:59Thaler has a new edition of the Winner's Curse coming out,
- 10:03I think in September 2025.
- 10:07And all of the findings replicate every single one.
- 10:11So that's, I think his exposition challenge in this amazing
- 10:16new edition of the Winner's Curse is not to be kind of crowing at
- 10:21the replication of the core findings, but they all replicate.
- 10:26And to say they replicate is one thing to say the magnitude or the conditions
- 10:31under which, et cetera, like you can make the endowment effect go down or
- 10:36disappear if people are really sad, as I recall, you don't see an endowment effect,
- 10:43but the central findings of that defining book all replicate.
- 10:48So within the field, by which I mean both practitioners and
- 10:53people are doing real academic work.
- 10:57I'm thinking of Alex Moss, whom I don't know, but whose work is very, very good.
- 11:02The fraud of Gino is a little like you're playing baseball and
- 11:09there's some player who took steroids.
- 11:13I mean, baseball still pretty good sport and
- 11:17shouldn't take steroids and the fraud has hurt horrific.
- 11:21I, I don't even understand it.
- 11:22I should say I don't understand the state of mind suggests my limits as a behavioral
- 11:27scientist that I don't, I don't see how one could do that.
- 11:31But that's clear with Gino and, and, but if you look at the,
- 11:36the extent of the field, fraud is horrific, but very limited in number.
- 11:44The replication challenge, as I'd, as I'd call it, I wouldn't call it a crisis.
- 11:48What's happening in Gaza is a crisis.
- 11:51Climate change, in my view, is a crisis.
- 11:54The replication challenge, that's a better word than crisis,
- 11:57is if things don't replicate, that's basically an opportunity for learning.
- 12:02And the core findings replicate.
- 12:05We're seeing more, you know, more material that tells us more about when default
- 12:11rules will be powerful and exactly why you could say that a default rule won't be
- 12:16powerful if people hate the thing they're defaulted into and they have freedom.
- 12:23Findings don't replicate.
- 12:25And that's, that's an advance to know that it's very important to keep at it to see,
- 12:31you know, is what are the boundary conditions for the availability heuristic.
- 12:37Stock trader probably isn't going to be vulnerable to the availability heuristic
- 12:41where they're going to lose a lot of money.
- 12:44>> Jon Hartley: So this is kind of, I guess, how I see the maybe evolution,
- 12:47like behavioral economics.
- 12:48You had like 20, 30 years ago, you had Kahneman, Tversky, Thaler,
- 12:53they were sort of challenging traditional models.
- 12:56They get into data, find some anomaly or some bias.
- 12:58Aha, yes.
- 12:59Some new behavioral biases are discovered.
- 13:02And then you also had in the sort of two, maybe 2000,
- 13:062010s, a lot of work on behavioral finance and factors and
- 13:11things like momentum or herding, Jeremy Stein's hurting theory paper.
- 13:18You also had these things like Ernest Fear's theory about fairness around
- 13:21that time.
- 13:23I think how it's evolved over time is now I think researchers are trying
- 13:28to find more of a unifying theory that connects these facts.
- 13:33So things like I would say the complexity work, I would maybe put under that.
- 13:41I guess maybe more on the empirical side.
- 13:45I don't know if it's fair to say that, you know, RCTs and experiments,
- 13:49I think it's fair to say that they've certainly been the backbone,
- 13:52a backbone of behavioral economics.
- 13:55I'm not sure if it's necessarily fair to say that every RCT or
- 13:58experiment is behavioral economics.
- 14:00I think some might disagree.
- 14:01And I think some of these definitions are very loose.
- 14:04But, you know, I think one challenge there is, you know, scaling.
- 14:07And I don't know, I've seen a lot of work that in my mind, like information
- 14:12provisions that maybe don't have significant results in that space.
- 14:16But I'm just curious, like, I think one that behavioral economics,
- 14:19with things like default rules and information provision experiments,
- 14:23can't really hold a candle in terms of magnitude of the effects of these things.
- 14:27Is that right or wrong or.
- 14:29Obviously, behavioral economics is kind of meant to be the sort of third way,
- 14:33like idea into something very new.
- 14:35I'm just curious what you think about scaling in behavioral economics ideas and
- 14:40implementation.
- 14:43>> Cass Sunstein: Okay, so suppose we did an RCT and
- 14:46I put on my front lawn a sign that said don't smoke.
- 14:52And we had a population who drove past my front lawn and a population that didn't.
- 14:59And let's.
- 14:59Suppose it's a big size and it's.
- 15:02Let's just go with the idea it's randomized and
- 15:07the diminution in smoking was zero.
