Document Type

Article

Abstract

For over a decade, perceptions of government have been shaped by three widely cited studies which purport to show that federal health, safety and environmental regulation is pervasively over-zealous and irrational. Only relatively recently have the studies themselves come under the glass, beginning with Lisa Heinzerling's 1998 article in Yale Law Journal (critiquing Morrall) followed by my 2003 article in Chicago Law Review which examined the methods employed by all three studies. These critiques concluded that the studies in question are so badly flawed methodologically that they prove nothing at all about the rationality of regulation, even when viewed from within the cost-benefit paradigm. Tengs and Graham, co-authors of one of the studies, have not responded to their critics in print. Morrall and Hahn, who produced the other two studies, have issued separate replies to which this essay responds in turn. This essay shows that there is no basis for Morrall's insistence that his benefit numbers are more credible than the higher benefit numbers of issuing agencies. It also demonstrates that Morrall failed to count important regulatory benefits and that he has refused to make his underlying data and calculations available to outside scholars attempting to replicate his findings. As a result, Morrall's claims of exorbitantly expensive agency regulations actually rest on nothing more substantial than his own ipse dixit. Hahn's defense consists of a "sensitivity analysis" which concludes that his prior findings are robust against reasonable variations in life values and discount rates and against exclusion of "zero-benefit rules" from the database. However, this defense addresses only two criticisms, implicitly conceding numerous other methodological shortcomings which are documented in my earlier critique and which are independently sufficient to invalidate his study. Moreover, it turns out that Hahn's cryptic term - "zero benefit rules" - is a misnomer which actually refers to extremely useful regulations, such as rules to help prevent Exxon Valdez-type oil spills and to protect 3.9 million agricultural workers from acute pesticide poisoning, along with many others. These are not, in fact, zero-benefit rules; they are simply rules to which Hahn has arbitrarily assigned a zero value by refusing to count the categories of benefits which they provide - ecological benefits, acute health benefits, procedural benefits, etc. This gross error - which Hahn implicitly concedes to be an error in his reply - cannot be corrected by simply excluding the mishandled rules from the database, as Hahn attempts to do. Rather, one must explore the possibility that these rules are actually success stories (which will dramatically improve the regulatory "success" rate). One must also explore the consequence of fully and properly accounting for the categories of benefits which Hahn arbitrarily excludes in relation to rules which show a positive number in Hahn's benefits column. If this were done properly, there is no assurance that the result would bear any relation to Hahn's arbitrary tabulation of regulatory benefits. Such errors render Hahn's and Morrall's critiques of government regulation invalid. More importantly, many of these errors are endemic to the enterprise of compiling strictly numerical scorecards, thus rendering this entire mode of analysis invalid. Sound analysis of government regulation requires the use of qualitative judgments as well as quantitative measures.

Date of Authorship for this Version

September 2004

Keywords

Benefit-cost, cost-benefit, regulatory impact, regulation, government, rationality, methodology

Share

COinS