Responsible Regulation: A Sensible Cost-Benefit, Risk vs. Risk Approach to Federal Health and Safety Regulation

Steve Calandrillo

University of Washington - School of Law

Boston University Law Review, Vol. 81, pp. 957-1032, 2001

Federal health and safety regulations have saved or improved the lives of thousands of Americans, but protecting our citizens from risk entails significant costs. In a world of limited resources, we must spend our regulatory dollars responsibly in order to do the most we can with the money we have. Given the infeasibility of creating a risk-free society, this paper argues that a sensible cost-benefit, risk versus risk approach be taken in the design of U.S. regulatory oversight policy. The goal should always be to further the best interests of the nation, rather than to satisfy the narrow agenda of powerful industry or political forces. This entails designing safety regulations efficiently to maximize society's welfare, choosing the point where their marginal benefits equal their marginal costs - rather than simply asking whether total benefits exceed total costs in the aggregate. Federal regulatory oversight policy should also ask that proposed regulations compare the risks they reduce to the new risks they unintentionally create (substitution risks). Additionally, our citizens should be educated regarding systematic risk misperceptions, and regulatory agencies should make their risk assessments objectively. Moreover, most-likely scenarios must be addressed by responsible regulatory solutions, rather than the current practice of focusing on worst-case estimates. Finally, agencies should publish and justify their regulatory triggers and perform ex-post evaluations of their programs in an attempt to continuously improve the quality of regulatory design.

Efforts by the executive branch, from Presidents Ford, Carter, Reagan and Clinton, have attempted to inject similar common sense into the regulatory oversight process. Unfortunately, the Congressional mandates given to government agencies are often silent on the subject of cost-benefit analysis, and recent Supreme Court cases have held that regulatory agencies are not obligated to even consider the costs of their proposals. I will explore several legislative reform bills that are aimed at overriding Congressional mandates, but to date, none have been successful.

Finally, this paper will address certain common criticisms to which a marginal cost benefit, risk-risk approach to responsible regulatory reform would be subject. Most notably, the measurement of costs and benefits is not an exact science, and using "willingness to pay" as a marker of individual and social utility has its limitations. Regulatory reform also faces challenges on moral grounds, as scholars openly decry the explicit tradeoff between human lives and financial resources. While these criticisms contain merit, this paper concludes that to ignore a sensible cost-benefit analysis of federal safety regulations is to divert resources from their most beneficial uses and to settle for second best. In a world of scarcity, we must make regulatory tradeoffs as efficiently as possible in order to do the greatest good for the greatest number, and to save the most lives we can. It would be unethical to do anything less.

Number of Pages in PDF File: 62

Keywords: regulation, cost-benefit analysis, CBA, health, safety, government, risk, analysis

JEL Classification: A10, D61, D81, D78, G38, H50, I10, I18, L50,

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Date posted: April 14, 2005  

Suggested Citation

Calandrillo, Steve, Responsible Regulation: A Sensible Cost-Benefit, Risk vs. Risk Approach to Federal Health and Safety Regulation. Boston University Law Review, Vol. 81, pp. 957-1032, 2001. Available at SSRN: http://ssrn.com/abstract=693043

Contact Information

Steve Calandrillo (Contact Author)
University of Washington - School of Law ( email )
William H. Gates Hall
Box 353020
Seattle, WA 98195-3020
United States
206-685-2403 (Phone)
HOME PAGE: http://www.law.washington.edu/Faculty/Calandrillo/

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