Oo Behavioral Law and Economics Edited by Cass R. Sunstein niet of Ching aw Sat CAMBRIDGE UNIVERSITY PRESS2 7 — Second-Order Decisions (Cass R. Sunstein and Eitna Uthmaren-Mergalit According tone pctreo pac esorng, pope deson making ‘inal mesg hesdvanagetond dadvanage of pope cores of Sotonand choos in acral hat seen Te pase plyea {Emior ein eons snd decom teey nero fms coe toleding envisions of eso in ad pls ven nop, thre mane of toned rata ate rcone sd wher set Ironto meno “yng theron optnang, le devon on be Under only gain he acon Use pcre, ‘ssn people ve nt, hs understanding i praca asoning ts qe nadegente! An import role that thon he xen impinges nt pops pws blac spot eons ‘stem A cena pa hereto poopie nck toe eon ‘Bevcoangs ei, oro tise =by ing ne wea ‘ole befor tic ment faite dahon Besson neboudey {atom popletenptto minimise the burds of cote ond hello om By cont ner dion wero detonate appropri sit «gy hr vedugthe problemsasocted wiring sioner decaon ‘Stover desl th ile th satus Uc peopl we in over I eva eng ino an dary Seton mang ston ae fe! ‘tance nn fo example dg fave sce oneal fn ‘evref enon he our intr promot edn td ee theburdare of sasequntcsone fx ply gts ote aco ‘trond rer deco avorafaeegbontocone tig pasy Wess ‘intr gen tthe vt eae smtp ad aus ‘hal and een dence queion are yt baad dectons repinl eep sa ee p ob datn post focal a ctable presanpon) fic ain hse oly theca aoen ene de Stel These somes iris evento wih thy pode sas anda nthe ‘tet o wih they poe infretont and oar dens one apt 1188 Surya Uae Maoar on eer ther fife the procs of lial decison or diving he ‘roensof ne doo, Tare ve hos pes intereing kinds of ‘cs The et inves conde decison tht greatly seduce burdens (inc of nate dei ogre colder thinking naan ‘Besatonsof his in, wich we cal gh Low, maybe dict to alee Festi fac the questions whether th bardenc are worhincusing ight ‘lihe aggregate Darden, mora cogritive, and otherwise of acoder tha fintrde decison taken together Te second we cal Low-Low. Some ‘Scund-ordesratgisinpose ls the way of decisional unde ier frorcer rng th ulete deen Thisiea gest advantage, eda me} "uct rbete tbestategy i queaton considera decsontip ac) ‘scr: too mach unfree on 09 ms) misiaks. The hid we cal Low= Fgh Some ncond-ordor tape involve ow ex ante decsional burdens otc agent themosives tthe cont of nnposing posbly hgh subsequent TMrdenron someane dace whom Uw fisvardr decion "exported" = (cegeon lf powe tosocae ited socal, or tan shor nthesron ‘vis cane "We step understand thee different ind of ats by denwing ot ctl prctensincvidaland intional. Ther it provide ee [fodrce for seen when ae or another seategy wile chosen, wen ne ‘anette best sna and how both alin an bounded raianat ‘esvns adittions might go about aking the relevant choices There [Eo conta! fssone The fat hn no parca tangy can be sad tobetete in the ebay the scond taf is poset ent nthe ‘Sotct the coc tat pushin ovr of one or another atgyenaothe “Eton in whch each appt makes sense Inthe pens ve es 8 ‘ange of tea pola a lea sues hat ar rai by various econd- ‘ide desis Dsisons and Mistakes Sitges ‘Tee flowing taxonomy is Intend to be edutve ofthe possible sector econ bute various eng should nat beeen asec ‘Fone anater there ome overlap between he. Rete, People anipating hand or repetitive detlons may adopt # re ‘hey fate ofa rl eta arsout fo afl or nel le ae ‘pein of reutsinndividunl ce People might fr example ‘Ectiny wil ocr heaton hair tes or fltoreetadeadinea legate inght rove at jigs an never make eseepsons othe speat-inilat rth vcryone ols bon convicted ce felons aus be sete ‘ehelmpetonnent. secon Mer Decisions ® Prsumptions, Sometimes oninary peopl ad public isitations rey not ‘he ule ut instead ona prosumpton, which on be rebut. Therese Pid ioped eto make fewer mises while atthe sme ne nang ‘eesonable docsonal burdens? An administrative gency ight presume fer oample tat ao one may amit mere than X tons of certain plant bute presumption con beet by showing that farther ets ae ot eae ‘Standaris Rules arse eocested wih tenders, Abanon “eco” speedo theighty snstandardsols requirement thatplltofaipanet reps ttt min hectare mt be compare with rule opening 8 ph sped oF 2 Sprout tiorrhenglaenore munca Rontnes By hs ems we nn something sma 3 ait but ore “olan ore lca and witout the peje cnotions ‘Sine hb ite he hot of chewing one's nga, To rp fervor might apt» routine of cng hr dor evry ine he sve it Sy cet mene crn i ey scammer nightedopprclarotend flitevey ay even ‘ough onsome aye anaes ate woud beboes Cutan geotre ‘spl flow rstine. Salty, Onova singing cif station athe ine oie ‘toma rn oc ae oat {ier en pononal ction ves npn nd apart inconmenmsabe inet pees lene sal evra nop > ‘orcampl Janey deaf wih Rober asus dees whether Shewantte my hearin ay goto night col tse faery ‘Sedna Asner“ ae approach te at Ago ‘sous aanon ke Jlges Opal mabe are denen fi aya the nd ce ee ih prefered nao of {prion en thay rent covet abot eager ite Dt ‘Fite common tr bt incase wo Pking, Smee the sty of dsson, oat song te o- fone pce eon avandom Ds Ty mig fra Spe ioral eapey centro) yuo th tate ot pom nds) ‘mh ise mie “Sloe ling tern cam bang hon ptr? ‘Spl yen Suge ues tn fo ded who wre on aes orn he {nln nde aeres oe se inn dra wer te Dron {Finda che shih ad enters pata pode185 Sistas UnuoweMascae sd on ober ther Kf the proces of ultimate dion or ding the proces of ulinate decision. Thre ar the espodlly interesting nd of ‘iss Thet involves second-order decisions that gest rece burdens atthe time of uiate decision but require considers hinkingin advance Decisions of ths kind, whlch we call High-Low, may bedi to make be- forethe ot the question whether treburdensare worth ncurringinight of the aggregate burdens, moral cognitive and otherwise of second-order ‘nd fastener decisions taken together Thesecond weal Low-Low. Some ‘Second-order sratepes nipoue Bite in the way of dedsonal burdens ether fore or during the limate decision. Thisira greatadvantage, anda major questions whether theattegy in question considera decision ofipacoi) rduces oo mud unalnes orto many mistakes. Thethind eel! Low High Some second order strategie involve low ex ante deisionl burdens {orn agents themselves, at thecot of mpg pasty hgh subsequent Tundene on someone else o whom the fistorderdeclson fe “exported” 3 alr busines the development of eeu sates otis genera kind The mest striking ene nvoive ‘Reoverng addict out people sho are not adits, and who are not 2 ‘Soaring rom anything often make mila secone-orde decisions, When ‘SBiecniol ls pectin filo acieve an agent may sek deg TENG Whathera delegation (Low-High ls preferabletonruleor presump. TeNtiigh-Low willdependin tum on the various eonsidertions discussed stove Donen Dectone =m ‘ow-Low ith Special eferenc to ching and Smal tp) Bip, Responsibly, and Commitment ayn atone aro omen ollie tes suhag eden ote Seas afin eosin eset sincere ates cts ent nt a ‘Pater ewe ‘occ estat ace "zs ela tls ca stl eet tien Serta sft arpa nf rece al Shc aes ‘seed a attra ey Seer Supa eter epcec sen SEO ee aera Sept attra SSE Se eam ate Slit es ay tl BB SRDS Tied fos aero te Ie lca tay stagnant Brae agp ep Per (Sn Seen Le eat aso Spite ice ean ara ees Serenata peal Change Unintended Consens and Reversiily {tess involve rds proses ol tp ook Weave sid tn sai on pt cel ey ening den dest nde coscqucnceofee afc man teenie anf noen ane incomes monet ye te payee sae een oe Grcon avaabetolbe dg iney per ean jsigerlnn en thc pene imeditely ae bat rmtters whe irs ight Seni ene isn sen ore eso in vor of nal see * Seppe or exapletha a cot see waving pr pee Set Shag “ight finda atthe irae the ot ‘umpe! © gonna eat cover al apn stan inOo 2m Swern avo Uamner Mosca ‘which thet ght might be exrcisd, the case would tao very long eneto ‘decide Perhaps theburdens of decsion would be prodibitive, The might be Sobecuso ofa shoo lack of information, rit might be becseof the pres ‘res imposed on amatinenber our consti of people who ae nae tor ln diagreeient abouta range of ubjecs Such a court nay havea great ‘eal of dificalty in reaching closure on toad rules, Stall step area naira resul, ‘When judges proceed by smal steps, they do so precisely beens they ow that thir Flings create precedes; they want to narrow the spe cof ature applications of the rulings given the various problems desea ‘above, nat mportanytelzek of sufient information about ature prob lems A distinctive problem involves the possibility of oo mack information. “Apaticular ese may havea surplus of apparent relevant etl and per haps future cares wl Ick one oF mae of he relevant entre, an hil ‘ethe source ofthe concern with creating wide proces Tho existence of Ger ai) features Xr Yin case Ay massing in cae B, makes it hazardous to generates ale in cane A that would oven cate BT narow ening and reception ofthe Supreme Court's decision inthe celebrated Anish case, ‘lowingan exemption of Amish chien from mandatary publischooling, ‘sanesample ‘Sul steps can alo make special sen if ceumstanes are changing rapidly Pechaps relevant ts and vole wil change in uch ay 38 ‘make a rule quickly aacivorstic eve fits wall uted to present cond- tions. Ths its possible that any desion Invaving the appaton of the ‘ust Amerdment lo new communications technologies, neg thei temnel should be narow busime a broad dese rendered atts Hie, ‘would belialy ogo wrong. On ts view smal stepir bert boca of he [Wlihod that « brood rule would be sation when appli io case not ‘elore the our ‘nan agament very much in hls pt Joseph Raz as connected a ind ‘of smal stp the form usually producod by analogical reasoning ~t the ‘Special problems created by one-shot interventions ito complex stem InRez’s view courts eason by analogy in order o prevent unintended side ‘fects from large disruptions. Stl suppostive of te small-tp srat- ‘ogy the German paycholglt Dietrich Dorner has done oan urinating per experiments designed ose wheter people can engage in uc sal soil engineering Partlpants are aed #0 sclve problems faced bythe inhabitants of some repon a the worl. Though the mogie of the computer, many pole initivs are avallable o save the vlevart prob Jems improved cae cf cle cllaheod immunization, dling moee Wel). But most ofthe participants produce eventual clams, beause they do notaeethe compe system-wide elects of particularintrvenions, Only the ‘areparscpantisable to cooa number otepsdowntherondtounderstand ‘he tpl fects of one-shot interventions on the system, Tha scat ‘nacre Dessons = patina alt otis snk anak smal rovers tap, along het oomer ve tine Hence Dore ng thes oan he robles eet! by Interventions ino tens angus nav fal Sep ge fae sar problema iceman dons ae 8 god ‘ry ofreapondingto the pricy prottom ofbounded aul cuted By igroraneof oie avers ets "om these points wo cn so nam sep hy be beter thn les ‘orth delegation Often an natton lacks the frst fo genet ‘Sear ul for he tre fen 0 appropriate delegate as tat nan Wieartaces ae changing apy ny ale o presumption might be ‘confounded by nubcquet development: What sepa inpatan i that enovement in any pricier lection shouldbe reverse probs ‘se On tho nasal sep proach ends» Kind ig GF temporary) deco in favor af the aso; nur re fo hale { prblen of dctniaton inceentaly may low ust paces Sentnue, and so 2 sate ats ying fo ava the pose of Jel in poor ares. A aml sep speach night abo underie ‘uning aod all tw provide advance oie of he cone of or Pally ‘rusitcnmoi beth stops aprechiy nthe etal spposch to buna rainy wheter Gully optima expo {Sbourdedraonaiy or uboplinaD reesin of Bounded eos depends on te conten. “Thearalyisis sia uti of th governmental ating. Agents might tskespalstep tenet lek thelnormaion tat would erae eo rl or presumption or bene he dace ny ac i Sao hay tote mpi so he tee no reson for rl or pre