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Journal of Regulation and Social Costs Volume 2, Number 4 March 1993 Industry Self-Regulation.and Environmental Protection: An ‘Alternative to “Command-and-Control” Regulation (Revised) by Thomas A. Hemphill ‘The Impact of Recent Federal Regulations on Small Business Job Creation by Lowell Gallaway and Gary M, Anderson Hazard Analysis and Critical Control Points: The Quiet Revolution in Food Safety Assurance by Stuart Hardy Carbon Taxes - Can We Compete? by Eugene M. Trisko ‘Ten Thousand'Commandments: Regulatory Trends 1981-92 and the Prospects for Reform by Clyde Wayne Crews, Jr. Journal of Regulation and Social Costs Volume t Wenber a Waren tees Industry Self-Regulation and Environmental ‘Tue NATIONAL CHAMBER Protection: An Alternative to “Command. ai ‘FOUNDATION Control” Regulation (Revised) 5 | Robert H.Kriebe By ThomavA. Herphil Chetan Dr Richer L Lesher ‘The Impact of Recent Federal. Progen ‘Small Business Job Creation .. By Lowel ollssy and Gary M, Anderson Hazard Analysis and Critical Control Points: The Quiet Revolution in Food Safety ANBUTANCE cms 6 | ios 1 JOURNAL OF By Start rds 30 ‘an Socian costs | Carbon Taxes - Can We Compet 9 Dy DigeneM.Ttko abt A Raglan Ten Thousand Commandments: Regulatory Te armairng Trends 1981-92 and the Prospects for Reform ...105 | Manasine Biter | By Chae Rome Crew BOARD OF REVIEW won | Boalt Dte NOVRCON Crpertion ‘StH Hanke | Soh ip tely av Lines ater ote James te, mt ‘hen ira Su eonany ‘Thomas Ole Moore inn an cial oa sheared ses | Tora ae Me A Raglan, or, Jouran of Ropsltgn and Soil Cat 1618 18 SiruNW, Washington, DC 20052/ phone: (20) #53 6583 ee eee eter aural Reguttion and Social Cows Ten Thousand Commandments: Regulatory Trends 1981 - 92 and the Prospect for Reform! “Ifyou say that the purpose of the [CJounci fon Competitiveness] is really to slow the flow of regulations and keop them under control, think ‘you would have to say it has failed, because the flow of regulations has accelerated markedly” ‘James C. Miller I. December 1991 “This edition of the [twice-yearly Unified Agenda lyde Wayne Crews, Jr. of Federal Regulations] contains 4,186 entries _| is an Economist at Citizens from 59 federal departments and agencies.” fora Sound Boonom Foundation, «260,000. member retearch and ‘education organization located in Washington, D.C. Mark G. Schoenberg Regulatory Information Service Center April 1992 Introduction During the late 1970s and early 1980s, mounting concern about the economic effects of the federal regulatory burden spawned several reforms designed to reinvigorate the national economy while stemming inflationary pressures. Prominent among. | these initiatives were partial trucking, rail, and airline | deregulation, partial financial services deregulation, 105 Journal of Regulation and Social Cote relaxed enforcement of federal antitrust laws, and restraints on the imposition of federal paperwork. An increasingly controversial reform measure was the formalization of activist central regulatory review —a ty given to the Office of Information and Regulatory Affairs (OTRA) at the Office of Management ‘and Budget (OMB), an offi more powerful than ita predecessors, Created by the Paperwork Reduction Act of 1980, OTRA initially concentrated on reducing federal paperwork burdens imposed upon the private sector. ‘Subsequently, OMB's oversight authority —and expanded by President Reagan's 1981 (8.0, 12291 to encompass far greater portion ofthe regulatory lamentally, that expanded management .J OTRA ta ensure that the benefits of any ‘now major regulation outweighed its costs, where not probibited by statute, In that capacity, OIRA embodied aan important new experiment. Barlier efforts at regulatory review, such aa those conducted by the ‘and Price Stability, the Council of powers. These earlier groups could require regulatory coet analysia whore not statutorily prohibited, but they. could not enforce a net-benelit requirement for any’ tsven regulation, Agencies could, in the end, reject the counsel of the reviewers and procoed with ‘Reviewer appeals to the Pre: rare and unsatisfactory? Ps assorted regulatory ref dosado of the 19808 witnessed a desine in regulatory costs and in the amount of regulation inflicted upon the economy. Yet a notable increase in regulatory activity, hhas materialized over the past fow years, even taking into account the moratorium on now fedoral regulation ‘announced by President Bush in January 1992. ‘Ten Mhousond Commandment: Regulatory Trends 19812 ond the