Eight days after President Trump signed his “One-In, Two-Out” Executive Order No. 13771, Public Citizen, the Natural Resources Defense Council, the Communications Workers of America, and Earthjustice filed suit against the President and a dozen or so agency heads, seeking declaratory and injunctive relief. That order, entitled Reducing Regulation and Controlling Regulatory Costs, instructs agencies to identify two old regulations for removal for each new rule they propose, and to limit net incremental regulatory costs to $0 in the remainder of fiscal year 2017. Plaintiffs allege that it would prevent agencies from maximizing the net benefits of regulation, thus depriving the…
“You must be the best judge of your own happiness.”
Jane Austen said that, in Emma, but the statement is also a keystone principle of modern microeconomic theory, and it provides the epistemic foundation that makes benefit-cost analysis possible. The only way to know people’s preferences is observe the choices that they themselves freely make; all inferences about the “public” interest must begin there.
Might the administrative state have expired quietly, six months ago? Arguably it did, if what we mean by the administrative state is the array of regulatory agencies, not only executing the law, but also creating binding new law without legislative consent. Bear with me.
How can we ensure that government officials use their powers in the public interest?
Before tackling some of the practical problems involved in the use of Benefit-Cost Analysis (BCA), I want to take a look at two foundational questions. How do we incorporate the interests of affected individuals into a BCA model? And how do we assemble those individual interests into a social welfare function that allows us to make a collective decision?
Benefit-Cost Analysis (BCA) is now widely known and used, but it is also widely misunderstood – by many of its advocates as well as its detractors. Over the next few weeks I want to examine some of the strengths and weaknesses of BCA as a normative science; and, yes, that phrase is an oxymoron, which is a source of much of the controversy. BCA is an imperfect answer, but often perhaps the best available answer, to the question of how a society should go about making collective but not unanimous choices. Nowhere is its use more contested than in its application to decisions by regulatory agencies.