Three myths about federal regulation

By Patrick A. McLaughlin and Casey Mulligan, Patrick of course being from GMU/Mercatus:

Despite evidence to the contrary, three common myths persist about federal regulations. The first myth is that many regulations concern the environment, but in fact only a small minority of regulations are environmental. The second myth is that most regulations contain quantitative estimates of costs or benefits. However, these quantitative estimates appear rarely in published rules, contradicting the impression given by executive orders and Office of Management and Budget guidance, which require cost-benefit analysis (CBA) and clearly articulate sound economic principles for conducting CBA. Environmental rules have relatively higher-quality CBAs, at least by the low standards of other federal rules. The third myth, which is particularly relevant to the historic regulations promulgated during the COVID-19 pandemic, is the misperception that regulatory costs are primarily clerical, rather than opportunity or resource costs. If technocrats have triumphed in the regulatory arena, their victory has not been earned by the merits of their analysis.

Here is the link to the NBER working paper.

Comments

Technocrats have triumphed, they are using their vast power capriciously. It must feel very empowering.

True. I use all that extra power I have lying around to do heavy deadlifts.

Yeah, it's only because we have headlight regulations that we have the "opportunity cost" of so few late night pile-ups.

What percentage of federal regulations does anonymous believe concern headlights?

90%? 99%?

Prize for dumbest answer.

LOL, that's truly another example of zero selfawareness. Kudos on the excellent trolling, it made me laugh.

Sad. Do you think "headlights" was the only regulation you enjoyed since waking up this morning? How about the injunction that keeps your neighbors from open defecation? That prevents self-dug outhouses on small lots?

I'd say the "zero self-awareness" award goes to those lazy libertarians who benefits from things like sewer or headlight regulation, but internalizes that as status quo prior, and forgets about it, and believes all regulations are bad anyway.

Still trolling and strawmanning people I see.

I guess I had better explain that because otherwise you probably won't figure it out.

No one on here has made the argument that "all regulations are bad anyway." When you make such unwarranted assumptions you are arguing in bad faith and strawmanning people's position.

I was answering "Reason" who blamed it all on "technocrats" who are "using their vast power capriciously." That's par for the course around here. No call for better governance. Just an attack on governance.

Not to mention this guy, with his not at all constructive criticism

"The US is a low trust society. Everything flows from there."

So we can't have technocrats, and we can't have trust?

And you wonder why I think you're a pack of idiots.

"...you're a pack of idiots."

Yes, I have no idea where Skeptical gets the idea that we are a low trust society. /sarcasm

This confirms that technocrats have not won and that more time needs to be spent understanding political economy. As a GMU graduate reminds me regularly about life as a technocrat “if you don’t solve the political economy problem your end up with an economic problem!”.

These three "myths" appear to be weak straw-man arguments. I'm curious if the authors actually did any research to see what people actually do believe about regulations.

+1, I didn't believe any of those "myths" were the entire story or even dominant.

There was a recent econ talk episode with Binyamin Applebaum pushing a new book. He was basically making the argument that most regulation since the 70s has been environmental.

+1, informative. Maybe that's where the idea came from, but it really doesn't make any sense. There has been a vast increase in the regulatory state and not all of it is environmental. So I'm curious as to how Applebaum makes his case. Maybe a cost weighted average?

I am not sure he has a good argument for making the case. Basically his thesis is things have gotten worse in the US since the 70s due to deregulation and lack of government investment. To this Dr Roberts made the reasonable objection, that there is in fact much more regulation now than there was in the 70s.

Applebaums reply was that the regulation is different now and there is less financial and labor regulation and the quantity is made up by environmental protections.

He wasn't challenged on this point so the conversation just moved on.
This is paraphrasing from memory, but I think it gives a fair account.

its Casey Mulligan, so dont expect anything other than straw-man arguments.

How come technocrats in Taiwan, Singapore, and Scandinavia can deliver the goods but the ones in America can't? What do their technocrats have that our technocrats don't?

It's perhaps not what they have but what they don't have. Deep-dyed corruption.

What makes you think they do?

Lol.

It’s not a mystery. Institutions reflect their society, institutions are not exogenous beings teleported from Alpha Centauri to benevolently act as philosopher kings.

The US is a low trust society. Everything flows from there.

This guy. Does he honestly think saying "the US is a low trust society" gets us out of that box? Does he think it builds trust, or helps create a problem solving society?

Have we transitioned from MAGA to "this is crap but don't expect better?"

(It is kind of ironic that some of you MAGAs think that Skeptical is on your side. He never works on the greatness part. He just like the lying in crap part. Or hell, maybe at this point you all do.)

"Mood:" or "Mood?"

https://twitter.com/Cbarzak/status/1264949764266905600?s=19

Ummm you’re constant haranguing for the past 3.5 years about every Trump tweet is evidence that we live in a low trust society. As is your headlight example above.

