In mid-May, the Senate Committee on Homeland Security and Government Affairs held a confirmation hearing for Cass Sunstein, the pick to head up the Office of Information and Regulatory Affairs. OIRA is the sub-office within the Office of Management and Budget that reviews proposed rules and the accompanying analyses that explain the need for those rules. We noted below the news on Sunstein’s supposed appointment, and on April 20 Obama made it official.
Most legal-punditry I read on the appointment noted Sunstein’s allegiance to cost benefit analysis. Used in a policy context, a cost benefit analysis quantifies to the extent possible all the costs and benefits that result from a regulation. How will Americans benefit, and what will Americans have to pay, if, say, the DOT requires all roads to have those reflective things between lanes?
One immediately sees a problem – while the term “benefit” allows some descriptive breadth, “cost” is a restrictive term that anchors us to a numeric dollar amount. And because you can’t compare apples to oranges nor warm fuzzies to greenbacks, both sides of the cost and benefit equation are restricted to $$. Also, does it matter who gets the benefits and who has to pay? Do we count benefits that apply to animals, to an ecosystem, or to what we perceive as a benefit to Earth?
Most cost benefit analyses reach a quantified value for things like aesthetic beauty, avoidance of risks, and life with sociological experiments that ask subjects to declare how much they would pay to protect something or avoid something. A study of salaries and risks in the workplace, for instance, gives us EPA’s value of a human life: $6.1 million.
So, how will Cass Sunstein treat cost benefit when he walks into OIRA? We have the opportunity to see Cass Sunstein defending cost benefit analyses against the above concerns in his New Republic book review that we noted below. Sunstein reviews Priceless: On Knowing the Price of Everything and the Value of Nothing,Frank Ackerman’s and Lisa Heinzerling’s attack on the use of cost benefit. Sunstein acknowledges their concerns…
The authors raise several good questions about cost-benefit analysis. Certainly regulators should care not only about reduced fatalities, but also about the health gains produced by regulation. They should take account of all the potential benefits, such as protection of ecosystems and animals, including members of endangered species. It is quite crude to say that every life is “worth” $6.1 million; some kinds of risk, and some kinds of death, produce heightened concern.
…but he does not buy their proposal to abandon cost benefit. By and large, Sunstein’s reaction to the book is much as Sunstein’s typical thinking, as far as I can tell in what I have read: measured. Yes, quantification can handicap cost benefit analyses, but it is still worthwhile to take costs and benefits into account.
One can see in the book review that Sunstein is keenly aware of slippery slopes and logical conclusions. Cost benefit analyses, for him, block those slopes. If, for instance, DOT went ahead with the rule to place reflectors between every lane, how many do we use? At what point (4 feet apart, 1 foot apart, 6 inches apart) do more reflectors become ineffective and simply a waste of money? We need some sense of the costs as compared to the benefits to prevent overprecaution. That, I think, is basically Sunstein’s point in the review.
Though the review came out in Spring 2004, we get a glimpse of what Sunstein might require of agencies from his desk at OIRA. About mid-way through the review, he imagines how we might take Ackerman’s and Heinzerling’s valid concerns:
We could read Ackerman and Heinzerling to be calling for an improved and chastened form of cost benefit analysis–for an assessment that includes all benefits, not just a subset; appropriately values the future; is sensitive to issues of distribution; and is based on more accurate “translations” of social risks into dollar equivalents.
Pivoting a bit to regulatory theory, I was struck by Sunstein’s presentation of cost benefit analysis as an antonym to the precautionary principle. Sunstein presents the development of regulatory policy as an option between two opposed approaches: the cost benefit analysis and the precautionary principle. We’ve covered the former, and Sunstein helpfully analogizes the latter with the “better safe than sorry” approach. In his first paragraph, he writes that the “standard account” sets cost benefit and precautionary as separate approaches- padding the notion of competing schools of thought to allow some complexity.
It isn’t clear to me, though, that these are mutually exclusive approaches to policy-making. Government rules are begot in Congress, frequently with a precautionary mood: we can’t let governments take people’s property, so let’s halt eminent domain, for instance. Then, agencies fine tune the law into a regulation, using cost benefit. Given, that trajectory of precautionary in Congress to cost benefit is agency work is far too simplistic – but I wonder if the approaches are simply different phases of a single policy-making timeline.