Prospects for Reform ‘The turning point came around 1986, Dollar costs of regulatory compliance, the annual number of Federal Register pages, the number of agency rules reviewed by OIRA, the number of major” rules those rules costing $100 million or rule documents, the number of 1980s, they both resumed their inerease in 1991. Two recent surges in particular — the Federal Register page {nerease and the jump in major regulations presented increases (as proxied by weighted Federal Register pages), economic performance (ax assessed by a as a proxy for regulation), but the tondeney ofthese variables to move in opposite directions may have vome significance, and deserves greater analysis. ‘Regulatory excesses could be better isolated regulatory review apparatus. Even ao, a8 regulation sew over the 1980s, the review efforts at OTRA — and. ‘more recently those at the President's Council on | Competitiveness, chaired by former Vice President Quayle — became increasingly handicapped by to0-narrow scope ited resources. Whatever the policies of President Clinton regarding regulatory review and reform, harnessing regulatory burdens will Ultimately require rejection of the anti-market A.B. Laffer, V.A. Canto & Associates found that whenever regulation performance appears to decline 107 earnal ef Regulation and Soil Costs eee eer eee - Number of Pages in the Federal Register Versus S&P S00/GNP ati ofS 500% GNP $1000 “SSP SOUGNP No. of Pages executive rogulatory review under a Rep) ‘administration. Non-executive-based regulatory constraints are Dismal Past Regulatory Experiences dispute between Congress probs iene and the executive branch. ‘The most frequently cited presentation of the atory burden is a 1992 paper by fessor Thomas D. Hopkins of the Rochester Institute of Technology. His study is a compilation of 108 Tin Thousand Commandments: Regulatory Tre Tree research efforts by other scholara combined with calculations and estimates based upon his own ‘extensive regulatory review experience at the Counell con Wage and Price Stablity* and as deputy director of IRA. Hopkins demonstrated that the groas cost of in 1990 was about $392 billion — ‘costs of government operations that al budget. He alao projected that ts would reach about $492 billion by the Hopkins has since updated those - At an August 1992 symposium on regulat held in Columbus, Ohio, he presented calculations that ‘pegged the current compliance bill for federal Because regulatory expenditures amount to roughly 8 percent of groae dome sin nearly every regulatory undertaking (although not necessarily for the supposedly intended beneficiaries or for the reasons intended), the ‘or societal benefits of individual programs ‘outweighed by costs. (Moreover, this “soc wealth transfers and rights of due process to be discussed later.) Consider the “social” downside of two sweeping environmental proposals so far dollars) to annual complianco expenditures while the 109 Jounal of Regulation and Soi Costs ‘Ten Phusand Commandment: Regulatory Tends 1981-92 ond the Prospects for Reform | eee ‘most likely value of benefite derived — including ‘agencies and departments gain—in terms of budget health benefits — will be only around $14 bllion.* tions, staffing, and political status —by the Similarly discouraging, the Environmental Protection breadth ofthe regulatory empires they oversee" rather ‘Agency (BPA) says the RCRA Amendments under than by regulating as a last resort after ‘consideration by Congress “could cost up to $46 billion the market have “failed.” Review recognizes that the | —_—— annually, while providing underlying menace of the regulatory stato is the very | ...the underlying menace same as the alleged menace of mat of the regulatory tate ——_— ‘The potential for “regulatory pork* can create compelling biases toward command-and- control measures, relatively low on the list of environmental priorities Researchers have demonstrated how regulations can often selectively, and even deliberately, benefit some groups of producers and regulatory ‘advocates at the expense of competitors and consumers, ‘This phenomenon occurs to varying degrees in Clean ‘ir logialation™ and in global warming proposals that promote command-and-eontrol rulea even where more ‘market-conscious alternatives are present and viable. ‘The potential for “regulatory pork" can create ling biases toward command-and-control sures since such rules have the double impact of (1) ting weaker competitors and thereby facilitati fe fon of greater for the winners, and (2) concealing that upatont