Skip to main content Accessibility help
×
Home

Rear Visibility and Some Unresolved Problems for Economic Analysis (With Notes on Experience Goods)

  • Cass R. Sunstein (a1)

Abstract

In 2014, the National Highway Traffic Safety Administration finalized its rear visibility regulation, which requires cameras in all new vehicles, with the goal of allowing drivers to see what is behind them and thus reducing backover accidents. In 2018, the Trump administration embraced the regulation. The rear visibility rule raises numerous puzzles. First, Congress’ grant of authority was essentially standardless – perhaps the most open-ended in all of federal regulatory law. Second, it is not easy to identify a market failure to justify the regulation. Third, the monetized costs of the regulation greatly exceeded the monetized benefits, and yet on welfare grounds, the regulation can plausibly be counted as a significant success. Rearview cameras produce a set of benefits that are hard to quantify, including increased ease of driving, and those benefits might have been made a part of “breakeven analysis,” accompanying standard cost-benefit analysis. In addition, rearview cameras significantly improve the experience of driving, and it is plausible to think that in deciding whether to demand them, many vehicle purchasers did not sufficiently anticipate that improvement. This is a problem of limited foresight; rearview cameras are “experience goods.” A survey conducted in 2019 strongly supports this proposition, finding that about 56 % of consumers would demand at least $300 to buy a car without a rearview camera, and that fewer than 6 % would demand $50 or less. Almost all of that 6 % consists of people who do not own a car with a rearview camera. (The per-person cost is usually under $50.) These conclusions have general implications for other domains in which regulation has the potential to improve social welfare, even if it fails standard cost-benefit analysis; the defining category involves situations in which people lack experience with a good whose provision might have highly beneficial welfare effects.

  • View HTML
    • Send article to Kindle

      To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

      Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

      Find out more about the Kindle Personal Document Service.

      Rear Visibility and Some Unresolved Problems for Economic Analysis (With Notes on Experience Goods)
      Available formats
      ×

      Send article to Dropbox

      To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

      Rear Visibility and Some Unresolved Problems for Economic Analysis (With Notes on Experience Goods)
      Available formats
      ×

      Send article to Google Drive

      To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

      Rear Visibility and Some Unresolved Problems for Economic Analysis (With Notes on Experience Goods)
      Available formats
      ×

Copyright

Corresponding author

Footnotes

Hide All
*

Robert Walmsley University Professor, Harvard University.

Cass R. Sunstein served as Administrator of the Office of Information and Regulatory Affairs from 2009 to 2012 and spent considerable time on the rear visibility regulation. In general, he relies on the public record, but in some places, he builds on personal experience. Some of this essay draws on a section of Cass R. Sunstein, The Most Knowledgeable Branch, 164 U. Pa. L. Rev. 1607 (2016). The analysis has been updated, reoriented, and significantly revised, and the central thrust of the argument has been changed.