Semper Orenel tspomeyfaow som heise of changeover ne frome fact tlre ddan might have unintended comsequmnes, oF from he wiht aldo oat 0 dlr te respons forges ange Summary and Condasions ‘Second Onder Strategies ‘The cincuesion is summarized in Table 72. Real ate terms “love” snd high” refer tote overall costo the decision, whicharenotnecessay borneby thesame gent With Lowe iighthecostaeresplitbtweendelegaor nd delegate wit High Love hey maybe pit betecn an inten whe ‘makes the ules, so) and en agent who fellows the ule). "Thereace two principal contusion, Thefts that no second-order sat: ‘gy canseasonably beprefredinthesbultoct Thesecondisthatitispossble ‘Dideniy the etings in which one or another is aly to make snes and leo the factor that argue favor of oF aga any pacar approch,rales, Tossa, wenGianocaee * Redtoeney ot Diy flaming ‘egenmecaicn eo, ‘Shewgeetwih Selopemaaier owovei cs, oer png inves i pool diene imine cence sg Aetcn oni Towctghs Spomeand nde Eee vie “eaten Lwtow: ‘poking eal “ale 72 Seed Order Steet Sep "Seco duson vc sfmamerois Diy fgverating good Sher rumba of oni ~ _ and. Onder Decsons 2s ‘Do Pople Actually Make Seoul Onder Decisions? Should Thay? ‘An important underlying love remus: Do people, o nations = tually make asel-consciousdeclion about which second-order sate to favor given the men of passiblites? Sometimes hiss inded the case A {an to maximize in any eytematetashon simply bocnure the forte way ‘of procading i easier (and thus may eaximina once we consider deron ‘sis of various Kind). For both iatations and individu, the salient featves ofthe context usally suggest a particular Kind of second-order srntegy here sno remo to think ong aed hard about te seco order ‘edn, “These ace ntended as descriptive points about the operation of practic ‘easn. But there i normative anu here a well we een sey tat poo ple’ second-ander decisions go wrong For example, legal formalist ost bromine Justice Antonin Scalia argue fra High-Low strategy, bit they {do so cm an priv! bais, without engaging the pragmatic ae en fssucs et sake and without showing that ths statgy is preferable othe realistic second-order aleratves The same ca be tld sbout those who favor ncremenalism, or smal steps, in politcal a egal rexsoning There sare many ways of handing decisional burdens and there may be betes decisions or choosing s second-order strategy withoutasenseoftheexndidaes Wehaveattempledtorytemats the undelyng consideration heeoO 206 Sure a UusuooeMarcait atoalty ad Bounded Rationality “Second-order decisions as often response toa particular source of ‘boule retonliyimied information. As we have emphasized, each of (he second oder stratgie sa potelally optimal sluton fo the problems posed by unanticipated ede cflecsand the dit of obtaining knowledge [bout the future. Or econd-order decisions may respond tam ination’ ‘Snarenes tht is prone tose unreliable heute devices when a dec “on mun made onthe spot Inaction sacond-orer strategies may be ‘response to motivational rather than cognitive problems people ty, for ‘Saale to counteract tat onntendencesoward impulsiveness myOpia, Shu unvaltic optinian” through eles and presumptions Ta these wy cond oder decisions an be soon a ents rational responses by rational ‘ors making howe dessins with fll awvazencs ofthe costs of taining, {sonmation ana of Se awn propensities fore “Although rational core mnie second-order dacisions to overcome thei ‘own bound atonal, bounded ratonelty can affect those decisions 8 ‘tell lack finformation often prewes people ancinsitionsinthe dre ov ot suboptimal second-order strategic a inadoquately informed curt for crampl, nay choose sleeps even though rules would be far better, ‘Wosspt thatthe avaiabty haunt by which people make judgments ‘by asking what sar eases come realy to mind ~undeles ome o- ‘neous judgments about appropriate recond-ordorstatgies" Bad second ‘rier Jens can sao bee esto motestioal