Participants at the annual meeting of the Society for Benefit Cost Analysis (SBCA) earlier this month heard keynote remarks from Senators Lankford and Heitkamp. In addition to being a rarity for their bipartisan friendliness, they were also a rarity for their thoughtful comments on a very wonky subject, benefit-cost analysis. The two Senators discussed their legislative efforts to more concretely enshrine benefit-cost analysis in the regulatory process.
The Senators voiced the commonly held desire of using analysis to reduce the role of political factors in regulatory decision-making. This sentiment has its roots in the Progressive Era; when the idea of separating policy from politics in an effort to get the “right answer” to policy questions was at its height. Our analytical tools have improved in the century since the Progressives rose in American politics, but the proper balance of politics and analysis in policy decisions that require a great deal of expertise has become no less thorny.
I recently wrote a book, Analysis and Public Policy: Successes, Failures and Directions for Reform which focuses on the factors that determine when analysis (in addition to cost-benefit analysis, I looked at risk assessment, environmental impact analysis and other forms of impact analysis) makes a difference in policy-making. Senator Lankford, who said, “The hardest thing to get in this town is the real number—the hardest thing—because everyone has a different baseline, everyone has a different direction,” would hardly be surprised to hear that one of the most important factors affecting the use of analysis is politics.
Politics does not corrupt analysis; rare is the instance of politicians pressuring analysts to come up with a particular result. Rather politics creates the space in which analysis can operate. On an issue which is very politically salient, there is going to be less room for analysts to have influence. When there is a tragic accident, political leaders are often under intense pressure to come up with a solution to the problem. The fact that the solution costs a great deal, and likely does little to solve the problem that caused the accident matters less than the appearance of responsiveness in the face of tragedy. Think about our current reactions to terrorist attacks as examples of this phenomenon.
Another situation in which analysis has limited room to influence is when interests on both sides of an issue line up in favor of a regulatory policy. In the book, I describe a regulation from the Food and Drug Administration (FDA) which required good manufacturing practices for dietary supplements. Public interest groups supported the regulation in the hope that it would rein in renegade dietary supplement manufacturers. Large companies also supported the regulation as a barrier to entry to potential competitors. Economists said the regulation would cost more than $100 million and were hard pressed to identify benefits (indeed the benefits of particular provisions of the regulation were not identified). FDA issued the regulation.
As regulatory reform bills percolate in the halls of Congress, advocates of reform should keep in mind the interaction between analysis and politics. In a democracy, elected officials both in Congress and in the executive branch do and should have the final word on policy decisions. But many of these officials, like Senators Lankford and Heitkamp want the best possible information when they make these decisions. With that in mind I suggest several reforms that take advantage of the relationship between analysis and politics. I’ll summarize two of them here.
One of the often professed benefits of analysis, particularly cost-benefit analysis is that it makes decisions more transparent by laying bare the impacts of a policy decision. But when analysis becomes increasingly complex and takes hundreds or even thousands of pages, this transparency benefit is lost. In order to allow a greater variety of interests to mobilize, analysis should be presented to the public more simply and earlier in the decision-making process. Chris Carrigan and I have outlined a specific proposal for such a simplification.
Finally a little known process conducted under the Small Business Regulatory Enforcement Fairness Act (SBREFA) combines analysis and participation in a unique way that increases the role of analysis. While SBREFA is geared toward small businesses, an always popular political constituency, it offers broader lessons for the use of analysis in a political context. Labor unions could be consulted on the impacts of regulations on labor. Agencies could experiment with citizen juries to evaluate analyses at early stages of decisions and provide public feedback.
How policy-makers use analysis will never be immune from politics and in a democracy it shouldn’t be. But the desire to have analysis inform policy voiced by Senators Lankford and Heitkamp is a noble one and one that many of us share. It is my belief that carefully constructed reforms can move us closer to achieving this goal.
Shapiro is Associate Professor and Director of the Public Policy Program at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.