But since you’re just trolling today I say carry on. It’s not like your comments make the place worse. Simply par for the course.

Did any of you geniuses actually propose anything better? Or are you asking for a special gimmie, that we accept Trump's idiocy as the best America can do ..

Not sure trust has much to do with it. Competence is the deciding factor.

I think it's more complicated than just "trust" also, but I do think we are seeing some root cause issues.

None of these strike me as common misconceptions at all.

You need to become more familiar with the work of those bridging the gap between academic ideas and real world problems. That should clear up any misconceptions you may have.

> “The first myth is that many regulations concern the environment, but in fact only a small minority of regulations are environmental.”

Both clauses of this sentence can be completely true at the same time, if it happened that there are a great many federal regulations overall.

CBA: I worked for a time for a committee (judiciary committee) in my state's legislature. The leadership that year decided that all proposed bills had to have a CBA attached to it. I was responsible for the CBAs for bills assigned to my committee. That year was also the year that mandatory minimum sentences were the answer to the rising crime rate. I used a simple technique for the CBAs for MMS bills: I determined the average sentence for the particular crime and the daily cost for maintaining a prisoner, subtracted the average sentence from the MMS, and multiplied the additional time that would be served by the daily cost. Howls of protest ensued. I just didn't understand human behavior: the MMS would greatly reduce crime and thus greatly reduce the amount the state spent on incarcerating prisoners. Thus did one idea, CBA, potentially defeat a politically popular idea (MMS). This dilemma was resolved by creating an exception to the CBA for MMS bills. Just as today howls of protest arise when CBA might quantify the cost of a human life or years lost from that life due to a toxin being released in the environment. On a similar note, here is the excellent Will Wilkinson on McConnell's plan to exempt businesses from liability for their own negligence: https://www.nytimes.com/2020/05/25/opinion/trump-mcconnell-reopening.html

+1 postmodern cba scam
what you didnt do in your MMS cba was
was factor the cost of the crime itself into the cba

+1, he left out the Benefit portion of the CBA.

The only "conventional wisdom" I've ever run across is that regulation is detrimental and should drowned along with the rest of government in a bathtub.

I certainly expected to open this page and see no one cite the benefits of regulation. That was pretty much true.

It's all basically a very lazy libertarianism, where everyone here benefits from things like sewer or headlight regulation, but internalizes that as status quo prior, and forgets about it, and believes all regulations are bad anyway.

If you forget the complexity of the world is easier to be an ideologue - episode 543

> headlight regulation

These "regulations" are written by the industry. Ford and GM want a clear spec for headlights, and the donate engineers to a working group to forge that spec. Why? Because they want clear safety rules so when there's an accident, they can say "We met the industry safety standards"

That is why building regulations exist. The builders want there to be clear rules so that they can treat the structural piece as a minimum all must meet, and they innovate outside of that realm.

Regulations that come from industry coming together and that are written by industry are a very good thing. But they would exist even absent a government. Building codes, NHTSA lighting standards are examples of this.

The regulations that are bad are those written in a vacuum largely by the government OR with a few select players who use the regulations as a way to keep smaller competitors out.

An example of this is Dodd Frank. Those regulations were unbelievably complex, forcing bank consolidation because small banks could no longer afford the legal and administrative overhead of ensure they were following the rules (and as a result, we've seen small banks declining since the regulation arrived). Additionally, the regulation hasn't really done away with the most risky practices that lead to the 2008 problems. In other words, it's made it harder for anyone to take on Bank of America.

Those are bad regulations.

That's a partial truth obscuring a bigger one.

Your *neighbors* value a mountain of regulations that keep their neighborhoods safe, quiet, and etc.

Law enforcement and the city council are in charge of defining safe and quiet. Making sure there's not a couch on the front porch and a car up on blocks in the yard is the job of a neighborhood covenant.

Seattle has currently allowed a group of homeless people to set up tents in what was formerly an active street. Now the street is unusable because it's filled with tents.

If I lived nearby, that would be my signal to sell the home get the hell out. Seattle City Council has lost their mind.

Crap on the steps of the city hall in front of a cop? Not a damn thing happens in spite of it being against the law. Pop a beer on the beach? $300 fine.

"The first myth is that many regulations concern the environment, but in fact only a small minority of regulations are environmental."

I agree with others who question whether this is in fact a common myth. The paper doesn't provide a citation to the claim that this is a commonly held point of view. Anyone who reflects for a bit would quickly realize there are regulations concerning guns, food, drugs, alcohol, telecoms, immigration, the financial sector, product safety, and many other things.

