Code, Nudge, or Notice?

• Author: Ryan Calo
• Pages: 773-802

Code, Nudge, or Notice? Ryan Calo  ABSTRACT: Regulators are increasingly turning to means other than law to influence citizen behavior. This Essay compares three methods that have particularly captured the imagination of scholars and officials in recent years. Much has been written about each method in isolation. This Essay considers them together for the first time in order to generate a novel normative insight about the nature of regulatory choice. The first alternative method, known colloquially as architecture or “code,” occurs when regulators change a physical or digital environment to make undesirable conduct difficult. Speed bumps provide a classic example. The second method, libertarian paternalism or “nudging,” refers to leveraging human bias to guide us toward better policy outcomes. For instance, the state might attempt to increase organ donation by moving to an opt-out system because people disproportionally favor the status quo. Finally, mandated disclosure or “notice” requires organizations to provide individuals with information about their practices or products. Examples include everything from product warnings to privacy policies. These methods feel more distinct than they actually are. The timely example of graphic warnings on cigarettes illustrates how hard it can be to characterize a given intervention and why categories matter. The issue— which was headed for the Supreme Court—turned on whether the Food and Drug Administration (“FDA”) intended for the warnings to change smoker behavior or merely to provide information. The FDA abandoned the intervention when it became clear the “warnings” were really about driving down smoking. Indeed, whether regulators employ code, nudge, or notice, they almost always have a deeper choice between helping citizens and hindering them. This Essay argues that regulators should choose “facilitation” over “friction” where possible, especially in the absence of the usual safeguards that accompany law.  Assistant Professor of Law, University of Washington School of Law. Affiliate Scholar, Stanford Law School Center for Internet and Society. Thank you to Jean Brownell, Steve Calandrillo, Ronald Collins, Mary Fan, Michael Townsend, Shannon McCormack, Evan Selinger, Pelle Guldborg Hansen, Jathan Sadowski, Diana Cooper, and Kathryn Watts for their helpful comments, to Michael Umberger and Alena Wolotira, for their excellent research support, and to Grace Feldman for her expeditious cite-checking. 774 IOWA LAW REVIEW [Vol. 99:773 INTRODUCTION ...................................................................................... 775 I. CODE ...................................................................................................... 778 II. NUDGE ................................................................................................... 783 III. NOTICE .................................................................................................. 787 IV. OVERLAP ................................................................................................ 790 A. D IFFERING C ONVERSATIONS .............................................................. 790 B. E ASY AND H ARD C ASES ..................................................................... 792 C. C OMMON V ALUES ............................................................................. 794 V. FRICTION OR FACILITATION? ................................................................. 796 CONCLUSION ......................................................................................... 801 2014] CODE, NUDGE, OR NOTICE? 775 INTRODUCTION To code, nudge, or notice? That is the question today’s regulators face—at least the growing number who would influence citizen or firm behavior without passing new laws against conduct. Absent throughout much of the twentieth century, alternatives to regulation in the classic sense, i.e., coercing behavior by laying down rules and punishing transgressions, are gaining widely in popularity. 1 Three regulatory mechanisms in particular seem to have captured the public, academic, and official imagination. The first is architecture or “code,” which refers to altering the physical or digital world to make certain conduct more difficult or costly. 2 A speed bump provides the classic illustration. 3 The second is “libertarian paternalism” or “nudging”; its mechanism is to exploit the ways that individuals deviate from rational choice in order to benefit themselves or society at large—for instance, by using our bias toward the status quo to encourage employees to put more of their paychecks into savings. 4 A third is mandated disclosure or “notice,” which works by requiring the provision of facts with the hope that consumers or citizens will use those facts to protect themselves and police the market. 5 Information privacy is mostly governed in this way. 6 Each alternative has its adherents; 7 each, its critics. 