- 15:12That this would be a test of a pretty pathetic nudge and
- 15:16whether it worked to diminish smoking in New England.
- 15:21And I predict that the effect would be zero.
- 15:24Or we could design in a cafeteria in Palo Alto or
- 15:29in Cambridge, an intervention where there was
- 15:33a notice contains meat with respect to meat products,
- 15:39which would be to nudge people not to eat meat.
- 15:43And I have no prediction about the effect of that.
- 15:46But I wouldn't be surprised if the effect of the nudge
- 15:52was small or zero if we had a randomized trial.
- 15:57So the number of nudges is.
- 16:00Is so large, just like, like the number of criminal punishments is so large and
- 16:06the number of medical interventions is so large that if you took a class and
- 16:12called them criminal punishments throughout, let's say,
- 16:16western history and the effect size of the punishment was really small and
- 16:22some populations are zero, that wouldn't be amazing.
- 16:26And if it turned out that across a category of medicines,
- 16:31the effect in diminish, diminishing fatality or
- 16:35illness was really little, and that wouldn't be surprising if the.
- 16:41I hope medicine's much better now.
- 16:43But if you look at medicine over the course of human history,
- 16:46you probably get a median effect size of zero.
- 16:50So I think the meta analyses of the effect of
- 16:55anything is imperfectly informative.
- 17:01So I would predict, and
- 17:02we have reason to think that default rules are the most powerful nudge.
- 17:07And there's a paper that's a meta analysis by Elkie Weber and
- 17:11others which shows the average or median effect, I Forget which, it's 26%.
- 17:17That's very large.
- 17:19But even that I want to be very careful with.
- 17:21There's a paper by Todd Rogers and another that finds
- 17:27a shift opt in to opt out creates over 90% increase in
- 17:32participation in use of an educational technology.
- 17:38And there are default rules that sometimes have very limited effect.
- 17:42And there are things we'd want to have.
- 17:44We want to use data like this to build up a theory of when a nudge has an effect.
- 17:50The question does the average nudge have an effect?
- 17:55It's kind of a crazy question.
- 17:57It's a little like the question,
- 18:00does the average increase in civil penalties have an effect?
- 18:07We need to know what's the increase from and to.
- 18:10And what kind of civil penalty is it and do people even know about it and
- 18:14what's the affected population?
- 18:16So then we'd build up an account.
- 18:19I'd love it if we'd have more precision than we now do about which nudges
- 18:23have what kind of effect.
- 18:26As a first approximation, architectural nudges have a larger
- 18:30effect than educative nudges like labeling or reminders.
- 18:35But even the category of labels and reminders, it's,
- 18:38it's too broad and too coarse.
- 18:40If you have a label that says with a smiley face, this has GMOs.
- 18:50I, I predict that will have very little effect in diminishing
- 18:54people's consumption of GMOs.
- 18:56If you have something that is a graphic wording for cigarettes, it wouldn't
- 19:01be at all surprising if that had a significant impact on smoking secession.
- 19:09>> Jon Hartley: So I guess, you know, we had this.
- 19:12I Think one of the biggest things that came out of all the interest in it
- 19:16was created and I think maybe most famously in the United Kingdom,
- 19:20I think this might have been during the David Cameron government that,
- 19:24you know, the idea was, you know, you would create a team within a government
- 19:29that would essentially advise on behavioral matters related to policy.
- 19:35I think also around the same time, you and Richard Thaler were also big advocates
- 19:40of this idea of libertarian paternalism, this idea of having choice architects.
- 19:47The idea of incorporating behavioral findings into policy,
- 19:50I think was a very new thing at the time.
- 19:53This was around maybe 2010 or so.
- 19:56I'm curious, what's the legacy of those groups like
- 19:59the original Behavioral Insights Team or Nudge or so called Nudge Unit in the uk?
- 20:03I think it's been spun up,
- 20:04but there's now groups in many countries that are helping to advise governments.
- 20:08I mean, what have been sort of made the largest contributions from nudges
- 20:12in that space with advising and working with governments?
- 20:18>> Cass Sunstein: It's a great question and
- 20:19it would be worthy of a long academic article or book.
- 20:23And there are pieces that try to catalog those things.
- 20:27I'll give a couple of examples.
- 20:30In the United States, there's a program called Direct Certification for
- 20:35school Meals where if you're poor and the school knows you're poor and
- 20:39you're a kid, you're directly certified, meaning you don't have to apply.
- 20:45And at one count, something like 10 million children were benefiting
- 20:50from nutritious free lunches and breakfasts to which they were entitled.
- 20:56And the Direct certification program was something in which they participated.
