Sludge and Ordeals

Is there an argument for behaviorally informed deregulation? In 2015, the United States government imposed 9.78 billion hours of paperwork burdens on the American people. Many of these hours are best categorized as “sludge,” understood as friction, reducing access to important licenses, programs, and benefits. Because of the sheer costs of sludge, rational people are effectively denied life-changing goods and services. The problem is compounded by the existence of behavioral biases, including inertia, present bias, and unrealistic optimism. A serious deregulatory effort should be undertaken to reduce sludge through automatic enrollment, greatly simplified forms, and reminders. At the same time, sludge can promote legitimate goals. First, it can protect program integrity, which means that policymakers might have to make difficult tradeoffs between (1) granting benefits to people who are not entitled to them and (2) denying benefits to people who are entitled to them. Second, it can overcome impulsivity, recklessness, and self-control problems. Third, it can prevent intrusions on privacy. Fourth, it can serve as a rationing device, ensuring that benefits go to people who most need them. Fifth, it can help public officials to acquire valuable information, which they can use for important purposes. In most cases, however, these defenses of sludge turn out to be far more attractive in principle than in practice. For sludge, a form of cost-benefit analysis is essential, and it will often demonstrate the need for a neglected form of deregulation: sludge reduction. For both public and private institutions, “Sludge Audits” should become routine, and they should provide a foundation for behaviorally informed deregulation. Various suggestions are offered for new action by the Office of Information and Regulatory Affairs, which oversees the Paperwork Reduction Act; for courts; and for Congress

On the Costs and Benefits of Aggressive Judicial Review of Agency Action

In this essay, the author undertakes three tasks. The first is to describe some of the difficulties of defining benefits in the setting of judicial review of administrative action. The second task is to offer reasons, though tentative and largely anecdotal ones, for an affirmative answer to the question whether aggressive judicial review has produced net benefits. At the very least, the author suggests, aggressive judicial review has had significant benefits in many settings. The third and final task is to outline some proposals by which to increase the benefits, and decrease the risks, of an aggressive judicial posture in administrative law

Lead as a tracer for automotive particulates: projecting the sulfate air quality impact of oxidation catalyst-equipped cars in Los Angeles

An analysis of the fate of lead in the Los Angeles Basin is used to evaluate an emissions to air quality model for automotive exhaust particulates. The dispersion model is then applied to projecting the annual average sulfate air quality impact of direct sulfuric acid mist emissions from oxidation catalyst-equipped cars of the 1975 model type. Estimates are given of the incremental sulfate contributions from three model years of oxidation catalyst-equipped cars burning a relatively low sulfur gasoline, and from roughly ten model years of 1975-type autos burning gasoline of sulfur content equal to that of the entire 1974 Southern California gasoline pool. In the latter case, sulfate concentrations in portions of downtown Los Angeles in 1985 could be elevated by roughly two thirds above present average sulfate values

Cost-Benefit Analysis Without Analyzing Costs or Benefits: Reasonable Accommodation, Balancing, and Stigmatic Harms

Is an accommodation "reasonable" under the Americans with Disabilities Act, if and only if the benefits are roughly proportional to the costs? How should benefits and costs be assesse?' Should courts ask about how much disabled employees are willing to pay to obtain the accommodation, or instead how much they would have to be paid not to have the accommodation? How should stigmatic or expressive harms be valued? This essay, written for a symposium on the work of Judge Richard A. Posner, engages these questions in a discussion of an important opinion in which Judge Posner denied accommodations involving the lowering of a sink in a kitchenette and a request for telecommuting. The problem with the analysis in that opinion is that it does not seriously analyze either costs or benefits. A general lesson is that while cost-benefit balancing can helpfully discipline unreliable intuitions about the effects of requested accommodations, it can also incorporate those intuitions. Another lesson is that stigmatic harms and daily humiliations deserve serious attention as part of the inquiry into which accommodations are reasonable, and that the removal of those harms and humiliations can create real benefits. Adequate cost-benefit analyses must attempt to measure and include those benefits.

Two Conceptions of Irreversible Environmental Harm

The concept of "irreversibility" plays a large role in the theory and practice of environmental protection. Indeed, the concept is explicit in some statements of the Precautionary Principle. But the idea of irreversibility remains poorly defined. Because time is linear, any loss is, in a sense, irreversible. On one approach, drawn from environmental economics, irreversibility might be understood as a reference to the value associated with taking precautionary steps that maintain flexibility for an uncertain future ("option value"). On another approach, drawn from environmental ethics, irreversibility might be understood to refer to the qualitatively distinctive nature of certain environmental harms, a point that raises a claim about incommensurability. The two conceptions fit different problems. For example, the idea of option value best fits the problem of climate change; the idea of qualitatively distinctive harms best fits the problem of extinction of endangered species. These ideas can be applied to a wide assortment of environmental problems.