problems. An impulsive ‘ximyopicintittion may fall ose the extent which oles wil econ ound by euteaquent development; an unraliacaly optimistic sti ttonmay overestimate i capac tomaes optial smal tps; sing imple IReuritis pple may choose second-order stategis that badly doseve thet wn gol, even whan he stakes are igh Conlin Cndiy peopl nd lfc nittons rfl oma ‘hcopot doco they pond with one or anther seconde ley ‘hed candle re cspabecia and ple robles, Smo toch stele invlve hgh al orden Sat generat a eave $i low-butden mech for decgingseqientcses These sae, Frcnly tokng te formot rales or presmptons, sem bes when the ane Spl Sinn momar nv a wi are ee ed pooingoe npn Oter states salve bh ight tal bur ‘ndana ight bure tthe tae of ang imate deco. Thee Spproaches ork wel when egies of ennlztonappeatingon no ‘Ekive geunds haps sent choise are oles equpsy orb {Suse one shoul o wl ake eoponstty for dtbertedecion, or =~ Jeond-Order Dest a he frstorder dein simply to ft o make tense of saeco ides ied tec) reson Imponderaties on isk of rg tend connec. Slot satg solvetow sa une bat gh exported bs dense of eons whens dla ade csc peo ‘ination ena tapes toon’ fre sel. Dlegstons ld a Aerator, with snort conan the pecon ors ‘making thedlegiton Steg dlgaton makers when dept ‘Savalable wo has evant experi uray anne eo Speco aris thers ator (aap ects he does ue ons ‘meat vation protic) when herp te {Ser oher advantage fo plang the responsi for den som ‘he ern ntti elegans cose sero cieo paon {Suc nt rene prosiens of wales when depts re Dede tacks tht thy do ot volta assume or woud a ae re ston and when the deen ncnstent with tesa {Xn dlegaton such tle 2 cour Hence Sleeone in tong em ie point ow of dese he spans pes “he fn st fee vole high Bade bth ble ad te Une fdecson sn eth coal caectcry ann gly defer Situons. He hve merely gerd inthe dito ths ae ‘bay make se une exe ccumstane, Du Wih pce oat ‘ansidered best oly en te asunptn that ening igh overll ardent ‘ decion san afte god (pertape or ora ena) or even one {hing to relish Ts esupeon might appa perl ut uncotey ‘aman pling tn cs vr one [provides the motivation cxtaer be oth oe poms se decisions discussed here, pening noha Notes > a sn own fn i Spectr mee ee et HES ira oe Sera tea et Roce Eiie Bere ea fine ash Dibagee tit Cette wien ohn _ Pea erste dat tee tadicoonianeaee iar Eiciiticececanrrc atone iat Stent ereamierae Satie pct eacetentaeatih Siagegeh athena cette Spoken mcrae hase8 s ¢ Sorsran ano Uaioe Manoa V qin when ne gent ci itionatn Wh psu, you ‘lace wthout iv infeatan wik ale wetneceptna you ret Poe, Finis youae tind nether ding sora ot dang ‘Sus nt Maga Opty Cove ig” Deon in The ofthe via ten Bese Lee an ici Lil Rang In pot ces, Se Gh tintin Te Sco Ming Tough 19 Puke Re ‘Sooseticheevan intent sd event gue botnet Pee Chimes Linsiom Sl adding Na Yt Toph 3 Po. Adi Re sa ‘Signy Margit an Siney orgs Pking aod Chorin So ae 87. Se 0 foe Corl; Why Bourke Ratna 3 i. Lee 90990, Ee £E Hinata On Nor tg to Kaow i Reming Pty {059 Gera Der Ne Chee Ber Than Us i enn (97 esse Holmes Pasi en CominsOx he Thy of et Deneracy 98. sa ter pa non Stn pt a tists fen propria wi donot cee est icubrand stoma cae wl ect snore sa ay might beter Serefiw pe ot. (Ce Tome Sing Sleommand x Paci, nF, sin «Try of Kena hoi 6 a Ra May 198 Fup & Poe a ‘Cnet netic ues oct wether sow ss Eee pra foes [et a he tity ofa Ep Lawn May O57). Exbiech Bevner eto aee My Tg Ge Wengen ht Me Con [pit The Rp 99. efecto Lie te St Hw Cera Seems ope Han ian re al (95. ‘neo e tepals ae favre in Seat cues rote Le ups Arr Mat, The Lat Dagon re 9 ‘Sno en Aor of rari Flt Cran Le 97 ‘Stee apa nate [SENCHD. enn Uncle Option Abou! Ssrptiy to Hath Pb isch Enea trom Conan Wide Sample 10 Be eA O98 ‘penal dissin ‘tt cton sn Dold Caesnd Dssn Te 10. ‘sis Danet Kafrenan sed Don Load Cokesand folé Foe ‘Rope Pepe an st Tn, 9 Mg Se 17 (0) ‘es tuon Fong Keng, ti Ki, Mah ie Bis Fa he Vain Dene 198 0890 for sgl.