Distributing the Costs of Environmental, Health, and Safety Protection: The Feasibility Principle, Cost-Benefit Analysis, and Regulatory Reform

Abstract

This article offers a normative theory justifying the feasibility principle found in many environmental statutes. It then uses this theory to shine light on the regulatory reform debate. The feasibility principle precludes widespread plant shutdowns while maximizing the stringency of regulation that does not have this outcome.

The feasibility principle provides meaningful guidance regarding both maximum and minimum stringency and a reasonable democratically chosen response to distributional concerns. Pollution's tendency to concentrate severe harms upon randomly selected pollution victims justifies the stringency of this approach. Normally, cost concerns cannot justify failure to protect people from death, illness, and ecological destruction. But the principle's constraints apply in the one situation where some initial restraint might be justified, when regulation threatens to produce widespread shutdowns that concentrate significant harms on individuals. Widely distributed costs, the type that obtain when plant closures are not likely, have de minimus impacts that cannot justify allowing death, serious illness, and ecological destruction to continue unabated.

Leading advocates of regulatory cost-benefit analysis (CBA) agree that distribution of costs and benefits matters to regulation. But they see the alternative to CBA as regulation without any analysis or meaningful guiding principles. The feasibility principle, however, relies upon rational analysis, offers more meaningful guidance than CBA, and has the capacity to advance CBA supporters' goals better than CBA does, and at much less cost.

Advocates of CBA have distorted the debate about regulatory reform by portraying it as a debate about whether or not cost receives consideration. Analysis of the feasibility principle shows that consideration of cost has always pervaded the regulatory system. Much of the debate should concern how we address costs, not only whether agencies should consider cost. This debate will profit from a clear picture of the feasibility principle.

Keywords: Cost-benefit analysis, regulation, feasibility, environmental law, welfare economics, administrative law

JEL Classification: I18