The federal government should revive the use of cost-benefit analysis when crafting regulations that affect the American public, says Professor Michael Livermore of the University of Virginia School of Law in a new co-authored book.
Written with New York University law professor Richard L. Revesz, “Reviving Rationality: Saving Cost-Benefit Analysis for the Sake of the Environment” is available from Oxford University Press.
Cost-benefit analysis is a way for regulators to understand the positive and negative effects of proposed regulations. In recent decades, the method was endorsed by administrations of both political parties, said Livermore, whose own expertise spans environmental and administrative law.
“What motivated us to start this project was the fact the Trump administration had abandoned what had been a bipartisan consensus going back decades,” Livermore said. “This radical departure from past practice was something that we wanted to investigate and explain to the public and the broader policy audience. We also provide a path to start to recover and build on the best parts of that consensus.”
Livermore said in decisions ranging from transportation policy to the pandemic response, real harm is caused “when experts are sidelined and evidence and analysis are ignored.”
He pointed to recent moves on federal rules that reduced emissions and improved fuel economy for automobiles.
“The original rules were intended to reduce greenhouse gas emissions from the transportation sector,” he said. “But another benefit is that consumers save a lot of money at the pump, because their automobiles are more fuel-efficient. These rules were massively cost-benefit justified, generating many, many billions of benefits for the American public over the costs of upgrading fuel efficiency.”
Accordingly, to Livermore, standards released in March by the Environmental Protection Agency and Transportation Department that weakened those rules were based on shoddy analysis.
“When you take experts out of the loop, when you don't rely on expertise, then there’s going to be negative consequences — in terms of bad policy, in terms of undermining the legitimacy of the government in the eyes of the people,” Livermore said.
With President-elect Joe Biden set to take office in January, Livermore said he looks forward to “going back a good-faith effort to count costs and benefits.”
“Our book details the generally sound approach to cost-benefit analysis used in prior administrations,” Livermore said. “I’m hopeful that President-elect Biden will break with many of the bad practices that we’ve seen in the last few years.”
Livermore also said the next administration should reaffirm the place of the Office of Information and Regulatory Affairs, the White House Office that oversees cost-benefit analysis in the federal government.
On top of that, cost-benefit analysis as a tool could be improved by “taking into account the distribution of regulatory costs and benefits and doing a better job of understanding what the effects of regulation are. Agencies can also do a better job of valuing certain benefits, such as reducing greenhouse gas emissions and protecting fragile ecosystems.”
The new book is a sequel to the pair’s book “Retaking Rationality: How Cost-Benefit Analysis Can Better Project the Environment and Our Health,” published in 2008. In that book, the authors argue that progressives who are rejecting cost-benefit analysis should shift their stance.
“We argue that progressives — by abandoning debates about how to do cost-benefit analysis — were actually allowing the methodology to tilt in a conservative direction,” Livermore said.
With a consensus on using cost-benefits analysis destabilized, Livermore said there needs to be a conversation in both political parties about where they’re going to take the issue in the future.
“It was Ronald Reagan who put cost-benefit analysis at the heart of regulatory decision-making in the U.S. Are the Republicans going to reclaim that tradition?” Livermore asked.
“There are still constituencies within the Democratic Party who do not like cost-benefit analysis,” he added. “On the other hand, there is longstanding practice of Democratic presidents, including Bill Clinton and Barack Obama, where cost-benefit analysis was used. And these administrations showed how cost-benefit analysis and a progressive policy agenda can work together.”
But getting Democrats back on board might be difficult, he said, as they’ve seen the Trump administration’s success in throwing out accepted practices.
They might say, “if the Republicans aren't going to follow the rules, and if they’re not going to impose this constraint on their ability to promote the policies that they favor, why should we follow the rules? Why should we do all this analysis that slows us down and might result in us not adopting a preferred policy option? Why should we constrain ourselves when the other party doesn’t?”
Livermore’s research focuses on environmental law, regulation, bureaucratic oversight and the computational analysis of law. Prior to joining the faculty, he was the founding executive director of the Institute for Policy Integrity at New York University School of Law, a think tank dedicated to improving the quality of government decision-making.
Founded in 1819, the University of Virginia School of Law is the second-oldest continuously operating law school in the nation. Consistently ranked among the top law schools, Virginia is a world-renowned training ground for distinguished lawyers and public servants, instilling in them a commitment to leadership, integrity and community service.