- 21:01So that's millions of kids getting to participate in school
- 21:06meal programs by virtue of the shift from opt in to opt out.
- 21:12Another one that is not a product of any particular nudge unit,
- 21:18but which is a product of behavioral economics research, is green by default.
- 21:27So we're seeing people who are automatically enrolled.
- 21:31This is a big program in Switzerland, as I recall.
- 21:35It's big in Germany.
- 21:36It's big in Southern California,
- 21:38where people are automatically enrolled in green energy.
- 21:42They can opt out, go into coal if they want, but that has very large
- 21:46effects in reducing pollution, including greenhouse gas emissions.
- 21:50And in some places it leads to higher electricity bills.
- 21:54But people aren't opting out.
- 21:56So that's kind of a big legacy item.
- 22:00In the United States, people are, whenever they buy a car,
- 22:05it has a camera in it that where you can see behind.
- 22:10And this was a rule I got to be involved in.
- 22:13It's not, it's.
- 22:14It has a nudge component that is you're nudged to look at the camera and
- 22:20to avoid smashing into a small kid or a dog or
- 22:23something physical and strong that'll batter your car.
- 22:28So it has a strong behavioral nudge feature in it.
- 22:32The mandate itself of the cameras and the cars is a mandate, not a nudge.
- 22:37But it was very much, I can attest,
- 22:39behaviorally informed by thinking about limited attention on the part of drivers.
- 22:45And there are people, including very little people, not because they didn't
- 22:50grow, but because they're children who are not dead because of that.
- 22:55And that's a, you know, very significant policy intervention.
- 23:01Dick Thaler would refer to automatic enrollment and retirement plans.
- 23:06And that's kind of the most visible, I confess, because I never want to retire.
- 23:12And the idea of retirement gets my system,
- 23:15one that is the intuitive automatic system in the brain.
- 23:20Sad I I the retirement one isn't the one that comes first to mine for
- 23:26me, but is true that automatic enrollment in retirement plans is a big deal,
- 23:33but there are 1001 uses of automaticity.
- 23:38The OECD now has a big project on sludge sludge audits,
- 23:42reducing administrative burdens of various sorts.
- 23:46Now, you can think of sludge as a problem even if you have no interest in or
- 23:51enthusiasm for behavioral economics.
- 23:54But the fact is that sludge route of behavioral economics, the concept and the.
- 24:00Concern about the adverse effects of administrative burdens on, like,
- 24:05entrepreneurs or innovators, or
- 24:07on people who want to build things like build housing, or
- 24:11on people who are seeking access to employment or other opportunities.
- 24:16Sludge is devastating, often because of behavioral characteristics of our species.
- 24:27>> Jon Hartley: I guess.
- 24:28Speaking of nudge units and regulatory policy,
- 24:31I sort of want to segue into your time at oira.
- 24:34So during the Obama administration, you led oira,
- 24:39which is the Obama administration's, I guess,
- 24:43chief regulatory rulemaking sort of oversight function.
- 24:49And during this time, I think you certainly were described as a pioneer and
- 24:54someone who'd held the role.
- 24:58Some folks, like, I think Richard Epstein, said that because you're one of the more
- 25:03conservative folks in the Obama administration.
- 25:06But one of the ideas that you champion, I think,
- 25:09was this idea of a regulatory budget.
- 25:11And some people were calling this regulatory money ball, I think,
- 25:15at one point.
- 25:16And I think it's something that really, actually was truly adopted in the first
- 25:21Trump administration and that they really followed this idea that every new
- 25:26rule that it created, for every new rule they create, they would delete a rule.
- 25:31>> Cass Sunstein: Okay, so the idea that I was very enthusiastic about and
- 25:36certainly didn't originate was in his cost benefit analysis.
- 25:41So the idea of careful analysis of the costs and
- 25:44benefits of regulatory options, including alternatives to the proposal
- 25:50that is being offered to the American people, seems to me essential.
- 25:56And you can, and many economists do, like cost benefit analysis,
- 26:00who have no interest in behavioral economics.
- 26:03The idea of cost benefit analysis outruns behavioral economics,
- 26:08was pioneered by people who were not particularly keen necessarily on
- 26:12behavioral economics or didn't know what it was.
- 26:16But I like behavioral economics because it is a corrective to behavioral
- 26:21biases which people in government, either because they're human or
- 26:26because they're responsive to people outside government, are subject to.
- 26:32So you might think, I heard of a case in which a risk came to fruition.
- 26:36There ought to be a law, let's regulate that.
- 26:38But it may be that the case was an outlier, very rare, and
- 26:42that the costs of regulating outrun the benefits.
- 26:47So cost benefit analysis as a foundation for every environmental rule,
- 26:53every highway safety rule, every food safety rule, I really like that idea.
- 27:00There may be cases where it's challenging to quantify,
- 27:03but the economic Constitution of the United States, I say, should and
- 27:08does have cost benefit analysis at its heart.
- 27:11Let's distinguish that from a regulatory budget.
- 27:15The idea of having a ceiling on the cost of regulation in a year,
- 27:20I don't like that idea because if.
- 27:23And so the regulatory budget idea is one to which I'M opposed.
- 27:26I get it, but I don't like it.
- 27:28The reason is if you have a regulation in a year, let's say, that costs $5 billion,
- 27:33and then you have three others that cost $8 billion, now we're up to $13 billion
- 27:39in cost, and then you have four others and the cost is starting to get really high.
- 27:44That might be horrific depending on what you get in return for them.
- 27:49If you get in return for them $100 million, it's a catastrophe.
- 27:54You shouldn.
- 27:56But if you get in return for them $100 billion in benefits, then go for it.
- 28:03So cost benefit analysis, hooray.
- 28:07Regulatory budget.
- 28:10A kind of sympathetic and
- 28:13respectful boo reaction.
- 28:18Cost benefit analysis right now isn't riding as high as I would like
- 28:24to in the US Government, and the reason isn't running as high as
- 28:29I would like is that the Biden administration didn't, let's just say,
- 28:34put cost benefit analysis at the foundation of its regulatory policymaking.
- 28:41It had environmental and
- 28:43other goals that I hope were broadly compatible with cost benefit balancing.
- 28:49But it wasn't, because cost benefit analysis was in the driver's seat.
- 28:54And in the Trump administration, the deregulatory efforts,
- 28:59some of which I applaud, some of which I don't like so much,
- 29:03the deregulatory efforts seem to be founded on a policy commitment
- 29:08that is not grounded in empirical analysis of costs and benefits.
- 29:14So the regulatory budget idea I'm not for.
- 29:19I don't like the idea of one regulation in, 10 out.
- 29:24I think that's random and a gimmick.
- 29:27If you have a year where you have three regulations out and
- 29:31500 in, that might be a good year, depending on their content.
- 29:37If you have a year with three regulations in and 500 out,
- 29:40that might also be a good year, depending on their content.
- 29:45What we want is careful cost benefit assessment of existing regulations.
- 29:50And we did that in the Obama administration, at least for starters.
- 29:54I would applaud the current administration if it did careful assessment of
- 29:59existing regulations in terms of cost benefit analysis in deciding whether
- 30:04to get rid of them.
- 30:06And you'd get rid of a lot of them if you did cost benefit analysis of whether they
- 30:10made sense.
- 30:11So there's a happy alternative universe which I hope will arrive at,
- 30:17in which the regulatory state really is a cost benefit state.
- 30:23>> Jon Hartley: I think one of the other things you were an advocate of in
- 30:27the first or in the Obama administration, correct me if I'm wrong,
- 30:32was occupational licensing deregulation,
- 30:35meaning that workers can take their license from one state to another.
- 30:41Don't have to take additional new exams.
- 30:43You know, say a nail technician in Maryland can also work in Virginia and
- 30:48doesn't have to get an entirely new license.
- 30:52This is a huge challenge for people that move a lot.
- 30:55So, you know, spouses of folks in the military that are moving quite frequently
- 30:59and if, you know, they're a licensed worker,
- 31:02they often have to get relicensed, which is a huge tax and huge burden.
- 31:06Here's what you think about all the progress on that.
- 31:09>> Cass Sunstein: I'm upbeat.
- 31:10I think it's good.
- 31:12So occupational licensing, you're right,
- 31:14is something that I was very concerned about in government.
- 31:19And the fact is it's a drain on economic growth,
- 31:23on entrepreneurship, and on individual opportunity.
- 31:27So there's an old liberal idea.
- 31:29By liberal, I don't mean left of center.
- 31:31I mean the liberal political tradition of careers open to talents.
- 31:36That's the idea.
- 31:38And libertarians tend to like it.
- 31:40Many progressives like it, too.
- 31:43And careers open to talents.
- 31:45It's a beautiful idea.
- 31:47It was a little bit boring, maybe in the 1980s because it seemed.
- 31:52Yeah, of course.
- 31:52What else have you got?
- 31:54But it's not boring now.
- 31:56Where careers open to talents isn't something that.
- 32:00Is a lived reality for too many people.
- 32:03So the idea, if you're licensed in Arkansas,
- 32:06you get to do the same thing in Mississippi.