As for cost-benefit analysis, the problem is that most of the costs and benefits that concern regulation are rarely clear. They often delve into contentious matters where there is little or no clear evidence from randomized controlled trials. Does childhood exposure to lead decrease IQ and/or increase crime? What is the partial elasticity between the unemployment rate and the minimum wage? How many QALYs does exposure to certain kinds of pollution take away? Or Rayward's example above about the extent to which mandatory minimum sentences deter crime.

Cost-benefit analyses have the same problems that expert testimony in court proceedings have: the "experts" often have ulterior motives for presenting their conclusions and the people who are asked to judge their credibility do not have the knowledge or expertise to understand all of the methodological issues. The problem in the bureaucracy is probably worse since analysts don't have to be cross-examined under oath by an adversary.

That said, I think people who are suspicious of bureaucracy and red tape should think twice before imposing too many additional requirements on regulatory agencies. Any rule change would require too much work and the result would just be permanent analysis paralysis.

>As for cost-benefit analysis,

Another problem with CBA is that the numbers and models are generally discretionary. Or put differently, they under the control of the person doing the analysis, and thus, aren't an useful tool to judge the quality of regulation.

IIRC, the CBA for the clean air act was something like: benefits ~ 60% of the economy. Costs ~ $50 million. Regardless of what you think about the the CAA, both sets of numbers were obviously absurd.

On what basis do the authors call these myths common? I don't think they are. If you have the paper, please let me know. Unfortunately, I am not eligible to get a free copy because I'm not a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy. I'm only a concerned citizen; that doesn't count.

I don't have access to NBER papers so can only go by what TC posts here. Published regulations do not included all the assessments or responses to the notice of proposed rulemaking. All that information is contained in the supplemental material published in the Federal Register statement announcing the final rule. Thus, the author's second myth is incorrect.

I think it is another "common myth" that the majority of regulations are there to prohibit or require certain behaviours. For example, in my area of expertise, tax law, there are are about 4 volumes of regulations (not counting IRS Revenue Rulings, Procedures, Private Letter Rulings, etc) for every volume of the Code. Why is that? It is largely because taxpayers and their advisors demand them in order to provide additional certainty that the Code alone does not provide. Taxpayers and their advisors prefer the additional certainty that the explanatory provisions and examples in the regulations provide. Regulations are much more concise and accessible and easier to interpret than wading through volumes of court decisions and trying to guess in advance how a court might react to different fact patterns. And, in my experience, professional lawyers and other staff at the Treasury Department, while "technocrats", are very consciencious and receptive to the public input that the rules of the Administrative Procedures Act allow and encourage. I have a generally high opinion of the "public servants" who are responsible for rule-making at the Treasury Department and I would not be surprised if other Departments are different. In dealing with many other national jurisdictions on complicated tax matters, my view is that the US system provides more certainty and is superior in part due to the plethora of regulatory guidance.

This is certainly not what my initial reaction to this post was, but after some reflection, I have to agree this is a good point.

There are still significant trade offs and costs to the current arrangement.

I have also had decades of experience with a variety of Treasury Department agencies, and I agree with Ms. Darkbloom above. Mainly an impressive group of people trying their best.

In fact, one of the regulatory 'holes' that had major causal force in banks' problems in 2008 was widely recognized and of great concern by the 'lifers', but they were not permitted to change it by Greenspan.

Is that a regulatory failure or a political failure?

U.S. society's harsh view of the bureaucrats often misidentifies the target--usually Congress (voted on by all of you), sometimes agency heads (appointed by administration (again, voted on by all of you).

Then there's the myth about originalism and regulations: https://www.theatlantic.com/ideas/archive/2020/05/nondelegation-doctrine-orliginalism/612013/

This seems off topic and distinctly partisan.

People in government, overwhelmingly, are C-team players. They learned very early on they could not complete medical school, do engineering, or join a top-tier law school. And so, they took their middling skills and joined the government. There, they competed against other C-team players, and some rose to the top. And those that excelled in this morass of mediocrity ran for office.

When we elect someone, we're effectively picking a junior high football team or U12 soccer team. Everyone knows that team isn't the best in the world. But suddenly you are forced to pick a team, even though on the world stage the team you are putting all your effort behind is likely ranked between 20,000 or 30,000.

There are no Elon Musks, Bill Gates or Steve Jobs in government. Even Barack Obama, revered by many, was viewed as middling by his peers where he worked as an adjunct professor. He didn't zoom to the top in that environment and they had every opportunity to zoom him to the top. He only zoomed to the top in government once we were forced to pick our favorite U12 soccer team.

Think how unimpressive our elected officials are. Now realize they beat out the regulators.

And here I thought going to school and getting an education was just signaling.

Most of the regulators, or at least those writing the regulations, come from industry. Do they deliberately send us their most mediocre people? Seems like they might be better off sending their A team players to make sure they get what they want.

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