Readers of this blog know that I am a big supporter of rigorous cost-benefit analysis as a way to make regulations better. Therefore I was pleased to have the opportunity during a panel last week to discuss why this is true and how the public can participate in shaping such analysis.
Cheryl Falvey, formerly the General Counsel at the CPSC, led the discussion, which also included Michael Fitzpatrick, a former senior official in the current White Houses’ Office of Information and Regulatory Affairs (OIRA), and Reeve Bull, an attorney with the Administrative Conference of the United States (ACUS). We discussed the arguments surrounding cost-benefit analysis, the use of OIRA review in the rulemaking process, and legislation that would affect independent agencies’ use of cost-benefit analysis. Here are a few key takeaways from the panel.
First, the CPSC is hardly the only independent agency grappling with cost-benefit analysis. However, unlike the CPSC which has rejected its use when not required by statute, other independent agencies like the Nuclear Regulatory Commission and the Commodity Futures Regulatory Commission have used such analysis despite their not being required to. This is important, because there is a fallacy out there that cost-benefit analysis kills rules. Cost-benefit analysis makes them better. And vetting rules through an OIRA review process also makes them stronger and more likely to survive judicial scrutiny. Doing this analysis publicly makes an agency have, as Fitzpatrick described it, a “disciplining conversation in public.” Going through that conversation makes rules more legally and politically defensible. That is why, more and more, agencies (with the exception of the CPSC) are using this analysis even when not specifically obligated to.
Second, when it comes to cost-benefit analysis, it is not only agencies that need to step up. It is the public generally and the regulated community more specifically. When a proposed rule is released to the public for comment, affected industries usually provide comments. Many of those comments are heavy on policy arguments and weak on numbers. But policy arguments are easily responded to with other equally powerful policy arguments. What agencies need is fact-and-figure driven comments. That is the kind of information that can actually change a debate. And because agencies have limited ability to get information from the public—thanks, in part, to the strictures of the Paperwork Reduction Act which limits our ability to ask for information from the public—we have to rely on general, publicly available data. If comments come in that have hard data, especially non-anecdotal data, an agency’s staff will have to grapple with it or risk the rule’s survival in a court challenge. And good data is precisely what agencies need to truly refine rules.
Cost-benefit analysis by itself is not sufficient to assure good rules. But it is a tool that more and more agencies use to improve the rules that affect the American economy. And it is a tool that needs the participation of the regulated community to be as effective as possible.