Notice & Comment

The Future of Cost-Benefit Analysis, by Michael A. Livermore & Richard L. Revesz

*This is the seventeenth and final post in a series on Michael Livermore and Richard Revesz’s new book, Reviving Rationality: Saving Cost-Benefit Analysis for the Sake of the Environment and Our Health. For other posts in the series, click here.

When we published Retaking Rationality: How Cost-Benefit Analysis Can Better Protect the Environment and Our Health in 2008, we were confident that the bipartisan consensus in favor of using cost-benefit analysis to improve regulatory decision-making was strong and would persistent indefinitely. In that book, we argued that progressives should recognize this reality and work to “mend, not end” cost-benefit analysis. By 2020, four years under the presidency of Donald Trump had shaken our confidence in any shared commitment to rationality in regulatory decision-making. We wrote Reviving Rationality: Saving Cost-Benefit Analysis for the Sake of the Environment and Our Health to catalogue the many defects in the Trump administration’s approach to cost-benefit analysis and to make the argument to people in both parties that continuing the Trump approach of rejecting analysis, evidence, and expertise would be a grave mistake.

We are extremely grateful to the organizers and contributors to the JREG Notice & Comment symposium on Reviving Rationality for engaging with our work. It is a great honor to have such a distinguished group of interlocutors providing their thoughtful and provocative feedback. We’ve learned a great deal from these responses, and have already started accumulating a lengthy to-do list for future work.

One important theme that emerges from the symposium is that in a politically and intellectually diverse group of commenters, the Trump administration found no defenders. It turns out that transparently manipulating cost-benefit analysis is not a recipe to gain the respect of knowledgeable observers. Rather, there appears to be universal consensus that cost-benefit analysis during the Trump administration was a disaster, with shoddy analysis leading to poor decision-making and an embarrassing string of losses in the courts.

Another theme of many of the comments was the question of how to rebuild the institution of cost-benefit analysis. As we wrote in Reviving Rationality, the future of cost-benefit analysis is unclear. Perhaps a stable bipartisan consensus will return. But it is also possible that the Trump administration has initiated a death spiral for the methodology. Everything depends on the actions of leaders in both political parties in the coming years.

There are some reasons for cautious optimism. When we submitted the final proofs for the book, the outcome of the 2020 presidential election was unclear. With Donald Trump’s defeat, hope for a more rational approach to regulatory decision-making emerged. In one of his first acts in the White House, President Joe Biden issued a memorandum that affirmed his administration’s commitment to cost-benefit analysis and called for a set of much needed updates to improve the technique. The Biden memo made clear that his administration planned to take economic analysis of regulations seriously. It also laid out a much-needed path for reforming cost-benefit analysis by modernizing the technique and promoting justice and equity in the process of regulatory review. It is still relatively early in the administration, and ultimately, proof will come when the administration updates the guidance for the preparation of regulatory impact analyses and agencies begin issuing major rulemakings in earnest. But the signs so far are promising.

Experience under the Trump administration may also serve as a warning for any future President who decides that analysis, evidence, and expertise can be jettisoned from the regulatory process. At the very least, courts have shown an unwillingness to allow the kind of flagrantly shoddy decision-making exhibited during the Trump years. The staggering loss record of the Trump administration before judges appointed by Presidents of both parties attests to the court’s power to ensure some minimum level of rationality in regulatory decision-making. Constituencies across the political spectrum would be wise to acknowledge this squandered policymaking opportunity. If both parties come to see the practices of the Trump administration as an “anti-canon of regulatory mismanagement,” there is hope for a revival of the stable, pre-Trump cost-benefit consensus.

Time will tell. But we are heartened by the many thoughtful and talented scholars who focus their energies on studying and improving regulatory decision-making in the United States. The symposium contributors demonstrate that there are no shortage of good ideas about how to improve the capacity of the administrative state to promote the well-being of the American people. Of course, reasonable people will sometimes disagree about which ideas are best, but the central lesson of this symposium is the widespread agreement that the Trump administration swerved off the path of rationality. That level of consensus is hard to come by these days in American politics, and we are hopeful that it is a sign that we are still, as a polity (or at least as a group of engaged scholars), capable of learning from the mistakes of the past.

Michael A. Livermore is the Edward F. Howrey Professor of Law at the University of Virginia School of Law. Richard L. Revesz is the AnBryce Professor of Law and Dean Emeritus at the New York University School of Law.