Tag Archives: regulation

The Costs of Regulating–and Not Regulating

A few days ago, I wrote about the REINS Act, a Congressional effort to block administrative regulatory activity. A commenter asked for a discussion of what we know about the costs of regulation, so I did a bit of research.

What I discovered reinforced my belief that the answer to most questions is: “it depends,” and/or “it’s more complicated than that.”

It turns out that there is not a lot of research calculating the costs of regulatory activity, and what does exist comes to very inconsistent results. Scholars argue about how such costs should be measured, and how best to conduct accurate analyses.

Despite these uncertainties, it is standard procedure to subject proposed rules to a cost/benefit analysis before they are promulgated. Since those analyses are being conducted prior to the implementation of proposed regulations, they are based upon estimates of both the costs and the benefits, and no matter how good-faith those estimates, they are essentially guesswork.

Anti-regulation politicians who throw around huge numbers that “demonstrate” how burdensome regulations are rarely admit that there is very little agreement on those numbers, nor do they address the benefit side of the equation, so a concrete example, assessing the actual costs of regulations that have been in effect for a long enough period of time to permit more accurate assessment, is instructive.

Vanderbilt University recently studied the compliance costs the university incurred, and came up with a big number. 

So let’s see which of those nasty, costly regulations we could dispense with.

The great majority of the university’s compliance costs were connected to research. There are a number of stringent rules governing academic research: some require respecting the privacy of human subjects, others ensure that volunteers in medical studies have information they need in order to make informed decisions about their participation. Still others ensure that the research will not pose unnecessary risks to individuals or communities.

Which of those “costly” rules should we dispense with?

Universities also bear the costs of obtaining accreditation. Accrediting agencies require lots of information in order to ascertain whether a given institution of higher education is providing…what’s that called?…education. Without accreditation, students would have to make expensive decisions about attendance without knowing whether the “product” had been adequately vetted, and whether a degree from that institution would be valued or discounted by potential employers.  (Actually, I’d favor a far more rigorous examination, since some “accredited” schools hardly seem to merit that credential. But that is a post for another day.)

Universities must also comply with regulations that are generally applicable. They must, for example, abide by rules governing immigration. Would the Congressional critics of regulatory costs prefer that University personnel turn a blind eye to the immigration status of their students? What about Human Resources regulations requiring compliance with civil rights laws?

Whole industries must comply with costly regulations governing food and drugs. Even if we could measure those costs with reasonable accuracy, how should we count the benefits? How do we determine–let alone value– the number of lives saved? How do we calculate, let alone value, reductions in illnesses from impure drugs or spoiled foods?

It seems likely that the REINS Act is aimed at environmental regulations. How do we value the benefits of clean air and water?

None of this is to say that all regulatory activity is wonderful or necessary. The “take away” is that both purported costs and anticipated benefits should be viewed with healthy skepticism, and all regulations should be evaluated individually and on their own merits.

Bottom line: it is perfectly justifiable to argue that the benefits of a specific regulation are not worth the costs involved in complying with that particular regulation. But ideological arguments against an activity called “regulation” are–excuse the expression–bullshit.

 

Flavors of Freedom

There is a book review in the latest issue of the Washington Monthly of “No Freedom Without Regulation: The Hidden Lesson of the Subprime Crisis.”  It was written by a Professor Singer of Harvard Law School, and in it, he considers a type of freedom that gets short shrift from the various special interests who are constantly insisting that any and all government regulation constrains our liberties.

I found this passage illuminating:

When the state sets minimum standards of safety and transparency for the manufacture and sale of consumer products, it affords me the freedom to buy a toaster oven without first hiring a lawyer to read the fine print and an electrician to look over the specs to make sure it won’t catch on fire. Other restrictions protect us from negative externalities. Building codes may limit my neighbor’s ability to contract for the construction of a house with cheap material and bad wiring, but it protects my house from the fire likely to erupt in his.

As I have noted in previous posts, I’m grateful for the Food and Drug Administration that relieves me of the need to test that chicken I bought at Kroger for e coli. (Before the recent news from Flint, Michigan, I used to be more grateful for the EPA’s monitoring of water quality–now, I’d like to see those regulations stiffened up a bit…)

The ongoing debate about government regulatory activity displays all the deficiencies of American policy arguments generally: it oversimplifies, assumes an “either/or” answer, and focuses on the wrong questions.

Can regulation be too stifling? Can a “nanny-state” approach impose unnecessary costs on businesses and consumers? Sure.

Can the lack of appropriate regulation endanger innocent people, and impose additional costs on those same businesses and consumers? You betcha!

The questions we should be addressing are the “how” questions: is this particular regulation necessary? Is it “narrowly tailored” to accomplish its goal? Does it make sense from a cost-benefit standpoint?

We’ll still disagree, still argue about the extent and substance of regulatory activity. But at least we’d be arguing about the right things.

Bought and Paid For

A Federal District Court judge in Washington recently upheld new Obama administration rules that deny federal aid to career training programs that charge outrageous amounts, saddle students with crushing debt, and give them useless degrees in return.

As the New York Times editorialized

The ruling strongly reaffirms the government’s authority to regulate these often-corrupt programs — and comes at a time when federal and state investigations are uncovering fraud and misconduct by for-profit schools all over the country. Regrettably, however, Republicans in both houses are moving bills that would block the Obama administration from enforcing the rules.

