The importance of regulatory humility
It’s hard to be humble. In fact, most of us fail at it systematically: 93% of drivers believe they have above-average driving abilities. 94% of professors believe they are above average relative to their peers. 75% of competitive chess players believe they are underrated even though the rating system is demonstrably accurate and chess players tend to know their ratings. 66% of people believe they have an above-average sense of humor. Curiously this overconfidence is negatively correlated with ability (that is, the lower our ability, the more optimistic we tend to be about our abilities) and positively correlated with news consumption (that is, the more news we consume, the more we overestimate how much we know). This illusion that we know more than we really do has frightening implications for regulators who seem to be asked to make ever more detailed assessments and decisions. As FTC Commissioner Maureen Ohlhausen – who will be addressing regulatory humility at an event at AEI tomorrow – recently wrote, government officials “should resist the urge to simplify, make every effort to tolerate complexity, and develop institutions that are robust in the face of complex and rapidly changing phenomena. Unfortunately, regulation too often is a procrustean bed for the regulated industry, due to the limits of regulators’ knowledge and foresight.” “Procrustean bed” is a reference to Greek mythology, in which Procrustes physically forced his guests to fit his bed by stretching those who were short and amputating limbs from those who were tall.