taxes and foes obviounly cannot, Regulatory review has taken some steps toward control over such abu Rogulatory Roviow Generates Pro-Consumer Outcomes Centralized review ean help ensure rule benefits exeeed costs. Under the Reagan and Bush ‘sdministrations, centralized review represented the primary procedural check against uneconomic or {inequitable regulatory interference. The: strategy is likely to rotain some form of eent regulatory oversight. At roa, executive review formal, institutional acknowledgement of the fact that be externalized, or foisted uninvited uy citizens, and resources consumed beyond a “s optimal” level. Externalizing costa can be especially easy for agencies, which suffer little negative repercussions when a roquirement proves scientifically irrational. Unlike profit-making firms, bureaucracies face no economic incentive the costs oftheir “product” (regulations) since outside partios, typically private sector businesses and the consumers who buy thetr products, are obliged to absorb the brunt of their error. Agency turf-bullding is an obvious source of excessive regulation and the tendency to ignore benefit- cost concerns. Several studies have concluded that congressional influence ia also an important determinant of ageney conduct and regulatory outcomes, often to the advantage of favored interest at the expense of the broader economy." Congressional {influence can be used to strategically spawn requirements hard to change by executive branch 3s heel of benelit-coat- review as practiced over the last ecutive order rather than statute, | Teview is impotent in the face of atatutorily driven mandates, To the extent Congress requires ‘unnecessarily speedy statutory deadlines for new regulations, prohibits benefit-eoat analysie, creates loopholes that prevent the review of certain federal paperwork, or adopts rules that benefit selected special interests, regulatory review becomes impossible. “An {ron role in Washington,” reminds journalist Jonsthan Rauch, “is that regulators regulate and legislators costs can be externalized land resourees consumed beyond a “socially optiraat” level excessive regulation a urna of Regulation and Seat Cots ‘Ten Thousand Commandments: Regulatory Trende 1981-99 and the Propet for Refrm Tecan cost consumers ‘more to organize and prevent having a dollar away, ste to-simply accept the loss. 2 legiolato unless somebody stops them." Executive branch regulatory review ean monitor and restrain gency rulemakings created apart from or tatutory authority, but it cannot block beyo legislators who consciously or unconsciously act to circumvent external oversight. Centralized review may empower ‘maximize their own support by balancing the desires of | competing interest groups, whether these are producer ‘groups, consumer groups, or some combination of the ‘two. In a rogime without regulatory review, costs of ‘influencing laws are high since policy formation is scattered among many agencies and lawmakers. ‘hose members are often more tly hold a relative advantage in favorably positioned. For dispersed consumers, politcal organization eosts are higher and tendencies to free-ride on the efforts of others may dominate." Tt therefore can cost consumers more to organize and simply accept the loss. Consumers thereby become the | | “suppliers of the regulatory transfer.* Regulatory review may help level the playing field for consumer groups, however. Centralized review ‘increases the rate of return to lobbying for dispersed groups like consumers relative to that of concentrated ‘one entity ir expected benefits review) The poliey outcome is that “cemmias the reviewing entities) that are re captured by a single industry, and thus are more likely | ‘an short-circuit review, regulatory reviews response to consumers in its present form ie limited. Federal Rogister Growth Trends ‘The Federal Register ta the daily government record furnishing publie notice of all proposed and final regulations. Eyeballing Federal Register page counte is an extremely popular way of appraising the regulatory burden on the economy (as the Laffer/Canto correlation readily demonstrates), but itis not without its pitfalls, Much of the Register’s contents, such as administrative tions, add greatly toi Further, numerous blank pages can appear in the Register as a consequence of the Government Printing Office's imperfact anticipation of the number of pages, needed by the various agencies, Proceeding with eaution then, the Register chronicled explosive regulatory growth in the 1970 ‘and reached an 1 high of 87,012 pages in 1980, precipitously until 1985, when it atood at a 12-year low of 47,418. While Federal Register page counta remain below the 1980 high, concluding that the regulatory climbing since 1986, reaching 67,716 in 1991 before ropping to 62,919 in 1992. (See Figure 2) The 1991 page count was the second highest in the history of the ‘Register, representing a 26.9 pereent increase over a Figure 2. Annual Fedoral Register Page Counts are Rising 1980- 1991 Thousands of Pages 1990's 53,620 pages. The 1992 count, though lower than 1991, i till the highest level since 1981. In spite of enforced regulatory review since 1981, the decade of the 1980s ushered in more pages of regulations than any prior decade, as approximated by pages in the ‘Register, This is true even if the pre-review high-water ‘year 1980 is omitted. (See Figure 3, which shows 1980's pages in contrasting shade for comparison) And | ifthe first three years of the 1990s are a rea approximation of what isto come, the 1990s wil surpass the 1980s in pages of regulation, as Figure 3's projection shows. In fact, every indication is that 1993 kely to be more of the same; by February 3, 1999, the Federal Register had already hit the 7,000-page mark. In an effort to assert some measure of control over regulation, former Prosident Bush issued a m4 ‘ex Thousond Commandments: Regulatory Trende 18812 and the Prospects for Reform | | Figure 2. Fedoral Register Pages per Decade 1940s - 1990s | Thousands of Pages 471914 210.007 M2772 496.974 19408 1950819608 19708-19808 19908 ‘moratorium on January 28, 1992, during which agencies were to refrain from issuing non-essential new rales and instead, examine and reduce the burden of regulations already on the books. During day phase of the moratorium, then Vice President tated that the moratorium was part of the - change a mindset, change Estimates from the agencies during the 3! 90-daye projected ‘hat savings of $16-$20 Billion per year may be realized through the agencies exists to substantiate these claima. The ‘moratorium was extended an additional 120 days ot April 28, and was extended for the remainder of term August 20, 1992. It was abandoned with Bi in the White House. 118, Journal of Reasation and Social Costs In any ease, those who expected the moratorium to sire a considerably smaller version of the Federal Register in 1982 were disappointed. Although, arguably, moratorium-exempt deregulation. oriented jons to “foster economic growth” could account for some of the 1992 volume, Bush also specifically exemptod regulations addressing hazards that “posefed] an imminent danger to human health and safety.” Combined with the fact that regulation ‘can be largely driven by logislation rather than by discretionary agency rulemaking, thie exemption effectively neutralized the moratorium. To fact, it was ‘obvious by roughly mid-year that 1992 was to be ‘another record year for regulation in torms of Register length — despite the enthusiasm and controversy ‘surrounding the moratorium in its early months, In 1990 and 1991, mid-year (June far more atringent currently exist will be needed to restr burden, the regulatory Federal Regulations Reviewed by OIRA Total rules reviewed are at the highest level since 1982. Since OLRM‘ regulatory review responsibilities were inaugurated in 1981, the 50-plus federal departmenta and agencies have consistently submitted more than 2,000 proposed and final rules each year for review. As with Federal Register pages, low-tide was reached in 1986 when 2,007 rules were presented for review. (See Figure 5) A general upward trend since 1986 ‘Ten Thoutnd Cammandment: Regulatory Trends 1981-92 and the Prospect for Reform, Figure 4. 1992 Regulations Advance Despite Presidentlal Moratorium Mid-Year and Yoar-End Federal Ragister Page Counts, 1586 - 92 ‘Thousands of Pages 79.4 q2a05 78.835 69.293 HI Page Count, June 15 Page Count, Dec. 31 Sources: Regutory Program ofthe US, | final regulations OTRA reviewed in 1991 marked the highest count since 1982, and a 17.9 pereent increase over the 1990 count of 2,189, The growth in rules | Teviewed since the 1986 low parallels the Register, with || the 1901 count marking a 25.7 percent increase over ‘The number of “major” rules reviewed increased sharply in 1991. To ensure that “net social benefits” are maximized, B.O. 12291 required agencies perform detailed written benefit-cost evaluations of 1" rules. Major rules are defined rules. ‘The required written evaluations of major 7 ournat of Regulation and Socal Conte 