The problem with ‘expert’ regulation
President Trump’s attempts to change the way we regulate in America are about to get more difficult with a divided Congress. Even so, there remains much he can do from his perch atop the executive branch of U.S. government. Enormous power has been delegated to expert regulators who answer to the president, and their power has the potential to do good or ill, depending on how it is used.
Federal agencies have been granted this lawmaking power by our elected representatives. And while this concerns many who worry about democratic accountability, the logic is that regulators possess proficiency and detailed knowledge that lawmakers lack.
Perhaps nowhere is this agency expertise more on display than when regulators produce technical reports like benefit-cost analysis (BCA), which is used in the design and selection of regulations. Regulators have used this kind of analysis for decades, including to justify some of the most expensive federal rules. But are regulators using their expertise wisely?
The Office of Management and Budget (OMB) recently claimed regulations last year imposed $3.3 to $4.9 billion in annual costs to the U.S. economy. Those estimates, made by analysts at federal regulatory agencies, sound big, but the BCAs produced alongside the rules projected annual benefits that are even bigger — between $13.6 and $27.3 billion, for a net yearly gain to society of $8.7 to $24 billion.
Yet if this kind of analysis is regulator expertise in action, then the trust we place in agencies is misplaced. These numbers rest on shaky — even missing — theoretical foundations.
A reasonable person might look at the OMB’s $24 billion number and conclude it has meaning. But despite being expressed in dollars, it has no intelligible meaning. The government’s BCA is not actually measuring money. In fact, it is not clear what it measures.