It takes unusual courage for a regulator to stand up and say "something must not be done," lest "something" makes the problem worse.
Thus far psychological input has been used in economics mainly to highlight the cognitive imperfections of market participants. However, cognitive psychology offers many findings that may be instrumental in emphasizing the limits of government intervention. I survey psychological literature and propose some concepts that may be relevant to the political economy of government regulation.
In the context of political economy, overconfidence takes the form of the contention of regulators that they fully understand the problems they face and are able to design optimal solutions for them.