Regulation Czar: Low Profile, Big Influence

As head of the Office of Information & Regulatory Affairs, Cass Sunstein will try to impose balanced regulations that don't break the bank

By Richard L. Revesz and Michael A. Livermore

Cass Sunstein, one of the new President's friends and advisers since Obama's days at the University of Chicago, has landed one of the most powerful jobs in Washington—but one that is little known outside the Beltway. As director of the Office of Information & Regulatory Affairs (OIRA), he will review every major regulation promulgated by any federal agency, from clean air to airline safety. He will have the authority to wave through or block any new rule, giving him enormous influence over the shape of federal regulation.

But if there is anything less well understood than the impressive authority of Sunstein's new job, it is the particular views and beliefs he brings to it.

Sunstein's Senate confirmation hearings are not yet scheduled. However, his appointment has set off some confusion as those on the left and right pore over his prolific writings and try to box him into familiar stereotypes. On both sides of the political spectrum, there are groups who look at Sunstein and see a University of Chicago conservative, influenced by his former colleagues (including Milton Friedman) and bent on dismantling federal regulation.

Others in the business community see Sunstein, 54, as a Harvard Law School liberal who has written books defending strong regulation. Progressives reading the same tea leaves hope that Sunstein's work on "behavioral economics" shows a desire to regulate everything from credit cards to retirement accounts.

Beyond Syllogisms

Sunstein just doesn't fit into any one of these forced categories. His views go beyond "corporations are bad, therefore regulation is good" or "business is good, therefore regulation is bad." A leading intellectual, he has spent his career preparing for the day when such syllogisms fail. And that day has come when Alan Greenspan acknowledges that a lack of regulation contributed to the financial crisis, and stimulus spending on energy efficiency is used to keep U.S. business afloat.

There is plenty of space between a suffocating regulatory state and a reckless, unfettered free market. Based on his past writings, and our own personal interactions with him, we believe that for Sunstein, developing regulatory policy is a technical enterprise where one can learn from one's mistakes and build a better mousetrap. He does not see pollution as a moral problem with a "correct" level of zero. Rather, he sees risk as a natural element of life, and a risk-free society as neither attainable nor desirable. In his worldview, regulatory goals, like safety or environmental protection, are important, but they can be attained in more—or less—intelligent ways. The highest priority in a Sunstein OIRA will be achieving a balancing act of strong regulations that don't break the bank.

But in a society of many disparate interests, there will be winners and losers, even when government regulation is well crafted.

Sunstein will probably favor approaches that shift more power to the private sector, but he will expect big results in return. The industries that have spent years developing competence in negotiating the regulatory labyrinth currently have a comparative advantage. Sunstein almost certainly will shake things up on issues from toxic waste to workplace safety, and companies that thrive in the status quo system are likely to lose out.