Deregulatory Benefit-Cost Analysis and Regulatory Stability
- Author(s): Caroline Cecot
- Posted: 10-2018
- Legal Studies #: LS 18-32
- Availability: Full text (most recent) on SSRN
ABSTRACT:
Benefit-cost analysis (“BCA”) has faced significant opposition during most of its tenure as an influential agency decision-making tool. As advancements have been made in BCA practice and, especially, in monetization of relevant effects, BCA has been gaining acceptance as an essential part of reasoned agency decision-making. This Article highlights an underappreciated effect of extensive use of BCA to support agency rulemaking: BCA’s role in promoting reasonable regulatory stability. In particular, a regulation based on a high-quality BCA is more difficult to modify for at least two reasons. The first reason relates to the nature of BCA. BCA, by focusing on the incremental costs and benefits of a proposed change, can make it difficult to justify changing course, especially when stakeholders have already relied on the prior regulation. The second reason relates to judicial review. Courts take a “hard look” at agency reasoning, including its BCA, and require reasonable explanations when an agency changes course. Any updated BCA supporting the new regulation will naturally be compared against the prior BCA, and the agency will need to explain any changes in BCA inputs, assumptions, and methodology. Together, these forces will constrain the range of changes that agencies could support. The Article then discusses the implications and the desirability of BCA’s stabilizing effect on regulatory policy. By constraining agency decision-making and policy updating, BCA should promote stability around efficient and predictable policies at and encourage targeted retrospective review. But admittedly this BCA-based stabilizing influence gives rise to several objections. The Article responds to, among others, concerns about agency bias, democratic accountability, and, most importantly, the use of alternative methods of modifying policies. Overall, the Article concludes that BCA and judicial review of BCA plays a desirable role in stabilizing regulatory policy across presidential administrations.