8 1. See Lawrence Lessig, The New Chicago School , 27 J. LEGAL STUD. 661, 662 (1998) (“Law . . . directs behavior in certain ways; it threatens sanctions ex post if those orders are not obeyed.” (footnote omitted)). I do not mean by this definition to endorse the so-called command theory of law or suggest that law operates exclusively by identifying transgressions and setting and enforcing penalties. Id. at 662 n.4; see also H.L.A. HART, THE CONCEPT OF LAW 16 (3d ed. 2012) (criticizing as insufficient John Austin’s theory of law as orders backed by threats). I mean only that within many civil, criminal, and administrative contexts the imposition of a rule serves as a natural starting point. The exact contours of law as such are outside the scope of this Essay. 2. See generally LAWRENCE LESSIG, CODE AND OTHER LAWS OF CYBERSPACE (1999); Neal Kumar Katyal, Architecture As Crime Control , 111 YALE L.J. 1039 (2002); Lessig, supra note 1, at 663 (referring to architecture or “nature”); Joel R. Reidenberg, Lex Informatica: The Formulation of Information Policy Rules Through Technology , 76 TEX. L. REV. 553 (1998). 3. See, e.g. , LESSIG, supra note 2, at 98; Leandra Lederman, Statutory Speed Bumps: The Roles Third Parties Play in Tax Compliance , 60 STAN. L. REV. 695, 696 (2007). 4. See RICHARD H. THALER & CASS R. SUNSTEIN, NUDGE: IMPROVING DECISIONS ABOUT HEALTH, WEALTH, AND HAPPINESS 4–6, 107–09 (2008); see also infra notes 69–70 and accompanying text. 5. Omri Ben-Shahar & Carl E. Schneider, The Failure of Mandated Disclosure , 159 U. PA. L. REV. 647, 649–50 (2011). 6. M. Ryan Calo, Against Notice Skepticism in Privacy (and Elsewhere) , 87 NOTRE DAME L. REV. 1027, 1031–32 (2012). 7. See generally THALER & SUNSTEIN, supra note 4 (defending nudge); Calo, supra note 6 (defending notice); Edward K. Cheng, Structural Laws and the Puzzle of Regulating Behavior , 100 NW. U. L. REV. 655 (2006) (defending code). 8. See generally Ben-Shahar & Schneider, supra note 5 (criticizing notice at length); Julie E. Cohen, Pervasively Distributed Copyright Enforcement , 95 GEO. L.J. 1 (2006) (criticizing the use 776 IOWA LAW REVIEW [Vol. 99:773 Code, nudge, and notice represent perhaps the ascendant regulatory alternatives of our time. They are much discussed in isolation. This Essay represents possibly the first effort in any discipline to treat them all together. My analysis suggests that, despite emerging out of very specific conversations, code, nudge, and notice are not in the end terribly distinct. They share mechanisms and problems to a greater degree than any existing literature would suggest. 9 Perhaps as a consequence, it is difficult to fit actual emerging regulatory interventions squarely within code, nudge, or notice. Consider New York City’s controversial attempt to limit the size of sodas. 10 A cap on portion size can be considered code in that it makes drinking an excess of soda physically more difficult. But it is also a nudge, in that consumers can override the policy by simply buying two sodas, and, like notice, it warns against the danger of overconsumption. Speed bumps are code, as I said. But what of “virtual” speed bumps, like an illusion of a little girl chasing a ball in a parking lot? Like code, this actual intervention eschews or supplements speed limits by making it harder to speed. 11 The intervention also exploits the way our brains see certain kinds of images as having three dimensions when in fact they do not. This feels like nudging. Or perhaps the virtual speed bump is a form of visceral notice to warn motorists of the possibility that children are in the area. 12 These questions of characterization really matter. The issue of whether the Food and Drug Administration (“FDA”) can require graphic visual warnings on cigarettes seemed headed to the Supreme Court until the FDA abandoned the intervention. 13 The Court of Appeals for the Sixth Circuit considered these warnings to be mere “information,” a carve-out to the usual scrutiny that attends coerced speech under the First Amendment. 14 The D.C. Circuit concluded instead that the visual images that the FDA would have required—which included, for instance, a woman weeping of architecture in the context of copyright); Edward L. Glaeser, Paternalism and Psychology , 73 U. CHI. L. REV. 133 (2006) (criticizing libertarian paternalism). 9. See infra Part IV (discussing why code, nudge, and notice are not treated together). 10. Ellis Henican, NYC’s Big-Soda Ban Falls Flat ― For Now , NEWSDAY (Aug. 3, 2013), http://long-island.newsday.com/search/nyc-s-big-soda-ban-falls-flat-for-now-1.5824291. I owe this helpful and timely example to the Iowa Law Review . 11. See Clay Dillow, Optical Speedbumps Create Illusion of Little Girl Darting Out in Front of You , POPULAR SCI. (Sept. 8, 2010), http://www.popsci.com/science/article/2010-09/optical-illusion-reminds-drivers-slow-down-change-pants. 12. See Calo, supra note 6, at 1033–47 (developing the concept of visceral notice). 13. See infra notes 132–34 and...