Footnotes

References

Hide All
Akinbami, F. 2011. “Financial Services and Consumer Protection After the Crisis.” International Journal of Bank Marketing, 29: 134147.
Becher, S. I. 2008. “Asymmetric Information in Consumer Contracts .American Business Law Journal, 45: 723774.
Bergemann, D., and Välimäki, J. 2006. “Dynamic Pricing of New Experience Goods.” Journal of Political Economics, 114: 713743.
Bronsteen, J., Buccafusco, C., and Masur, J. S. 2013. “Well-Being Analysis Versus Cost-Benefit Analysis.” Duke Law Journal, 62: 16031689.
Cicchino, J. B. 2017. “Effects of Rearview Cameras and Rear Parking Sensors on Police-Reported Backing Crashes.” Traffic Injury Prevention, 18: 859865.
Dorman, P. 1996. Markets and Mortality. Cambridge, UK: Cambridge University Press.
Feldman, P., Papanastasiou, Y., and Segev, E. 2017. Social Learning and the Design of New Experience Goods. Available at http://faculty.haas.berkeley.edu/feldman/assets/sl_quality_2017.pdf. (accessed July 23, 2019)
Frederick, Shane, Novemsky, Nathan, Wang, Jing, Dhar, Ravi, and Nowlis, Stephen. 2009. “Opportunity Cost Neglect.” Journal of Consumer Research, 36: 551561.
Israel, M. 2005. “Services as Experience Goods.” American Economic Review, 95: 14441463.
Kahneman, D., and Thaler, R. 2006. “Anomalies: Utility Maximization and Experienced Utility.” Journal of Economic Perspectives, 20: 221234.
Kidd, D. G., and Brethwaite, A. 2014. “Visibility of Children Behind 2010-2013 Model Year Passenger Vehicles Using Glances, Mirrors, and Backup Cameras and Parking Sensors.” Accident Analysis & Prevention, 66: 158167.
Klein, L. 1998. “Evaluating the Potential of Interactive Media Through a New Lens: Search Versus Experience Goods.” Journal of Business Research, 41: 195203.
Laband, D. 1991. “An Objective Measure of Search Versus Experience Goods.” Economic Inquiry, 29: 497509.
LaHood, R. 2013. Letter from Ray Lahood, Secretary, U.S. Department of Transportation, to Fred Upton, Chairman, Committee on Energy and Commerce, U.S. House of Representatives, et al. Available at http://www.citizen.org/documents/In-re-gulbransen-LaHood-Delay-Letters-6-20-13.pdf (accessed July 23, 2019).
Mashaw, J. 1985. “Why Administrators Should Make Political Decisions.” Journal of Law, Economics, and Organization, 1: 81100.
Masur, J., and Posner, E. 2010. “Against Feasibility Analysis.” University of Chicago Law Review, 77: 657716.
Morse, D. 1980. “Asymmetrical Information in Securities Markets and Trading Volume.” Journal of Financial and Quantitative Analysis, 15: 11291148.
Nelson, P. 1970. “Information and Consumer Behavior.” Journal of Political Economy, 78: 311329.
Paul, L. A. 2016. Transformative Experience. Oxford, UK: Oxford University Press.
Robinson, L., Raich, W., Hammitt, J., and O’Keefe, L. 2019. “Valuing Children’s Fatal Risk Reductions.” Journal of Cost-Benefit Analysis, 10: 156177.
Rowell, A. 2012. “Partial Valuation in Cost-Benefit Analysis.” Administrative Law Review, 64: 723742.
Sharot, T. 2011. The Optimism Bias: A Tour of the Irrationally Positive Brain. New York, NY: Random House Pantheon Books.
Sunstein, C. R. 2008a. “Is OSHA Unconstitutional?.” Virginia Law Review, 94: 14071449.
Sunstein, C. R. 2008b. “Illusory Losses.” Journal of Legal Studies, 37: S157S194.
Sunstein, C. R. 2013. “The Office of Information and Regulatory Affairs: Myths and Realities.” Harvard Law Review, 126: 18381878.
Sunstein, C. R. 2014a. Valuing Life: Humanizing the Regulatory State. Chicago, IL: University of Chicago Press.
Sunstein, C. R. 2014b. “The Limits of Quantification.” California Law Review, 102: 13691422.
Sunstein, C. R. 2018. The Cost-Benefit Revolution. Cambridge, MA: MIT Press.
Szathmary, Z. 2018. “Rule Requiring New Vehicles to Have Rearview Technology Goes Into Effect.” Foxnews.com, May 6, 2018. Available at https://www.foxnews.com/auto/rule-requiring-new-vehicles-to-have-rearview-technology-goes-into-effect. (accessed July 21, 2019)
Trottenberg, P., and Rivkin, R.S. 2013. Memorandum from Polly Trottenberg and Robert S. Rivkin, Office of the Secretary of Transportation, to Secretarial Officers Modal Administrators. Available at http://www.transportation.gov/sites/dot.dev/files/docs/DOT%202013%20Signed%20VSL%20Memo.pdf. (accessed July 23, 2019)
Tversky, A., and Kahneman, D. 1973. “Availability: A Heuristic for Judging Frequency and Probability.” Cognitive Psychology, 5: 207232.
U.S. Department of Transportation. 2014. Press Release: NHTSA Announces Final Rule Requiring Rear Visibility Technology. Available at https://www.transportation.gov/briefing-room/nhtsa-announces-final-rule-requiring-rear-visibility-technology. (accessed July 23, 2019)
U.S. Department of Transportation. 2015. Press Release: New DOT Consumer Rule Limits Airline Tarmac Delays, Provides Other Passenger Protections. Available at https://www.transportation.gov/briefing-room/new-dot-consumer-rule-limits-airline-tarmac-delays-provides-other-passenger. (accessed July 23, 2019)
U.S. Department of Transportation. 2016. Economic Values Used in Analyses. Available at https://www.transportation.gov/regulations/economic-values-used-in-analysis. (accessed July 23, 2019)
U.S. Environmental Protection Agency. 2012. Final Rulemaking for 2017-2025.
U.S. Office of Management and Budget. 2003. Circular A-4. Available at https://www.federalregister.gov/documents/2003/10/09/03-25606/circular-a-4-regulatory-analysis. (accessed July 23, 2019)
U.S. Office of Management and Budget. 2012. 2012 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities. Available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/inforeg/inforeg/2012_cb/2012_cost_benefit_report.pdf. (accessed July 23, 2019)
U.S. Senate Committee on Commerce, Science, and Transportation. 2008. Report 110-275: Cameron Gulbransen Kids Transportation Safety Act of 2007. Available at https://www.govinfo.gov/content/pkg/CRPT-110srpt275/html/CRPT-110srpt275.htm. (accessed July 23, 2019)
Ullmann-Margalit, E. 2017. Normal Rationality. Oxford, UK: Oxford University Press.
Williams, S. 2013. “Statistical Children.” Yale Journal on Regulation, 30: 63124.
Business Roundtable v. SEC, 647 F3d 1144 (DC Cir. 2011).
Corrosion Proof Fittings v. EPA, 947 F.2d 1201 (1991).
Gundy v. United States, 588 U.S. _____ (2019).
Heckler v. Chaney, 470 U.S. 821 (1985).
Michigan v. EPA, 135 S. Ct. 2699 (2015).
Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935).
Whitman v. American Trucking Association, 531 U.S. 457 (2001).
Cameron Gulbransen Kids Transportation Safety Act of 2007. 2008. 49 U.S.C. 30111.
Federal Regulation. 1981. Executive Order 12291. Available at https://www.archives.gov/federal-register/codification/executive-order/12291.html. (accessed July 23, 2019)
Federal Motor Vehicle Safety Standards. 2010. Rearview Mirrors; Federal Motor Vehicle Safety Standard, Low-Speed Vehicles Phase-In Reporting Requirements, 75 Fed. Reg. 76,186.
Federal Motor Vehicle Safety Standards. 2014. Rear Visibility, 79 Fed. Reg. 19,178.
Improving Regulation and Regulatory Review. 2011. Executive Order 13563. Available at https://obamawhitehouse.archives.gov/the-press-office/2011/01/18/executive-order-13563-improving-regulation-and-regulatory-review. (accessed July 23, 2019)
Regulatory Planning and Review. 1993. Executive Order 12866. Available at https://www.archives.gov/files/federal-register/executive-orders/pdf/12866.pdf. (accessed July 23, 2019)

Keywords

Rear Visibility and Some Unresolved Problems for Economic Analysis (With Notes on Experience Goods)

  • Cass R. Sunstein (a1)

Metrics

Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed