Why All the 'Heat' Over Regulatory Reform?
SOMETIMES it becomes necessary to remind our fellow Americans that economists breathe the same air and drink the same water as real people. Sadly, that course of action now seems necessary as the debate over regulatory reform heats up, and ''heat'' is the correct term to use in describing recent events.
A bit of explanation is necessary for understanding why the work of staid academic economists is getting caught in a bitter political crossfire. The place to begin is the phenomenon that started it all, the rapidly growing array of regulation administered by government in the United States. As would be expected, those subject to regulation believe there is too much of it, while the proponents of regulation believe that, at least in this case, more is better than less.
In these circumstances, economists responded in what we considered to be a fairly neutral manner. Yes, we had the temerity to suggest that regulators be required to weigh the advantages and disadvantages before they issue a new regulation. Thus, efficiently crafted rules - those whose benefits exceed their costs - would get a green light. Those other regulations - whose costs are greater than their benefits - would be sent back for redrafting.
A certain amount of criticism of this approach is to be expected; it may even be inevitable. Advocates of bigger government naturally resent a methodology which questions their good intentions by suggesting that some of the proposed expansions of the public sector might not be worth doing. Likewise, some libertarians are extremely suspicious of an analytical approach that could give a go-ahead to some proposed expansion of governmental power. The economist's response is that benefit-cost analysis is, at least in principle, an unbiased method of appraising proposed federal activities.
Moreover, by executive order, benefit-cost analysis has been promulgated by every recent president from Gerald Ford to Bill Clinton.
But these philosophical considerations carry little weight with those who oppose the legislation now being considered by Congress to reform the regulatory process. Rather, the effort to legislate benefit-cost analysis has been greeted with emotional outbursts.
Those of us trying to introduce some economic rationality into the regulatory process are accused of attempting to ''gut'' environmental protection, food safety, workplace standards, etc. One such attack comes from David Kessler, head of the Food and Drug Administration, who charges, ''these proposals are an assault on 40 years of consumer protection.''
It is not apparent why the defenders of the status quo react so vehemently. Do they really believe that their pet programs are beyond criticism? Are they really oblivious to the economic burdens that they have been blithely imposing on consumers and employees? Or can it be that they are afraid that the current array of federal regulation is so inefficient that many of those rules would flunk the simplest benefit-cost test?
Mr. Kessler and other regulatory advocates finesse the consumer concern by describing a caricature of the regulatory process which pits enlightened regulators against greedy businesses. This convenient dichotomy overlooks the fact that much regulation extends to federal, state, and local governments as well as to nonprofit institutions. Indeed, some of the very worst polluters in the United States are installations of the Departments of Defense and Energy. Some of the most bitter battles over workplace regulation are being waged in nonprofit organizations.
But most fundamentally, staunch defenders of the status quo in regulation ignore the painful fact that the consumer is the ultimate recipient of regulatory benefits as well as the ultimate source of payment for the costs of government regulation. It is only fitting that both sides of the equation be carefully considered before government promulgates more regulation.
The public interest is not served by taking a closed-minded attitude in favor of either more regulation or less. Rather, the sensible course is to adopt a more efficient and effective response to the public's concern for a healthier environment and safer workplaces.