The White House apparently wants to shake up federal rulemaking with an executive order that may radically shift the focus of oversight by its Office of Information and Regulatory Affairs (OIRA). Now, the criteria used in such oversight has never been cut and dried – politics counts along with economics. But over the past few decades, the OIRA has relied more and more on nuts-and-bolts analysis, insisting that agencies formally estimate both benefits and costs and explain how they fit into their decisions.
The revised approach wouldn’t abandon cost-benefit, as far as we know. But it would add a bunch of interesting criteria for judging rules that vaguely fit under the rubric of fairness or social justice. For example, the White House is keen on “nudge” strategies – rules that encourage people to act in their own interest – save more, eat better, smoke less – but don’t insist that they act. It is also pondering the use of a lower “discount rate” to value environmental benefits – say, better weather or happier polar bears – that will be enjoyed far in the future in order to promote intergenerational equity. And it wants to place an extra weight on the benefits going to lower-income people – for instance, by emphasizing the impact of air pollution rules on poor neighborhoods.
Economists generally have more to say about matters of efficiency than matters of equity, though only because figuring out what constitutes fairness (and getting all interested parties to agree) is so difficult (see this brief, for example). The big problem here for the Obama administration, we expect, is that adding more criteria to regulatory oversight – criteria that are, often as not, intangible – gives the overseers more wiggle room to make decisions based on interest group politics. The challenge, then, for the White House will be to discipline the process, to be truly transparent in explaining why this rule is in the public interest and that one isn’t.
