The Unpopularity of Cost-Benefit Analysis
If cost-benefit analysis (CBA) is really part of the furniture, you wouldn’t think recently departed OIRA Administrator Cass Sunstein would need to dedicate a column to convincing us it’s so. But there it is, and though Sunstein is now but a private citizen like the rest of us, the claims merit a response.
We’re told “cost-benefit analysis has become part of the informal constitution of the U.S. regulatory state,” but that’s some odd constitution – not approved by any legislative body (and often, in fact, at odds with the dictates of the U.S. Congress), followed very selectively, and adjusted quickly at the whims of pressure from powerful industries. Billed as a non-ideological analytical tool, CBA today is in fact the opposite: questionable value judgments masked as technical calculations, all used as window-dressing to block rules that benefit the public but upset powerful industries.
Big industries and conservative think tanks spent years pushing CBA. It never made sense for the public. Cost-benefit says, for example, that a polluter can’t foul a waterway and kill a couple people along the way, unless it makes a whole lot of money doing it. It pretended that the costs …
Agricultural producers in the United States receive billions of dollars in federal subsidies, crop insurance, conservation payments, and other grants. Defying fundamental principles of transparency and openness in a democracy, the U.S. Department of Agriculture (USDA) is authorized to keep secret much of the basic information that farmers provide to qualify for this public funding. Congress granted this unprecedented loophole in the nation’s sunshine laws by inserting section 1619 into the 2002 Farm Bill and later amending it in the 2008 Farm Bill. This section provides an exemption to the Freedom of Information Act (FOIA) that covers the information farmers give USDA about their properties. Farmers submit their business names and locations, geographic coordinates, types of crop produced and animals raised, and farming practices (such as irrigation practices and fertilizer or pesticide use) and are assured secrecy: federal, state, and local governments cannot generally access …
The proposed Independent Agency Regulatory Analysis Act, S. 3468, is a troubling idea. As Rena Steinzor explained here when the bill was introduced, it would authorize the President to bring independent agencies under the purview of OIRA. This proposal is worrisome given the persistent flaws inherent in OIRA’s cost-benefit approach; extending the reach of a poorly functioning process is hard to justify. But even more problematic is where S. 3468 treads: the domain of independent agencies. This development calls for thoughtful attention to the reasons for independence in the first place.
The fundamental difference between executive and independent agencies lies in the degree to which each is insulated from presidential control. For example, executive agencies are typically headed by individuals who serve at the will of the President—but independent agencies are governed by multi-member commissions who are removable only for cause. While executive heads are …
Former President Bill Clinton, campaigning for President Obama in Florida on Tuesday, the 9/11 anniversary, offered a passionate defense of government employees, the AP noted. I was curious about the whole quote, so I watched and wrote it out (via C-SPAN, at 34:55):
On this day, of all days, we should know that there are good and noble people who work for the government. I remember when the Oklahoma City bombing occurred – which, before 9/11, was the biggest terrorist incident in the United States' history – and a man who had been on my Secret Service detail, had transferred there because he thought it'd be a great place to raise his children, and he was killed that day, along with other people.
And I had, like every politician, on occasion, gotten upset by some example of government waste or something the way we all …
a(broad) perspective
Today’s post is the seventh in a series on a recent CPR white paper, Reclaiming Global Environmental Leadership: Why the United States Should Ratify Ten Pending Environmental Treaties. Each month, this series will discuss one of these treaties. Previous posts are here.
Persistent Organic Pollutants (POPs) are toxic substances that remain in the environment for long periods of time. They travel long distances via the wind and water and bio-accumulate in the food chain. POPs have been found virtually everywhere on earth, including thousands of miles away from any place they have been used, such as pristine areas of the Arctic.
The Rotterdam Convention, the Stockholm Convention, and the POPs Protocol to the Convention on Long Range Transboundary Air Pollution (LRTAP) each address aspects of the international movement of toxic substances. Each of these agreements has been signed by the United States, but …
When Barack Obama took office, reform of U.S. chemical regulation appeared to be an area of some bipartisan agreement, especially when compared to climate change, where it was clear a contentious fight would loom on Capitol Hill. Prominent Members of Congress had called for reform of the outdated Toxic Substances Control Act (TSCA) of 1976, EPA Administrator Lisa Jackson soon laid out the Administration’s key principles for TSCA reform, and the largest chemical industry trade association acknowledged that TSCA needed to be “modernized” and “updated.”
Four years later, though, progress on TSCA reform has been frustratingly slow. The 2010 Republican victory in the House dashed hopes for quick action on the Hill, and the chemical industry is once again defending the status quo.
The stakes are enormous. Under TSCA, more than 90% of all chemicals in use have never been tested for their health and …
Mitt Romney added a new twist Tuesday to false right-wing claims about the EPA’s regulation limiting mercury and other pollutants from coal power plants.
EPA estimated that the “utility MACT” will have annual monetized benefits of $37-90 billion and costs of $9.6 billion. A critique we’ve heard over and over again from the industry and its supporters goes something like this: “But only $6 million of those benefits come from reducing mercury pollution, the top target of the rule!” It’s sort of an odd critique, but it’s misleading anyway: the mercury numbers are so low because EPA simply didn’t monetize most of the mercury reduction benefits. Putting a dollar value on not poisoning kids with a neurotoxin is difficult or impossible, and the benefits of the rule far outweigh the costs already anyway.
Now here’s the twist. On Tuesday, the …
Ben Somberg posted here recently about the Republican platform and the environment. He noted that the platform uses a discredited estimate of regulatory costs, calls for making environmental regulations into guidance documents for industry, and proposes a moratorium on new regulations for the indefinite future.
Unfortunately, that’s only the tip of the iceberg. If you can think of an anti-environmental measure proposed by any Republican since Reagan took office, there’s a good chance you’ll find it tucked away somewhere in this platform. Since there are so many of them, it’s helpful to organize the proposals into four bins: (a) regulatory reform; (b) climate change and energy; (c) wildlife, water and property rights; and (d) enforcement.
Regulatory Reform. As Ben noted, the platform calls for a moratorium on all new regulations pending White House review of all existing ones. New regulations will also be …
Reposted from RegBlog.
Traditionally, the field of law and economics has treated government regulation as if it were a mere transaction. This microeconomic approach to law assumes that government regulators should aim to make their decisions efficient by seeking to equate costs and benefits at the margin.
As I argue in a new book, The Economic Dynamics of Law, the microeconomic model of government regulation misconceives the essence of regulation. Government regulation produces not an instantaneous transaction, but a set of rules intended to influence future conduct, often for many years. Accordingly, regulation provides a framework for private resource allocation, rather than allocating the resources itself. This framework performs a macroeconomic role by reducing systemic risks that might permanently impair important economic, social, and natural systems. As such, government regulation resembles monetary policy, which likewise affects, but does not control, resource allocation. 
Properly understood, the relationship between …
NEW DELHI — Here’s what monsoon season looks like in India. This summer, the northern states have been lashed with rain. In the northeastern state of Assam, July rains swamped thousands of homes, killing 65 residents. Floods and mudslides in northeast India sent nearly 6 million people heading for the hills in search of temporary housing (a tarp, a corrugated roof) and government aid (when they can get it). In New Delhi, the monsoon hasn’t caused anything nearly as traumatic. But one cloudburst can easily flood roads and storm canals, sending bubbling streams of grease and sewage across the urban slums.
Haven’t heard about all this? Normally, I wouldn't have either. But this semester I’m living in New Delhi, near one of those storm canals, working as a Fulbright-Nehru Research Scholar affiliated with India’s Centre for Policy Research (another “CPR”). My plan …
