Reinventing Rationality: The Role of Regulatory Analysis in the Federal Bureaucracy.

• Author: Williams, Bob

Increased awareness of consumer and environmental problems bred a wave of governmental rules and regulations in the 1960s and 1970s. Fearing the economic consequences of these regulations, many within the affected industries and in academia called for "regulatory reform". The reformers argued that federal agencies were ignoring the economic burdens of their regulations. With Reagan's election in 1980, the federal rulemaking process was modified to assure that federal regulations met the test of economic efficiency. Known as regulatory analysis, McGarity examines how this new approach affected rulemaking in the early Reagan years in five federal agencies. From these experiences he assesses the strengths and weaknesses of regulatory analysis and offers his insights on its future use and potential.

In Part I McGarity outlines the development of regulatory analysis within the federal government. A month after taking office, Reagan signed Executive Order 12,291 which required all federal agencies to undertake a Regulatory Impact Analysis (RIA) for all "major" rules. The executive order placed the burden of proof on each agency to demonstrate that its proposed rule passed the cost-benefit test. This emphasis on regulatory analysis offered a significant departure from the traditional rulemaking process. In the traditional approach, technical experts rely on intuition and experience to develop remedies to highly complex problems in which accurate information is either inadequate or nonexistent. Rules are developed that accommodate as many interest groups as possible in order to reduce resistance to the proposed rule. Labelled techno-bureaucratic rationality by McGarity, this approach identifies rules that will survive the inevitable political and legal challenges as well as those which are enforceable. On the other hand, regulatory analysis attempts to identify all regulatory options, quantify the societal costs and benefits of each option, and thereby solve the regulatory problem in a systematic and objective manner. Only those regulatory actions in which the net social benefit can be clearly demonstrated are to be taken. Rules that achieve the remedy in the most cost-effective manner are chosen. As McGarity suggests, this approach affected the selected remedies as well as the kinds of regulatory issues to which agencies gave future consideration.

In Part II, McGarity uses five case studies to examine the regulatory conflicts that arose between...