Ethical Choices Inside Regulatory Cost-Benefit Analysis

• Author: Arden Rowell
• Position: Professor of Law, University of Illinois College of Law
• Pages: 693-715

THE MACHINERY OF REGULATION

Ethical Choices Inside Regulatory Cost-Benefit

Analysis

ARDEN ROWELL*

ABSTRACT

Although much has been written about the ethical implications of choosing to

use cost-benefit analysis as a regulatory decision procedure, the ethical choices

made “inside” cost-benefit analysis tend to be obscured by the technicality of

cost-benefit procedures. Indeed, Congress, courts, and commentators often treat

cost-benefit methodologies as either negligible or as falling well within the

ambit of technical agency expertise. While the practice of cost-benefit analysis

does implicate substantial technical skill, a number of internal methodological

decisions, particularly about valuation, are fundamentally ethical choices as

well. Such ethically weighty choices include scoping decisions about whether to

consider a global or only domestic scope of harms; benefits transfer decisions

about whether to value mortality risks differently depending upon whether the

people at risk are poor or rich; and whether to value people’s altruistic prefer-

ences about others. In some cases—as where agencies have adopted income-

blind methods for valuing mortality risk, so that risks to the rich and the poor

are treated the same—regulators’ ethical choices may map onto common ethi-

cal intuitions. In other cases, however—as where regulators have chosen to

purposefully excise people’s “other-regarding” or altruistic preferences—

regulators’ ethical choices may be worrisomely removed from most people’s

ethical intuitions and resulting preferences. These seemingly technical “trans-

economic” choices—which in fact imbed potentially controversial ethical posi-

tions—can have extraordinary practical impacts. As an example of such

impacts, the essay points to a concern that traditional excising of other-regard-

ing preferences from regulatory cost-benefit analyses may undermine the ability

of the regulatory state to adequately account for the type of harms that COVID-

19 generates. This is because current practices fail to recognize deeply held

ethical commitments and resulting preferences, including preferences not to

cause harm, and to observe special obligations where there are close personal

relationships. In the ongoing global pandemic, where infectious disease passed

through close contagion raises the tragic and pervasive risk of people killing

and harming their loved ones, the implications of current practice are particu-

larly disturbing.

* Professor of Law, University of Illinois College of Law. © 2021, Arden Rowell.

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Cost-benefit analysis remains a mainstay of modern regulatory decision-mak-

ing,

1

even as regulatory rulemaking has become the most widespread form of fed-

eral lawmaking.

2

A chief feature of cost-benefit analysis as a decision procedure

is that it allows for comparisons between diverse goods by translating those goods

into a single metric: money.

3

This essentialization of complex features, dangers,

and qualities into a relatively administrable framework offers regulatory decision-

makers—who are routinely faced with evaluating multiple potential policies with

diverse impacts across space and time—both practical and legal advantages.

Practically, it introduces tractability into problems that may otherwise seem hope-

lessly unwieldy. Legally, it satisfies a set of Presidential executive orders that

stretch back to the presidency of Ronald Reagan,

4

requiring agencies to perform a

cost benefit analysis before taking significant action;

5

Congressional requirements

meant to limit unjustified regulatory costs;

6

and judicial decisions affirming these

requirements.

7

Despite its influence within the U.S. regulatory state, regulatory cost-benefit

analysis retains a flavor of controversy. Traditionally, this controversy focused on

whether cost-benefit analysis is a justifiable approach to public policy analysis at

all.

8

In recent years, however, attention has begun addressing the “how” of cost-

1. For an overview of current practice and a set of arguments regarding opportunities for

improvement, see MICHAEL A. LIVERMORE & RICHARD L. REVESZ, REVIVING RATIONALITY: SAVING

COST-BENEFIT ANALYSIS FOR THE SAKE OF THE ENVIRONMENT AND OUR HEALTH (2020). See also CASS

R. SUNSTEIN, THE COST-BENEFIT REVOLUTION (2018).

2. Each year, federal agencies make substantially more binding rules of conduct than does Congress.

These rules reflect substantial public investment: compliance with them, and with the adjudications also

performed at agencies (which adjudicate more disputes each year than all federal courts combined),

costs almost one-tenth of total GDP. For an overview, see LISA SCHULTZ BRESSMAN, EDWARD L. RUBIN

& KEVIN M. STACK, THE REGULATORY STATE (3d ed. 2019).

3. See LIVERMORE & REVESZ, supra note 1; MATTHEW D. ADLER & ERIC A. POSNER, NEW

FOUNDATIONS OF COST-BENEFIT ANALYSIS (2006).

4. See Exec. Order No. 12291, 46 Fed. Reg. 13193 (1981).

5. See Exec. Order No. 12866(1)(b)(6), 58 Fed. Reg. 51735 (1993) (directing that “[e]ach agency

shall assess both the costs and the benefits of the intended regulation and, recognizing that some costs

and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned determination

that the benefits of the intended regulation justify its costs.”).

6. See Unfunded Mandates Reform Act of 1995, 2 U.S.C.A. §§ 1501–71 (1995) (requiring a cost-

benefit assessment for significant rule-makings).

7. See, e.g., Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208, 226 (2009) (permitting agencies to

perform cost-benefit analysis in the face of statutory silence); cf. Whitman v. American Trucking

Ass’ns, Inc., 531 U.S. 457 (2001) (prohibiting agency use of cost-benefit analysis in the rare

circumstance where the statute clearly prohibits it).

8. For a classic presentation of this concern, see Frank Ackerman & Lisa Heinzerling, Pricing the

Priceless: Cost-Benefit Analysis of Environmental Protection, 150 U. PA. L. REV. 1553 (2002); FRANK

ACKERMAN & LISA HEINZERLING, PRICELESS: ON KNOWING THE PRICE OF EVERYTHING AND THE VALUE

OF NOTHING (2004). The analysis in this essay sets aside the normative and ethical questions that arise

from the decision to perform cost-benet analysis at all, focusing instead on the how of how cost-benet

analysis is performed in practice.

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