Office of Information and Regulatory Affairs

The Office of Information and Regulatory Affairs is presented as a federal administrative institution that helped carry behavioral economics from research into public policy. Under President Obama, Cass Sunstein served as its administrator, giving him an important position from which to encourage government agencies to apply findings about framing, limited rationality, and human decision making. The office therefore appears not merely as a regulator, but as a practical testing ground for the claim that institutions can help Humans make better choices.

Institutional Role and Intellectual Background

The office’s significance emerges from the contrast between the rational agent of traditional economic theory and the psychologically realistic Humans studied by Daniel Kahneman and Amos Tversky. The rational model assumes agents who are consistent, selfish, and stable in their preferences, whereas Humans are influenced by System 1, limited by the information immediately available, and vulnerable to framing, narrow framing, and preference reversals. Because people cannot reliably satisfy the demanding standards of perfect rationality, public institutions may sometimes need to structure decisions in ways that make accuracy easier without dictating the outcome.

This institutional question is connected to the broader debate over libertarian policy. The assumption of rationality supports the view that government should not protect people from their own choices, while behavioral research suggests that ordinary decision makers often need assistance. The office represents the administrative setting in which that assistance could be designed and evaluated. Its implied task was not to replace choice with compulsion, but to recognize that the presentation of a choice already influences what people do.

Behavioral Science in Administration

Cass Sunstein’s position gave him considerable opportunity to encourage the application of psychological and behavioral-economic lessons across government agencies. The 2010 Report of the Office of Management and Budget is described as embodying this approach, particularly through recommendations for disclosures that are clear, simple, salient, and meaningful. Such language reflects the premise that information is not automatically useful merely because it is technically available. Presentation greatly matters, especially when an outcome is framed as a loss rather than a gain.

The office’s work is linked to a wider policy vocabulary associated with Richard Thaler and Cass Sunstein’s Nudge. That approach treats policy design as a matter of choice architecture: defaults, wording, visibility, and procedural effort can alter behavior while preserving the formal freedom to choose otherwise. The office thus becomes an example of how an institution can apply findings about cognitive limitations at the point where regulations and administrative forms meet everyday decisions.

Concrete Policy Applications

One prominent example concerns fuel-economy information. Research on the MPG Illusion showed that miles-per-gallon is a misleading frame for comparing fuel savings. A driver moving from 12 to 14 miles per gallon saves more fuel than a driver moving from 30 to 40 miles per gallon, even though the latter increase appears larger in the familiar MPG frame. For drivers traveling 10,000 miles, the first change reduces consumption from 833 gallons to 714 gallons, a saving of 119 gallons; the second reduces consumption from 333 gallons to 250 gallons, a saving of only 83 gallons.

The policy response was a fuel-economy and environment sticker that, beginning in 2013, included gallons-per-mile information for new cars in the United States. The more informative measure appeared in small print beside the more familiar MPG figure, so the correction was incomplete, but it marked movement toward a less misleading presentation. The interval between publication of the research and implementation of this partial correction was described as an unusually rapid application of psychological science to public policy.

Other applications involved automatic enrollment in health insurance, dietary information, and food labeling. A revised dietary presentation replaced the difficult-to-understand Food Pyramid with the more immediately intelligible Food Plate, while a USDA rule allowed meat products to describe themselves as 90% fat-free only when the statement 10% fat was displayed alongside it in lettering, color, type, and background of equivalent prominence. These measures treated the format of information as part of the decision environment rather than as a neutral container.

Defaults, Framing, and Institutional Consequences

Organ donation provides a further illustration of why administrative design matters. Neighboring and culturally similar countries showed strikingly different donation rates: nearly 100% in Austria compared with 12% in Germany, 86% in Sweden compared with 4% in Denmark. The difference was attributed primarily to the default embedded in the form. In opt-out systems, people are treated as willing donors unless they check a box; in opt-in systems, they must check a box to become donors. The single strongest predictor of donation was therefore the option adopted without an active decision.

The Office of Information and Regulatory Affairs is significant because it sits at the point where such findings can become routine governmental practice. Its examples show that policy does not influence behavior only through penalties or rewards. It also influences behavior through the order of information, the visibility of alternatives, the effort required to alter a default, and the emotional meaning attached to gains and losses. A well-designed institution can use those forces transparently and retain the individual’s ability to refuse, while an inattentive institution can produce large effects through forms and labels that appear administrative and innocuous.

Relation to Organizational Decision Quality

The office also fits the book’s broader argument that organizations may be better equipped than individuals to reduce judgment errors. Individuals often fail to notice when they are in a cognitive minefield, and System 2 is least likely to intervene under stress or when a decision feels urgent. Organizations, by contrast, can impose checklists, standard procedures, reference-class forecasting, and the premortem. They can make the production of decisions resemble quality control, with separate attention to problem framing, information collection, decision formation, and later review.

This organizational perspective clarifies why an administrative office matters beyond any single regulation. Independent judgments can be protected by asking committee members to write their positions before discussion, preventing early and assertive speakers from pulling others into alignment. Errors can be decorrelated rather than amplified through social influence. In the same spirit, routine review is preferable to a wholesale investigation only after disaster. The office represents the possibility that public administration can build these lessons into recurring procedures instead of relying on individual officials to notice every bias in real time.

The institution’s role is therefore both practical and conceptual. It demonstrates how the study of Humans can modify the design of government without treating citizens as irrational or stripping them of responsibility. Its policies make the central lesson concrete: when choices are framed, defaults are selected, and information is presented, institutions are already shaping behavior. The question is whether that shaping is deliberate, intelligible, and aligned with people’s long-term interests.