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7 J. Legal Analysis 1 (2015)

handle is hein.journals/jlegan7 and id is 1 raw text is: 


Oren Bar-Gill* and Cass R. Sunstein


      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, gov-
      ernment serves as our agent. Understood in light of Principal-Agent Theory and
      Behavioral Principal-Agent Theory, 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.

In diverse areas-from retirement savings, to consumer credit, to prescription
drug use, to fuel economy and energy efficiency rules, to tobacco consumption,
to food and beverage consumption-government makes decisions for us or
endeavors to help us make better decisions. In other words, government
serves as our agent. Principal-Agent Theory (PAT), broadly applied in econom-
ics and political science, can serve as a useful framework for considering the
optimal scope and nature of this assistance that our agent, the government,
   It is quite common to talk about government as the agent of the People in a
democratic society (Ackerman 1993).1 Our focus is not on the People, but
rather on an individual person. Accordingly, we are thinking about personal
decisions-decisions whose primary effect is on a single principal, an

Professor of Law and Economics, Harvard Law School, 1525 Massachusetts Avenue, Cambridge, MA
    02138, E mail: bargill@law.harvard.edu
    Robert Walmsley University Professor, Harvard Law School. We are grateful to Meirav Furth and
    Lisa Marrone for excellent research assistance. For helpful comments and discussions, we thank John
    Beshears, Ryan Bubb, Jacob Gersen, David Laibson, Oliver Hart, Daryl Levinson, and Matthew
    Stephenson. We are especially grateful to the editors of the JLA and to the referee for their comments
    and suggestions.
1   For a critical review, see Vermeule (2015). PAT has also been used in political science to characterize
    and analyze relationships between different government actors, e.g., President and administrative
    agencies or Congress and administrative agencies (See: Cook & Wood 1989; Gersen 2010).
© The Author 2015. Published by Oxford University Press on behalf of The John M. Olin Center for Law, Economics and
Business at Harvard Law School.
This is an Open Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License
(http://creativecommons.org/licenses/by-nc/4.0/), which permits non-commercial re-use, distribution, and reproduction in any
medium, provided the original work is properly cited. For commercial re-use, please contact journals.permissions@oup.com

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