500 2000 1500 there is no way of fnowing the full economic significance of any rule unless an RIA, or its ‘equivalent, is completed at the outeet, | Figure 5, Total Annual Number of Rules Reviewod by OIF All Departments and Agoncias, PRoposed and 2516-2368 called Regulatory Impact Anslyses (RIAs), are one of the primary devices OIRA uses to make its regulatory ssments, A knowledge problem that can create biases toward negligent analysis and over-regulation is immediately evident here: an agency's basing the preparation of an RIA on a finding of substantial ‘impact is backward. Excopt in cases where costs are so transparent or excessive that one can tall beforehand that the $100 million threshold will be exceeded, there is no way of knowing tho full esonomie significance of| ‘ny rule unless an RIA, or its equivalent, is completed at the outect. ‘This cart-before-the-horse approach to policy. Extensive economic analysis of rules more often than not simply romaine undone. In practice, those ‘Ten Thousand Commandment: Regulatory Trends 196-92 and the Propet for Reform -xperience the scrutiny of an RIA, have averaged ss than 4 percent of the total number of rules each year since 1981. (See Figure 6) Uncertainty prevails eta ofthe remaining 96 percent of rules departments and agencies stood at | ofthe years 1981, 1984, and 1985, '991 is 187 percent higher than 1985's 60 major rules, rely because of an unprecedented 73,2 percent jump from 1990's 82 major ral significant agency ruler ‘themselves aro largely fagmentary, non- comprehensive documents. Benefit calculations, Journal of Regulation and Soil Conte Despite the RIA requirement two-thirds of 1992's finalized major rules lacked benefit calculations. 120 Figure 6. Major Rules Reviewed by OIRA {Al Dopartments and Agoncies, Porposed and Final 1981 - 91 whether for health and safety concerns or for economic effects, are often entirely absent, even for approved major rules headed directly for finalization. Despite the RIA requirement for major regulations, two-thirds of 1992'e finalized major rules lacked benefit calculations. ‘The fiseal year 1992-88 Budget of the U.S. Government reports that during 1992, 57 new significant rulemakings were ‘in the Federal Register 3" inerease the compliance burden on the ctor by at least another $15 billion per year 1 to estimates provided by agency RIAs, although the actual burden is likely tobe far higher But most notable, the benefits" xo often touted by regulators and regulatory advocates are simply not Ten Thousand Commandmene Regulatory Trends 1981-98 andthe Prspct fr Reform of pollution reduced, bringing the total number of 1992 || major rules with quantified benefita to only 19, or 33 jim non-quantified "benefits" known" (there were 17 of ‘more accurate test resulta,” .nd “energy savings.” One factor that may explain why the benefits of these regulations were not presented (aside from agency turf- is increasingly clear that these calculations are not being made for even the most burdensome rules, ‘The most expensive of these 57 major rules further underscores regulatory reviews disconcerting the 10-year, $600 million, congreetionally ioned National Acid Precipitation Assessment study found no evidence of severe damage from acid rain. Yet Congress chose to ignore thie study in the deliberations preceding the Clean Ar Act Aeadline for the rule's final promulgation also blocked ‘any meaningful opportunity for OTRA to substantially review or encourage abandonment ofthe standards. commissioned National Acid Precipitation Assessment Program study found no evidence ‘of severe damage from ‘acid rain. Yet Congress ‘hose to ignore this study. 121 1 Journal of Regulation and Social Cote ‘Ten Thousand Camandmeni: Regulatory Dende 198188 ond he Papi fr Ref Disclosure of benefite and coats has ‘The number of final rule documents is deteriorated further since the fiacal-year 1999 Budgee 1, based upon “new require 8 to existing requirements, Program for 1993" lists 16 roles required by statute or Judicial deadline to be issued in final form in 1993. But this time, no accompanying coste and benefta are provided.” All the more ominous i the fact that the final rule documents pub April 1992-Mareh 1998 Regulatory Program (which was decreasing since a 1987 peak, In 1962, theve were never iagued to Congress until January 15,1998) | 1,526 ofthese final rule documents. The number increase in the Federal reports that 25 agencies are now at work on 389 | declined for three years, began rising in 1986, and Register. significant