Making regulations work at the state level

Last month Harvard released a discussion paper by Edward Glaeser and Cass Sunstein, “Moneyball for State Regulators.” As published in the summer edition of National Affairs, that analogy is dropped, but I can’t resist a Moneyball analogy, so the quotes below are from the Harvard version. (Glaeser and Sunstein also wrote about their idea in a Sunday Wall Street Journal op-ed.)

Glaeser and Sunstein basically argue that the federal government has required cost-benefit analyses of regulations, “allowing agencies to go forward, and to burden the private sector, only if the benefits justify the costs”—and state and local governments should do so as well:

In 2011, the Obama Administration, with bipartisan support, called for an ambitious process through which federal agencies would periodically evaluate their existing rules, with the goal of eliminating or streamlining them when cost-benefit analysis suggested that elimination or streamlining was warranted. The “regulatory lookback,” as it is called, has produced over 500 reform proposals, and it is saving billions of dollars each year. While the lookback remains a work-in-progress at the national level, there is every reason to think that states should be engaging in lookbacks of their own, eliminating and streamlining burdensome requirements.

In some ways, states might be able to go far beyond the efforts of national government, because of their relative capacity and incentive to innovate. We envision a kind of competition at the state level, not to produce a mutually destructive “race to the bottom,” but to activate creative thinking about how to institutionalize regulatory simplification, freeing up the private sector while also improving, and certainly without jeopardizing, public safety, health, the environment, and quality of life.

Moneyball comes in due to the elevation under this proposal of data over intuition:

When the evidence is clear, it will often lead people with different values to the same conclusion. If a regulation would save many lives and cost very little, people are likely to support it regardless of their party identification, and if a regulation would produce little benefit but impose heavy costs, citizens are unlikely to favor it regardless of their abstract ideas about government. No less than the national government, state and local governments should be moving in the direction of Regulatory Moneyball, making choices about rules on the basis of careful analysis rather than intuitions, anecdotes, dogmas, and impressions.

This all has real-world implications. Glaeser and Sunstein write about the regulatory consequences on jobs, prices, and neighborhoods:

For example, there is a detailed literature in the relationship between regulation and job loss, and while any particular assessment requires a great deal of technical work, there is no question that some regulations cost jobs. And whenever regulations impose high costs, they can increase prices as well, straining consumer budgets and reducing consumer purchases as well (a particularly serious problem for the poor). . . .

There are reasons behind all of these rules [liquor licenses, occupational licensing, etc], which aim to limit public nuisances and health hazards, but together they can have serious adverse effects and even kill a neighborhood. Moreover, none of these rules have ever been subject to the kind of analysis performed daily as a result of the OIRA process. Many studies have found that entrepreneurship is the life’s blood of urban regeneration, which means that new business regulations that stymie entrepreneurship can have particularly large costs.

Thus, urbanists should find the proposal promising.

There are countless examples of regulations that would most likely fail a cost-benefit analysis. From Walter Russell Mead’s blog this week:

LA’s housing might be the most expensive in the nation, but it isn’t the only place where regulations drive up housing and other costs. . . . In response, liberals often propose further redistributing resources to make the higher prices more bearable for lower-income families. But this is grabbing the wrong side of the stick: policymakers ought first to clear away the regulations squeezing the incomes of working families and then see what, if any, redistribution measures are necessary.

(This is what I was talking about last week regarding unintended consequences from regulations.) And here’s a recent example from France on how regulations can impede innovation and competition.

See our Thrive Washington paper, “Confronting Washington State’s Overlapping Regulatory Structures,” for similar ideas on making regulations work. In the paper, we made several recommendations, including the creation of a permanent task force to monitor legislative and gubernatorial rulemaking and watch for emerging conflicts. Also, Washington has a statute (RCW 34.05.328) that requires cost-benefit analyses of significant legislative rules from certain agencies. We recommended that it be strictly applied and enforced, and we recommended that regulatory agencies be required “to adopt only the ‘least burdensome rule’ which implements expressed legislative intent.”

As we noted then, “Regulations happen for a reason. They are designed to protect consumers, workers, citizens and the environment. The trick is stopping when new regulations add costs without adding benefits.”

One thought on “Making regulations work at the state level

  1. I support efforts to continuously review regulations (and govt programs and services) using good data to see if they are performing as promised. Thank you to the Council for its work on this. Hope that approach also applies to tax expenditures. As I recall in past WRC did not support including tax preferences in POG process. I realize there is (was?) a LEAP program that did something like that.

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