The Cost-Benefit State: The Future of Regulatory Protection.

• Author: Abramowicz, Michael

THE COST-BENEFIT STATE: THE FUTURE OF REGULATORY PROTECTION. By Cass R. Sunstein. Chicago: American Bar Association. 2002. Pp. 199. Paper, $69.95.

TABLE OF CONTENTS INTRODUCTION 1709 I. THREE CHEERS FOR COST-BENEFIT ANALYSIS 1711 A. Consideration of All Relevant Factors 1711 B. Cognitive Correction 1714 C. Democracy-Advancing 1717 II. SUNSTEIN'S RECOMMENDATIONS FOR COST-BENEFIT ANALYSIS 1720 A. Expanding Cost-Benefit Analysis 1720 1. Statutory Interpretation 1720 2. Judicial Review 1723 B. Allowing Flexibility in Cost-Benefit Analysis 1725 1. Qualitative Considerations Trumping Analysis 1725 2. Rights and Irreversibility 1728 III. COST-BENEFIT BALANCING IN JUDICIAL REVIEW 1730 A. The Advantages and Disadvantages of Aggressive Judicial Review 1732 1. The Problem with Unconstrained Agency Decisionmaking 1732 2. The Problem with Unconstrained Judicial Decisionmaking 1734 B. Common Law Cost-Benefit Principles 1735 C. Agency Reputation in Judicial Review 1738 CONCLUSION 1741 INTRODUCTION

In 1989, Cass Sunstein (1) published an article entitled On the Costs and Benefits of Aggressive Judicial Review of Agency Action. (2) Sunstein apparently meant the words "costs" and "benefits" in an informal sense, as the article considered the advantages and disadvantages of aggressive judicial review without pretense of explicit quantification. That article was several generations ago in Sunstein scholarship, almost 100 articles and over a dozen books. The central concerns of that article, however, are relevant to an assessment of Sunstein's latest book, whose title, The Cost-Benefit State, uses the words "costs" and "benefits" as labels for quantitative assessments of the effects of governmental actions. Sunstein, though a democratic theorist rather than an economist, enthusiastically urges agencies to make decisions based on numerical assessments of regulatory consequences, factoring in variables ranging from effects on consumer prices to lives saved. The book is not so much a primer on cost-benefit analysis as a manifesto, concluding without apology that cost-benefit analysis "is for everyone" (pp. 19-20).

It may seem ironic, then, that The Cost-Benefit State is written in much the same easygoing, engaging style as the 1989 article. Though illustrating with examples how cost-benefit analysis might prevent regulations whose costs exceed benefits, (3) and perhaps more startlingly how it might spur regulations whose benefits exceed costs, (4) Sunstein makes no attempt to quantify the costs and benefits of cost-benefit analysis itself. At one point, Sunstein muses about whether a version of cost-benefit analysis survives cost-benefit analysis (p. 121) but his analysis has less quantification than even some of the agency analyses that he criticizes in the book. (5) "The answer is that we cannot be sure," he concedes. "But the current situation is not nearly as good as it could be, and if the analysis is done well, there is every reason to expect that it will lead to improvements" (p. 121).

My intent, however, is not to criticize Sunstein for writing the book in a conventional form, without mapping his arguments into a series of calculations. After all, even a study assessing cost-benefit analysis quantitatively might not survive cost-benefit analysis (and so on to infinite regress), even if cost-benefit analysis in general is justified. The reason is not so much on the costs side--a law professor's time is not the scarcest of resources--as on the benefits side. Any study inevitably could be attacked as suffering from methodological imperfections. There may be no obvious objective way to determine, for example, how much more expensive it is for an agency to engage in cost-benefit analysis than in old-fashioned reasoning, at least in the absence of a controlled experiment. In the absence of such a study, Sunstein's argument would not be much more persuasive if it included a back-of-the-envelope calculation of the benefits and costs of cost-benefit analysis.

That cost-benefit analysis would not make much difference to the quality of Sunstein's arguments does present a paradox, however. Why should we embrace cost-benefit analysis as a means for justifying action except when it comes to arguments about undertaking cost-benefit analysis itself? Based on the conception of cost-benefit analysis that emerges in the book, I suspect that Sunstein would answer that cost-benefit analysis is less useful the more abstract the problem. This is sound, but there is a complementary answer: Cost-benefit analysis can serve as a lingua franca of the administrative state that facilitates review of administrative decisions and helps to suppress idiosyncratic decisionmaking. Sunstein is not part of the administrative state and has little reason to couch most arguments in the form of cost-benefit analysis, but we may wish to require legal decisionmakers to do so.