- 32:09A presumption in favor of that seems to me a really good idea.
- 32:14Unless there are unique conditions in Mississippi
- 32:17such that the Arkansas license doesn't warrant that license, or
- 32:22unless there's something wrong with these original states licensing policies.
- 32:29Now this could be an opening through which you could drive a truck.
- 32:33But I,
- 32:34I want to start by saying there's a strong presumption in favor of reciprocity.
- 32:39>> Jon Hartley: It's fascinating.
- 32:42It's amazing to see how much strides that have been made in occupational licensing.
- 32:46It's an area that I, I work in and sort of tracking these trends across states and,
- 32:51and across countries and, and I mean the US in general, at least from some of
- 32:56the work that I've done in a forthcoming paper with Morris Kleiner, is that the US
- 33:01actually has some of the most stringent occupational licensing regulations.
- 33:05At least if you were to measure the fraction of workers that have a license
- 33:10compared to many other countries is very, very high compared to say, Europe.
- 33:15So it's interesting that you would think sometimes that we have a very
- 33:21dynamic economy in the US but there are all these sorts of barriers that exist.
- 33:28Not saying that we don't need some licensing for doctors and
- 33:32certain professions are important, but to what degree do hair braiders and
- 33:37nail techs have to be licensed and so forth?
- 33:40Dog walkers and so forth.
- 33:43It's certainly an interesting topic that's made a lot of headway in recent years.
- 33:47Some people might say it's still small compared to other macro things,
- 33:50But I'm with you in that I think it, it's more important than people realize.
- 33:53I think maybe about 25, 30% of the workforce has a license or so,
- 33:58and it's really substantial and
- 34:01it's used toward those people who are generally in lower incomes.
- 34:05And so it's really, I think, one of those policy ideas, you know,
- 34:09occupational license deregulation that can actually improve opportunity for
- 34:14lower income individuals and help improve their productivity.
- 34:18So I'm with you there.
- 34:20I want to sort of segue into legal philosophy.
- 34:23You spent a lot of time,
- 34:24time in your career teaching law classes across a variety of fields.
- 34:30You, I think, spent a lot of time working on administrative law.
- 34:33I just was curious, how would you describe your judicial philosophy?
- 34:36I kind of understand you're a judicial minimalist.
- 34:39You're sort of an advocate for maybe more executive and administrative
- 34:43decision making or more intelligent administrative decision making.
- 34:47You're a fan of Experts, broadly speaking.
- 34:50And you recently wrote a book, Law and Leviathan Redeeming
- 34:53the Administrative State with your Harvard Law colleague Adrian Vermeil.
- 34:57Tell us more all about your judicial philosophy.
- 35:01>> Cass Sunstein: Okay, so there are a couple things I like.
- 35:03If there's the idea at a highest level of abstraction,
- 35:07the idea is deliberative democracy.
- 35:10So a deliberative democracy is something associated
- 35:14with the German philosopher Jurgen Habermas.
- 35:18John Rawls has endorsed it.
- 35:20James Madison was a deliberative democrat in economics.
- 35:25Amartya Sen is an enthusiast for deliberative democracy at Stanford.
- 35:33James Fishkin is a fan of deliberative democracy.
- 35:37And the basic idea here.
- 35:39We'll get to the judges in a moment.
- 35:41Is that a well functioning constitutional order combines accountability and
- 35:46responsiveness.
- 35:48That's the democracy part of deliberative democracy, with a commitment to reason
- 35:53giving and deliberation among people who are trying to figure things out.
- 35:59That's the deliberative part of deliberative democracy.
- 36:03So we don't have a government by referendum.
- 36:09The right to instruct was rejected by the Constitution's founders on the ground
- 36:14that it would destroy the point of the meeting.
- 36:17They're supposed to deliberate with one another and figure out what's best.
- 36:21So deliberative democracy will naturally lead, lead to some enthusiasm for
- 36:25technical expertise.
- 36:27If you're trying to figure out how to handle road safety,
- 36:31intuition won't be enough.
- 36:33The deliberative part requires a commitment to getting really empirical.
- 36:39And I see the administrative state at its best, not as it always exists by
- 36:44any means, as continuous with the founding commitment to a deliberative democracy.
- 36:51Okay, in terms of the judges, we want a judicial role
- 36:56that's alert to the ambition to a deliberative democracy.
- 37:01And we want courts respectful of the processes of deliberative democracy and
- 37:09we want them attuned to ensuring that it doesn't misfire.
- 37:15So the most important thing the Administrative Procedure act does,
- 37:20maybe is to authorize courts to strike down agency action.
- 37:25That's arbitrary.