Are Poor People Worth Less Than Rich People? Disaggregating the Value of Statistical Lives

Each government agency uses a uniform figure to measure the value of a statistical life. This is a serious mistake. The very theory that underlies current practice calls for far more individuation of the relevant values. According to that theory, the value of statistical lives should vary across risks. More controversially, the value of a statistical life should vary across individuals -- even or especially if the result would be to produce a lower number for some people than for others. One practical implication is that a higher value should be given to programs that reduce cancer risks. Should government use a higher VSL for programs that disproportionately benefit the wealthy -- and a lower VSL for programs that disproportionately benefit the poor? A serious complication here is that sometimes the beneficiaries of regulation pay only a fraction or even none of its cost; when this is so, the appropriate VSL for poor people might be higher, on distributional grounds, than market evidence suggests. An understanding of this point has implications for foundational issues about government regulation, including valuation of persons in poor and wealthy nations. Also of interest from the Joint Center: Is Granny Worth $2.3 Million or$6.1 Million' Robert W. Hahn and Scott Wallsten

Irreversible and Catastrophic

As many treaties and statutes emphasize, some risks are distinctive in the sense that they are potentially irreversible or catastrophic; for such risks, it is sensible to take extra precautions. When a harm is irreversible, and when regulators lack information about its magnitude and likelihood, they should purchase an "option" to prevent the harm at a later date; the Irreversible Harm Precautionary Principle. This principle brings standard option theory to bear on environmental law and risk regulation. And when catastrophic outcomes are possible, it makes sense to take special precautions against the worst-case scenarios; the Catastrophic Harm Precautionary Principle. This principle is based on two foundations: an appreciation of people's failure to appreciate the expected value of truly catastrophic losses; and an understanding of the distinction between risk and uncertainty. The Irreversible Harm Precautionary Principle must, however, be applied with a recognition that irreversible harms are sometimes on all sides of social problems, and that such harms may be caused by regulation itself. The Catastrophic Harm Precautionary Principle must be applied with an understanding that in some cases, eliminating the worst-case scenario causes far more serious problems than it solves. The normative arguments are illustrated throughout with reference to the problem of global warming; other applications include injunctions in environmental cases, genetic modification of food, protection of endangered species, and terrorism.

Willingness to Pay vs. Welfare

Economists often analyze questions of law and policy by reference to the criterion of private willingness to pay (WTP), with the belief that people's WTP for a good is an accurate proxy for the welfare that they would obtain from that good. For two reasons, the proxy is crude. The first problem is that people may not pay for all of the benefits they receive, and in such cases, use of WTP may lead in unfortunate directions, even or especially if welfare is our lodestar. The second and more fundamental problem is that people may be willing to pay for goods whose acquisition does not improve their welfare. People typically choose on the basis of their "affective forecasting," and their affective forecasts can lead them to make bad blunders. Sometimes people overestimate the welfare effects of both losses and gains. These points have many implications for law and policy. In particular, juries are probably offering greatly inflated dollar awards for hedonic damages, and the outcome of cost-benefit analyses, based on WTP, may not capture welfare, suitably defined.

The Complex Climate Change Incentives of China and the United States

It is increasingly clear that the world would be better off with an international agreement to control greenhouse gas emissions. What remains poorly understood is that the likely costs and benefits of emissions controls are highly variable across nations. Most important, prominent projection suggest that the world's leading emitters--the United States and China'have weak incentives to participate in an agreement that would be optimal from the standpoint of the world. The first problem is that any significant emissions effort would probably be exceedingly expensive for both nations. The second problem is that on prominent projections, the United States and China are unlikely to be the most serious losers from climate change. There are two ways to eliminate the resulting obstacle to an international agreement. The first is through altering the perceived cost-benefit analysis for both countries. The second is through an understanding that both nations, and the United States in particular, are under a moral obligation not to inflict serious harm on the highly vulnerable citizens of Africa, India, and elsewhere. Existing proposals for unilateral action on the part of the United States seem to stem from an unruly mixture of confusion, hope, and a sense of moral obligation. There are also interesting differences between the situations of the two leading emitters: Because China is much poorer and has much lower per capita emissions, it is especially difficult to interest China in taking aggressive steps to reduce its emissions.