Bentham at the OMB: A Response to Professor Rowell

Abstract

This Response to "Partial Valuation and Cost-Benefit Analysis" argues that the author’s conclusion that regulators should not regulate when the costs of regulation are greater than the monetized benefits implicitly depends on a false assumption that there is an identity of interests between regulatory winners and losers (without this identity of interests, it is simply utilitarianism, recast), and that the author also incorrectly assumes that economic valuations based on beneficiaries’ estimated “willingness to pay” fully reflect larger, societal preferences. Without these assumptions, which are necessary to support her logical argument, the author’s claim resolves to a highly controversial normative assertion, one that requires a normative defense she does not provide.

The author is correct in asserting that there are many regulatory goods that regulators deem “incommensurable” with money but that — in theory — are at least partially monetizable, in the sense that there does exist some willingness to pay for these goods. But the benefit of acquiring ad hoc valuation estimates for all such regulatory goods for which there exists some willingness to pay, goods that often cannot be even partially monetized without significant new research, would not justify the delay and expense the proposed, very expanded monetization process would require. And, in many cases, unavoidable uncertainty regarding risk and exposure will make it impossible for agencies to generate useful monetary values for many valuable public health, safety, and environmental protections.

Finally, this Response disputes the author’s claim that OIRA should block a proposed auto safety regulation unless and until the auto safety agency has produced a new cost-benefit analysis that presents monetized benefits in excess of the rule’s monetized costs.

Keywords: Cost-benefit analysis, regulatory review, risk regulation, OIRA, Office of Information and Regulatory Affairs, NHTSA, National Highway Traffic Safety Administration