- 37:27So if an agency says that we're going to deem the social cost
- 37:32of carbon to be 500 because that's really big and
- 37:36the climate crisis is upon us, that's arbitrary.
- 37:41That's not reason giving.
- 37:43If you say we're going to deem the social cost of carbon to be zero because
- 37:48we think climate change is not real, that's almost certainly arbitrary.
- 37:53I think the almost is just I'm being very careful here.
- 37:57We have to figure out what the grounding is for
- 38:00the administrative state doing one thing or another.
- 38:05So arbitrariness as A very bad thing is consistent
- 38:10with the aspiration to a deliberative democracy.
- 38:15A democracy that's not deliberative might be arbitrary, but
- 38:20that's a form, I say, of authoritarianism, which runs afoul of
- 38:24the founding era's ambitions to have a deliberative democracy, which.
- 38:30Okay, then there's the rule of law.
- 38:32So the book Law and Leviathan is about what the rule of law entails.
- 38:40And here the idea is that the rule of law has an internal morality where,
- 38:46and this is Hayek is an inspiration, at least in my mind, for
- 38:51this, that if you have a rule in the world that isn't on the books,
- 38:56that's not the rule of law.
- 38:58So if. If in reality the enforcement officers
- 39:02are acting inconsistently with the rules on the books,
- 39:05that violates the internal morality of law.
- 39:08If the law is changing so rapidly that people can't plan,
- 39:11that's inconsistent with the rule of law.
- 39:14If there's retroactivity, so
- 39:17people do things that are fine by legal requirements in 2025,
- 39:22but then in 2027 they're punished that it runs afoul of the ban on retroactivity.
- 39:30If people can't understand what the law is, if it's too vague or confusing,
- 39:34that's inconsistent with the.
- 39:36The rule of law, the morality of law.
- 39:39Now, if you have no redistribution or lots of redistribution,
- 39:43that might be good or bad, but it has nothing to do with the rule of law.
- 39:48At least it doesn't until we specify what the legal sources.
- 39:54But you can do lots of stuff consistently with the rule of law.
- 39:57Still, the rule of law is.
- 39:59Central and a foundational part of the restrictions, as they should exist and
- 40:05frequently do exist on the operation of the administrative state.
- 40:10In terms of the Supreme Court's role,
- 40:13I like the idea of the judges avoiding very ambitious theories and
- 40:18avoiding very ambitious, broad rulings.
- 40:22So there's some people on the left and some people on the right get
- 40:27excited about maximalist rulings where the court, you know,
- 40:32strikes down a bunch of things or adopts a theory of liberty or equality,
- 40:37and bam, our country is now being ordered to do all sorts of stuff.
- 40:42I'm skeptical of that.
- 40:44The idea of judges being theoretically humble and
- 40:48ruling in ways that are agnostic about what liberty and equality really means.
- 40:56They don't have expertise on that.
- 40:57And it's a pluralistic society, after all.
- 41:00So being theoretically modest and
- 41:03also ruling narrowly on the case, these are presumptions.
- 41:07These aren't edicts.
- 41:10But ruling narrowly rather than broadly, I.
- 41:13I like that.
- 41:14So here I stand with Chief Justice Roberts, who says,
- 41:18if it's not necessary to decide an issue in order to resolve a case,
- 41:22it's necessary not to decide an issue when we're resolving a case.
- 41:27So that's a plea for a form of minimalism, which, whether or not it's good in art,
- 41:32is usually pretty good for the Supreme Court of the United States.
- 41:37>> Jon Hartley: I'm curious, I guess, on the topic of both the courts and
- 41:40deliberate democracy.
- 41:41I'm curious how you think about our current system and
- 41:46how much it has maybe strayed from how the founders maybe
- 41:50envisioned the sort of original Madisonian form of government.
- 41:56And maybe, you know, you think it's important that for
- 42:00it to have changed since then.
- 42:02I mean, we now live in a world that's very,
- 42:04very different from the time of the Founders.
- 42:06Certainly from a national security perspective,
- 42:08we have nuclear weapons and so forth.
- 42:10But I'm just curious, you know, there's this, I would say, criticism
- 42:15of the current sort of state of affairs or the current regime in saying that,
- 42:20well, you know, Congress doesn't make laws and tries to avoid.
- 42:25To deliberate.
- 42:26Now they don't want to decide these big issues that it's
- 42:30really their responsibility to decide.
- 42:34And then what ends up happening is they give a lot of power to
- 42:37the administrative state that decides a lot of things, or the presidency,
- 42:42the executive that decides a lot of things, and
- 42:44then they do things, and then sort of it goes between the executive and the courts,
- 42:49and the courts kind of are being forced to weigh in on these things that.
