To Democratize Regulation, Reform Regulatory Analysis

James Goodwin
Sidney Shapiro

March 23, 2021

This op-ed originally ran in The Regulatory Review. Reprinted with permission.

To paraphrase French economist Thomas Piketty, the task of evaluating new regulations is too important to leave to just economists. Yet, since the 1980s, White House-supervised regulatory impact analysis has privileged economic efficiency as the primary and often only legitimate objective of federal regulation. The regulatory reform initiative launched by President Joseph R. Biden on his first day in office creates an opportunity to reorient regulatory analysis in ways that both reformers and the public support.

Legal and policy experts object to hyper-technical regulatory analysis, and new public opinion polling indicates that voters agree.

Far from a monolithic concept, cost-benefit analysis encompasses a wide range of approaches and techniques, all with their own theoretical underpinnings and ethical commitments. Indeed, the current version of cost-benefit analysis is grounded in the conservative discipline of welfare economics and seeks to promote maximal economic growth through socially optimal regulatory decision-making. It reflects a distinct worldview that is inextricably intertwined with the subjective values and policy preferences that prevail among conservative economists.

Defenders of this form of cost-benefit analysis nevertheless argue that it is coterminous with common sense and that its detractors favor irrationality. Defenders conclude that there is simply no alternative to their form of cost-benefit analysis, apparently unaware of the myriad proposals put forward by legal and policy experts that better account for qualitative inputs and multiple values.

The public also supports these alternative proposals. Polls recently conducted by the Center for Progressive Reform and Data for Progress cast serious doubt on the appropriateness and legitimacy of cost-benefit analysis as currently practiced. The polls show that likely voters disapprove of both its underlying premise and its methodological techniques. These results raise significant concerns about the democratic legitimacy of the current regulatory decision-making apparatus and indicate strong support for overhauling how regulations are evaluated.

Most significantly, likely voters across the political spectrum reject the foundational principle of the hyper-technical, economics-focused form of cost-benefit analysis—namely, that maximizing economic growth should take priority in regulatory decision-making.

Nearly three in four respondents favor taking effective action to regulate drinking water pollution. Support to fight climate change and pass down a livable planet to our children and grandchildren, even at the cost of slowed economic growth, crosses party lines. Some 83 percent of Democrats and 62 percent of Republicans take this position.

The poll finds that large majorities of voters also disapprove of many common methodological techniques that cost-benefit analysis employs. Seventy-one percent of respondents disapprove of assigning a monetary value to human lives for the purposes of measuring regulatory benefits, while only 16 percent approve of this practice. Strikingly, Republican opposition exceeds Democratic opposition by a sizeable margin—9 percentage points.

The poll also asked likely voters whether the value of human life, as measured in terms of the “value of statistical life,” should be adjusted to account for differences in race, gender, or wealth—the latter characteristic being one that many economists recommend taking into account. Likely voters across the political spectrum reject this position by huge margins and instead favor treating all lives the same. Overall, 74 percent of respondents—80 percent of Democrats and 68 percent of Republicans—support treating all lives the same.

Defenders of the current form of cost-benefit analysis claim that everyday Americans are systematically wrong or mistaken in their views on regulations because of irrational beliefs or cognitive deficiencies. They argue that this bias leads the public to demand excessive regulatory protection and that a hyper-technical cost-benefit methodology corrects against such errors.

Setting aside the argument that defenders’ values and policy preferences are inherently “better”—which is far from evident—such technocratic usurpation of the policymaking process, however well-intentioned, raises serious questions about the democratic integrity of the regulatory system.

On day one, President Biden launched a process to develop “a set of recommendations for improving and modernizing regulatory review.” This process should democratize regulatory analysis and make it more people-centered. Among other things, the recommendations should seek to build a new, more qualitative approach that is grounded in statutory requirements and that reflects authentic human experiences and values.

The public may not think like economists, but that does not mean their values should be dismissed. The United States can build an accurate and reflective assessment of proposed regulations—one that is legitimate, democratic, and consistent with public understandings of how government should work, while still giving appropriate weight to technical considerations.

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