In this Review, I will illustrate Sunstein's conception of cost-benefit analysis and critique this conception by suggesting that cost-benefit analysis could serve a more important role than Sunstein would allow. Sunstein views cost-benefit analysis as a tool, one that any rational agency decisionmaker would choose regularly to use for concrete problems, just as any rational carpenter would use a hammer for driving nails into a wall. Those who oppose cost-benefit analysis are thus like those who recommend against hammering for driving nails, foolish and unlikely to be successful in pursuing their goals. There may be skeptics who fit into this metaphor, but opposition to cost-benefit analysis can be rational too, for someone whose valuations of costs and benefits are different from others' and who thus worries about not being able to achieve policy goals when forced to calculate net benefits using the accepted scheme. (6) This is, in my view, an argument for cost-benefit analysis rather than an argument against it. If properly implemented, cost-benefit analysis can push decisionmakers toward factoring in generally accepted valuations rather than their own idiosyncratic ones. This is a democratic benefit, producing results closer to what an informed body politic would decide.

Though Sunstein and I agree on more about cost-benefit analysis than we disagree, our different conceptions of cost-benefit analysis have significant implications, particularly for how courts should review agency decisions. My analysis thus brings us back to Sunstein's 1989 article (7) concerning the aggressiveness of judicial review of agency decisions. I argue for a more active judicial role in scrutinizing agency actions than Sunstein would recommend, though not necessarily a less deferential one. Where agencies can engage in cost-benefit analysis, judicial review can be more democratic and less likely to represent the arbitrary elevation of judicial preferences than if arguments are made without numbers.

This Review will proceed as follows. Part I will outline Sunstein's defense of the role of cost-benefit analysis and his recommendations for implementing it. Part II considers how Sunstein envisions implementation of cost-benefit analysis, including the ways in which Sunstein seeks to expand the practice and the ways in which he ultimately would limit it. In Part III, I offer a broader vision of cost-benefit analysis, recognizing the limitations of both unconstrained agency decisionmaking and unconstrained judicial decisionmaking. I argue that the development of cost-benefit principles through common law processes best avoids these opposing dangers. Finally, also in Part III, I argue that judicial review of cost-benefit analyses should take into account agency reputation and political proclivities as developed over a number of such analyses, as well as the political orientation of the courts in cases reviewing agency action.

1. THREE CHEERS FOR COST-BENEFIT ANALYSIS

   Sunstein's defense of cost-benefit analysis is sprinkled throughout the book, but several significant themes emerge. Cost-benefit analysis, Sunstein argues, is useful in forcing decisionmakers to consider all relevant factors, in improving the cognitive processes of decisionmakers, and in promoting democratic governance. Although I agree on all three counts, I believe these advantages are likely to be slight if cost-benefit analysis serves as a flexible mode of justification rather than as a rigid requirement.

   1. Consideration of All Relevant Factors

      Perhaps the most controversial word in the phrase "cost-benefit analysis" is "cost," and Sunstein emphatically argues that costs are a critical consideration in regulatory decisionmaking. Costs may seem most vulnerable to critique when benefits and costs seem incommensurate, (8) for example if lives are on one side of the balance and money is on the other. "[I]t might be possible to question," Sunstein acknowledges, "whether a large amount of money (say, $400 million) would really be too much to spend to save a small number of lives (say, two)" (p. 21). Sunstein's response cites decisions that people make in their own lives. "Each of us has limited resources, and we do not spend all of our budget on statistically low risks. We spend a certain amount, and not more, to protect against the risks associated with poor diet, motor vehicle accidents, fires, floods, and much more" (p. 21). At some point, the cost of avoiding a risk is so high that individuals will take that risk, and so too, Sunstein believes, should the government.

      Although I find it persuasive, this argument is insufficient to meet Sunstein's goal. Sunstein insists that a "suitably devised system of [cost-benefit analysis or] CBA is for everyone," including, for example, both "people who think that workers deserve much more protection and those who think that worker-protection programs have gone much too far." (9) Sunstein characterizes his case for considering costs as "heavily pragmatic" (p. 21), without acknowledging that many are...