- 42:53That perhaps Congress should be weighing in on.
- 42:56I'm curious what your thinking is about the, the current regime and
- 43:00how the current powers, you know, three branches of government work
- 43:05together compared to sort of Madison's original vision.
- 43:08And, and how do you think it should be, how you think it should function?
- 43:12>> Cass Sunstein: It's great.
- 43:12It's complicated.
- 43:14So let's take two stabs at it.
- 43:18There's a grand narrative out there which your question can be taken to press,
- 43:24which is that we've seen successive breaches of Article 1,
- 43:29Article 2 and Article 3 of the Constitution.
- 43:34Article 1 insofar as Congress grants broad discretionary authority to
- 43:39the executive and administrative entities, violation or
- 43:43breach of Article 2 insofar as we see independent agencies exercising authority
- 43:48outside of the presidency, that's on the run in current constitutional law.
- 43:54So the idea of independent agencies is no longer secure.
- 43:57It might be gone pretty soon, but it's been around since 1935.
- 44:03And then there's a third breach of Article 3 where a lot of adjudication is done by
- 44:08the executive agencies.
- 44:10You're putting a Spotlight on Article 1.
- 44:12I don't think the grand narrative is right, but I think.
- 44:16But I'll get to something kind of adjacent to it that I think is right.
- 44:20If you look at the founding period,
- 44:23a lot of discretionary authority was given to the executive and to agencies and
- 44:29the constitutional concerns were either absent or very occasional.
- 44:35So the breadth of grants of authority to the executive pursuant to open
- 44:40ended words like reasonable is pretty eye opening in the founding period.
- 44:45It's not like Congress made all the decisions and so, okay, and
- 44:49said to the executive, okay, do what we just said.
- 44:52Instead Congress said do what's reasonable or appropriate, things like that.
- 44:57So there's real continuity between the first, second Congress and
- 45:01first and second Congress and what we now observe, the idea that independent
- 45:06agencies are constitutional affront or barnacle, that's also hard to defend.
- 45:11Independent agencies were around in the founding period and
- 45:15it looks like most people then thought that was constitutionally fine.
- 45:21The adjudication issue is a little more complicated and
- 45:24the magnitude of adjudication done by the administrative state now is very
- 45:29plausibly out of accord with constitutional expectations.
- 45:33Okay, there's all that.
- 45:36It's clearly the case that the breadth and and
- 45:41ex magnitude of executive branch authority was not expected.
- 45:48And I think it's less because there's discretion than the number of
- 45:53domains in which discretion is exercised.
- 45:56And the power that discretion is exercised with respect to
- 46:01way outruns the founding period.
- 46:04So if you think of the EPA or the Department of Transportation or
- 46:08the Social Security Administration or
- 46:11the Federal Communications Commission, or the Federal Trade Commission.
- 46:16My gosh, they're doing all sorts of stuff that at the founding,
- 46:21the national government wasn't expected to do.
- 46:24The Department of Labor.
- 46:26So whether this is an affront of the Constitution is, I think,
- 46:30not at all clear.
- 46:32Because what part of the Constitution does it violate is a very fair question.
- 46:37It's not clear it violates any part of the Constitution, but
- 46:40it's very different from what was anticipated.
- 46:44Now, this is a large question.
- 46:48No modern industrialized society looks like the founding era or
- 46:5440 years after the founding era government.
- 46:59So we're not seeing that in Canada or France or Italy or Germany.
- 47:04Not that any of those is perfect.
- 47:06But the idea that we would have a small national government akin to that of,
- 47:12let's say, 1830, that seems cray cray.
- 47:17I think.
- 47:18So that's cool person talk for crazy.
- 47:21I'm trying to be a cool person.
- 47:22So failing, evidently.
- 47:25But the, the, the mission of trying to discipline
- 47:29the administrative state by reference to the rule of law and
- 47:35to cost benefit analysis, including elimination of
- 47:39administrative burdens and barriers and sludge.
- 47:44That's a really honorable mission.
- 47:48>> Jon Hartley: That's fascinating.
- 47:50I guess you just maybe broadly.
- 47:54Thank you. Here, just about political philosophy and
- 47:57liberalism, you've written quite a bit.
- 47:59Bit about political philosophy as well, in particular about liberalism.
- 48:07In 2023, you wrote a New York Times essay titled why I Am a Liberal.
- 48:12Does the term liberal mean a whole lot anymore?
- 48:16I'm just curious.
- 48:16There's everything from economic liberals to social liberals.