As the editorial notes, the new rules were inspired by data showing that students in for-profit schools account for only about 12 percent of college enrollment, but nearly half of student loan defaults.

We the taxpayers have been footing the bill for these predatory practices.

Research has consistently shown that graduates of for-profit institutions are more likely than graduates of other institutions to have debt of more than $40,000 by the time they leave school, and far less likely to find the employment promised by those marketing these programs.  What is particularly odious about these “schools” is that they deliberately target veterans, minorities and the poor.

Republican attempts to block the new rules are not sitting well with organizations that work on behalf of consumers, veterans and the poor. This spring, a coalition of these groups sent a letter reminding Congress that 37 state attorneys general are jointly investigating allegations of fraud in for-profit schools. Various investigations have already uncovered deceptive tactics; dismal graduation rates; false or inflated job placement rates; and dubious sales and admissions policies that target veterans and students of color.

It’s hard to argue with the Times‘ conclusion.

At issue here is an industry that routinely exploits the country’s most vulnerable citizens and fleeces the federal student aid program at the same time. The administration’s effort to bring it under control deserves support, not legislative sabotage.

Struggling Against Impotence

A friend of mine who lives in Wisconsin sent me a link to a story in his local paper, reporting on a study about hormone levels in the waterways. 

“All over the country, chemicals known to disrupt or act like hormones seem to have permeated the waters and may be harming wildlife — or people.

‘The more you know, the more scared you are,’ said Kimberlee Wright, executive director of the Wisconsin-based nonprofit law center Midwest Environmental Advocates.”

Just one more example of our human interdependence and individual powerlessness–an example to join with random terrorist attacks like the most recent example from Boston, industrial accidents like the one that leveled much of a small Texas town last week, the periodic outbreaks of e coli caused by contaminated foodstuffs….the list goes on.

In a country and culture that has always emphasized individual responsibility and self-determination, the increasing evidence of our individual impotence is particularly disorienting and destabilizing. We are forcibly reminded that we have few alternative to collective measures–government measures–to protect us. We have to trust that those we entrust with responsibility for public health and safety are doing their jobs properly–that police and OSHA investigators and FDA inspectors are well-trained and honest, and that there are enough of them.  In our complex modern world, the only alternative to that trust is withdrawal from the human “grid”–retreat into the woods somewhere, and a life without modern amenities.

No one likes feeling impotent. I have a hunch that much of the “crazy” we see around us–the anti-government “patriots,” the conspiracy theory wackos, the stereotypical angry old white guys–is a response to those feelings of impotence. The notion that we actually have to rely upon our common institutions, the constant reminders that our common lives are complicated and interwoven, and that we require a social infrastructure upon which to “stand on our own two feet” is particularly galling to people who grew up in a less interdependent time. It’s one more element of the dizzying change that confuses and infuriates them.

The reality is, in today’s world, we can’t afford to make government small enough to drown in a bathtub. As unwelcome as that truth is, we need agencies with the authority to require safe factories, to prevent harmful discharges in our waterways, to ensure the food at the supermarket is uncontaminated…Instead of starving government, we need to make sure that it is doing what it is supposed to do–and only those things–and doing them well.

 

 

Live and Let Live in a Connected World

Watching the Indiana legislature is sort of like driving past a big wreck….hard not to slow down and stare, even when you know you should look away. The debate over a measure intended to close down “clinics” (aka Planned Parenthood) by requiring them to build mini-hospitals and force patients to undergo two trans-vaginal ultrasounds got me thinking more generally about the nature of law in our contemporary society.

I often tell students that the underlying premise of the Bill of Rights is “live and let live.” There was a libertarian philosophy that heavily influenced our approach to government, a respect for the individual right to personal autonomy, best summed up as: people have a right to live their lives as they see fit, so long as they don’t harm the person or property of a non-consenting other, and so long as they are willing to extend an equal right to self-determination to others.

The seeming simplicity of that construct belies the difficulty Americans have had in applying it. The confounding issue is the nature of harm (and sometimes, as in the so-called “abortion wars,” the definition of “person”).

Smoking is a good example. If you are an adult, the government has no business interfering with your choice to engage in a bad habit. When it became known that passive smoke is harmful, however, the government was justified in stepping in with regulations intended to protect non-smokers from the effects of your bad habit. Seat belts are a more dicey proposition; there is an argument that drivers who fail to buckle up sustain more injuries in accidents, thus driving up the insurance premiums for everyone else, but that’s a pretty speculative harm on which to base a fairly substantial intrusion.

The problem is, as a society, we are becoming more and more connected. Increasingly, the actions of one person affect many others, and if those actions threaten some sort of harm, we look to government to intervene. Worse, the Puritans who have always been a part of American culture remain with us, insistent scolds who want government-as-moral-nanny-state, government that both protects us from ourselves and prevents us from sinning (as they define sin).

We may never agree on where to draw the line. Government surely has the right to tell us we can’t rob the local liquor store, and it just as surely has no right to insist that we eat our broccoli, but between those poles lies great conflict.

We need to become much more thoughtful about the nature of the harms that justify government interventions in our lives. I understand the ongoing debates about abortion–those debates spring from very different beliefs about “personhood.” Seat belts, not so much.