Cost-benefit default principles.

Author:Sunstein, Cass R.

Courts should be reluctant to apply the literal terms of a statute to mandate pointless expenditures of effort.... Unless Congress has been extraordinarily rigid, there is likely a basis for an implication of de minimis authority to provide exemption when the burdens of regulation yield a gain of trivial or no value. (1)

It seems bizarre that a statute intended to improve human health would ... lock the agency into looking at only one half of a substance's health effects in determining the maximum level for that substance. (2)

[I]t is only where there is "clear congressional intent to preclude consideration of cost" that we find agencies barred from considering costs. (3)

In order better to achieve regulatory goals -- for example, to allocate resources so that they save more lives or produce a cleaner environment -- regulators must often take account of all of a proposed regulation's adverse effects, at least where those effects clearly threaten serious and disproportionate public harm. Hence, I believe that, other things being equal, we should read silences or ambiguities in the language of regulatory statutes as permitting, not forbidding, this type of rational regulation. (4)

The rule-implicit valuation of a life is high -- about $4 million -- but not so astronomical, certainly by regulatory standards, as to call the rationality of the rule seriously into question, especially when we consider that neither Hepatitis B nor AIDS is a disease of old people. These diseases are no respecters of youth; they cut off people in their working years, and thus in their prime, and it is natural to set a high value on the lost years. (5)


    Risks never exist in isolation. They are part of systems. For that reason, any effort to reduce a single risk will have a range of consequences, some of them likely unintended.

    If the Federal Aviation Administration ("FAA") requires parents to purchase seats for children under three so as to make flying safer, it will also make flying less convenient and more expensive, and thus lead some people to drive instead. (6) Flying is much safer than driving, and hence the FAA's measures might ensure that more lives are lost on balance. If noise levels are reduced at the Grand Canyon, so that people can enjoy the area in peace and quiet, air tourism there will have to be dramatically reduced, so that fewer people can enjoy the area at all. (7) If the Environmental Protection Agency ("EPA") requires aggressive corrosion control technologies to reduce lead in water, it might thereby produce increases in other contaminants, because the very technologies that reduce lead can contribute to water pollution. (8) If the Occupational Safety and Health Administration ("OSHA") increases regulation of benzene, a carcinogenic substance, it might lead companies to use a less safe, or perhaps even an unsafe, substitute; it might also decrease the wages of affected workers, and decrease the number of jobs in the relevant industry. People who have less money, and who are unemployed, tend to live shorter lives -- and hence occupational regulation might, under certain circumstances, sacrifice more lives than it saves. (9) Of course the unintended consequences of risk regulation might be desirable rather than undesirable -- as, for example, when regulation spurs new pollution-control technologies.

    Now consider the following cases:

    1. The Clean Air Act requires the EPA to issue standards controlling any substance that "contributes significantly" to pollution problems in certain areas. EPA issues regulations governing relevant pollutants, but without considering the costs of compliance. Industries challenge the regulations on the ground that cost is a statutorily relevant factor. (10)

    2. The National Highway Traffic Safety Administration ("NHTSA") is asked to promote fuel economy in automobiles through fuel economy standards. The Coalition for Automobile Safety, a public interest organization, contends that the effect of certain proposed standards will be to lead manufacturers to produce smaller and more dangerous cars. The Coalition contends that NHTSA acted unlawfully in failing to take this effect into account. (11)

    3. A federal statute requires the Occupational Safety and Health Administration to regulate toxic substances "to the extent feasible." (12) OSHA interprets this language to require it to consider whether the regulation is technologically feasible and whether it is "practicable," economically speaking, for the industry to comply. OSHA imposes a regulation that is admittedly "feasible" under this test, but the regulation cannot pass a cost-benefit test because the benefits to workers are low, even trivial, and the costs are high. Insisting that costs must be compared with benefits and that high costs cannot be imposed for trivial gains, industries subject to the regulation complain that it is unlawful. (13)

    In which of these cases has the agency acted unlawfully? The question is of immense importance, both for regulatory policy and for the relationship between courts and agencies. One of my main purposes here is to demonstrate that federal law has now built a novel set of rules for statutory construction: the cost-benefit default principles. In brief, these principles (1) allow de minimis exceptions to regulatory requirements; (2) authorize agencies to permit "acceptable" risks, departing from a requirement of "absolute" safety; (3) permit agencies to take account of both costs and feasibility; and (4) allow agencies to balance costs against benefits. Taken as a whole, the cost-benefit default principles are making a substantial difference to regulatory policy, both because of their effects in litigated cases and because of their systemic consequences for regulation. (14)

    At the same time, the cost-benefit default principles remain mostly the creation of the U.S. Court of Appeals for the District of Columbia. Currently, it is not clear whether the Supreme Court will ultimately adopt them. I attempt to explain here why the principles make a good deal of sense and deserve general support.

    Even if broadly accepted, however, the default principles raise many questions. For the most part, the cost-benefit default principles say what agencies are permitted to do. It is not clear whether the default principles also mean that when statutes are ambiguous, agencies will be required to do any of these things. Nor do the principles give much indication of how agencies permitting "acceptable" risks, or engaging in cost-benefit analysis, might be expected to proceed. What does it mean to say that agencies are permitted to "consider" costs? Would it be unlawful for an agency to say that even very high costs are worth incurring? In what way should the monetary valuation of human life be constrained? What counts as an acceptable or de minimis risk? How should agencies deal with the interests of future generations?

    However these questions are resolved, there can be no doubt that the cost-benefit default principles have emerged as a central part of what amounts to the federal common law of regulatory policy. Of course most of that common law, including the incipient federal common law of cost-benefit analysis, will emerge, and is emerging, from regulatory agencies, which have to decide how much to regulate, and why. (15) Here agencies are the principal architects of what shall be seen as a form of nonjudicial common law. But courts will undoubtedly play an important role, (16) and it is in the interaction between agencies and judges that binding law will emerge. Among my largest purposes here is to understand the nature of the cost-benefit default principles, their legitimacy, and their future content. (17)

    There is a still more general point in the background. The steady emergence of the cost-benefit default principles signals the impending conclusion, in all branches of government, (18) of a "first generation" debate over whether cost-benefit analysis is desirable. (19) That debate appears to be terminating with a general victory for the proponents of cost-benefit analysis, in the form of a presumption in favor of their view (signaled above all, perhaps, by President Clinton's substantial endorsement of cost-benefit balancing via Executive Order). (20) The "second generation" debates raise difficult questions about how (not whether) to engage in cost-benefit analysis -- how to value life and health, how to deal with the interests of future generations, how to generate rules of thumb to simplify complex inquiries, how to ensure that agencies do what they are supposed to do, how and when to diverge from the conclusion recommended by cost-benefit analysis, how to determine the roles of agencies and courts in contested cases. My identification and assessment of the cost-benefit default principles is intended as a contribution to these "second generation" debates. An especially important "second generation" question is when, if ever, the presumption in favor of cost-benefit balancing is rebutted. I attempt to make a start in answering that complex question.

    The Article is organized as follows. Part II traces the rise of cost-benefit default rules in federal law. It begins with the emergence of cost-benefit principles, outlines statutory formulations, and then elaborates the default rules. Part III explores the underlying considerations in some detail -- what supports the use of default principles generally and these default principles in particular. In Part III, I address the general question of when the presumption in favor of the principles might be rebutted. Part IV turns to the question whether agencies should be required to do what the cost-benefit default principles permit them to do. Part V deals briefly with a set of issues that an agency must address if it is going to engage in cost-benefit balancing. Part VI is a brief conclusion.


    1. From 1970s...

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