- 48:21Many who I would say are firmly in one camp and firmly not in the other,
- 48:26which traditionally I'd say would be a key distinction between maybe Republicans and
- 48:33Democrats, at least from the 1980s through maybe 2016.
- 48:38I'd say it would probably go back even further,
- 48:43maybe even pre the time of Buckley and others in maybe the 50s.
- 48:49Now, Locke also talks about a lot about moralism in book four of
- 48:53the essay concerning human understanding.
- 48:57And certainly I think it's fair to say that the founders believe that morals
- 49:01writing about nature's God and the laws of nature and then declaration.
- 49:06So I think there's some today, namely the post liberals,
- 49:13that might characterize them as libertarians,
- 49:18you know, in social liberals.
- 49:22But, you know, I think that's somewhat historical and untrue.
- 49:28And I mean, they also were in favor of tariffs as well.
- 49:31So, you know, I think calling them full economic libertarians I think wouldn't be
- 49:35true either.
- 49:35Now, they certainly believed in property rights.
- 49:38That was something that was foundational.
- 49:39And they certainly believed in, you know, fighting the excesses of government.
- 49:45You know, they're fighting, you know,
- 49:47very small taxes by compared to the taxes today.
- 49:50And that in part the American Revolution.
- 49:55Obviously, you know, economic liberalism, property rights has been responsible,
- 50:00in my opinion, for enormous amounts of economic growth.
- 50:04And maybe there's some unintended consequences of that.
- 50:07But I'm curious, what does it mean to be a liberal today as you see it?
- 50:13And are there limits on liberalism as you see it, if any?
- 50:17>> Cass Sunstein: Okay, so a liberal today believes in freedom and
- 50:22pluralism and the rule of law.
- 50:25That's a triumvirate, a holy trinity.
- 50:29Freedom, pluralism and the rule of law.
- 50:33Ronald Reagan was a liberal.
- 50:35Barry Goldwater was a liberal.
- 50:38Barack Obama is a liberal.
- 50:41Franklin Delano Roosevelt was a liberal.
- 50:44So this is a big tent.
- 50:46Hayek was emphatically a liberal, no question about that.
- 50:52John Stuart Mill, also Robert Nozick for sure.
- 50:57John Rawls, definitely Susan Okun,
- 51:00Stanford's political scientist, no question at all.
- 51:07So I have a book coming out in just a couple weeks called Liberalism in Defense
- 51:11of Freedom and, and I almost called it Big Tent Liberalism.
- 51:15Now, the disagreements between Susan Okun, for example, and John Rawls are fierce.
- 51:23The disagreements between Robert Nozick on the one hand,
- 51:27and Joseph Raz, a philosopher who was a liberal, died not long ago.
- 51:33Those are also fierce.
- 51:34But pluralism, freedom, and the rule of law are a shared set of convictions.
- 51:42I think it's.
- 51:43It's like, really important for those who are part of the liberal
- 51:48tradition to stand up and say so, even if they disagree, you know,
- 51:54very fiercely with people who are also part of the liberal tradition.
- 52:00So I feel, right now, I'm not a libertarian, but
- 52:03I feel libertarians are my brothers and sisters.
- 52:06I worked in the Reagan administration as the Department of Justice.
- 52:10I had some serious, serious disagreements with
- 52:15President Reagan, but, you know, my.
- 52:19My intellectual sibling and commitment to liberalism.
- 52:24So this might not have seemed as important 30 years ago as it is now,
- 52:29but given what's happening in Russia and China,
- 52:33in various parts of the world, given the illiberal left,
- 52:38which is sometimes not that excited about freedom of speech on campus or
- 52:43elsewhere, not just the Marxist left, but
- 52:47the illiberal left, given the illiberal right in Hungary, for
- 52:52example, where the idea is a democracy, that's illiberal,
- 52:57I think it's an oxymoron, but we understand what the sentence means.
- 53:04To put a spotlight on freedom, pluralism, and
- 53:09the rule of law as composing the liberal tradition
- 53:14is a big step forward, and it may be, you know, of.
- 53:21Of great importance in the next 50 years.
- 53:25>> Jon Hartley: Well, Cass, I really want to thank you for coming on.
- 53:27This has been an amazing conversation, and you've had such a prolific career.
- 53:32It's a true honor to have you.
- 53:33>> Cass Sunstein: On, an honor to be able to talk to you.
- 53:35Thank you.
- 53:37>> Jon Hartley: This is the Capitalism and Freedom the 21st Century podcast,
- 53:39an official podcast of the Hoover Institution Economic Policy Working Group,
- 53:43where we talk about economics, markets, and public policy.
- 53:45I'm John Hurley, your host.
- 53:47Thanks so much for joining us.