regulatory actions, Of these, 114 (30 peaked at 1607 in 1987. Final rule documents percent) are subject to statutory or judicial deadline, declined thereafter, dipping to 1,201 in 1990, But in eye likely o escape review. Fully 96 1991, the number rose 11.1 percent to 1,446 final rule icant regulatory actions come from the documents, party offsetting the de! Protection Agency alone (More will ‘The 1991 inereaso in final rule docu 3 about which agencies produce the most with that year's 26. Federal Register. i The 1991 increase in final Figure 7. Final Rule Documents Pubil ‘Now Requirements and Rovisions to Existing Roquiromonts 188: | Rogistor 140114484436, announcements and better represent regulations as finished “producta” But still, eaution is in order. So far, final rule data for the 1980s and 1990s are only incompletely summarized in the 1992-98 Regulatory | Program. However, some inferences can be drawn from | vided there. While the Regulatory 12 Journal of Regulation and Soin Conte | 14,777 finalized regulatory requirements between 1982 | information is now provided in final rule documenta Figure 8, Pages Devoted to Final Rule Document and 1991. ‘The increase in final rule documents for 1991 becomes more pronounced when page counts are considered. Tho estimated annual number of pages ‘that these final rules occupy in the Federal Register decreased since peaking in 1988, but lurched abead sharply in 1991. (See Figure 8) Data in the 1992-03 Regulatory Program® can be used toes ate annual stood at 7,973; the number of pages then peak 10,500 in 1988. Despite decreasing to 9,459 pages in the 1990 Register, final rule pages lurched 38.1 percent ‘to 19,060 pagea between 1990 and 1991, which i 63.8 | percent higher than 1986s low. While more | roOoOooaeaeemuae see ‘Tew Thousand Commandment: Regulater Trends 183-92 end the Prospects for Reform ‘han in years past, some portion of thi incroaee can be information versus increased regulation, would be justified. Average compliance costs of ‘to be rising. Those agencies that publi cost estimates are the exception rather than the rule, but inferences can be drawn about average rule coats ‘based upon agency-specific rule flows and the rare cost ‘estimates that do exist. Consider the case of EPA. By ‘that agency's own estimates, total yearly compliance costs imposed by the agency's rules increased 65.5 percent between 1981 and 1980, from $60.5 billion to $110.2 billion (in 1986 dollars). These costs represented an inerease in proportion of GNP from 1.62 percent to 2.14 percent. Furthermore, relative to the rest of the regulatory enterprise, environmental regulation's share of all regulatory coats grew from 9 percent to 23 pereent of the total regulatory burden between 1977 and 1988 Yet EPA's cost increases took place despite a 76.4 percent decrease in the from 784 in 1981 to only 173 in 1990.5 {implementation end impacts of pro-1981 ‘and rules are euroly driving some ofthese cost ‘nereases, the implication remains that the average cost of new regulations issued has increased considerably during the decade of OTRA revi ‘number of final rule documents p agencies had been deer regulatory caste ro9e, the average cost of federal rules is increasing, There appear to be legitimate grounds for further anal cost trends at other health and safety agencies, but 80 hhave major implications for the regulatory debate, environmental regulation’s share ofall regulatory coste grew from 9 percent 10 23 percent of the total regulatory burden between 197 and 1988. Yournalof Regulation ond Sova Costs — oe eee luable recourse ‘The Regulatory Program for examining the state of regulation in torme of rules | a hefty, twice yearly “summary” document (1,285 pages ‘not counting the index) compiled by the Regulatory Information Service Center that surveys regulatory activites planned for the following 12 months. As noted at the outset ofthis paper, the April 30, 1992 ‘edition of the Unified Agenda contains 4,186 entries from 59 federal departments and agencies. The etober 1992 edition contains 4,809 entries. That representative because many of the rules ‘October edition due to the regulatory moratorium” Federal Agoncy Employment Status Employment at the 18 most active rule spendulum” pattern exhibited by Federal Register employment £993,000 in 1982 and 998,000 in 19% reached 1,094,900, a level 7.7 pereent higher than before £.0. 12291 was issued in 1981, and 9.7 pereont higher than in 1986. Since 1986, roughly the turning | point at which regulations renewed thelr advance, {97,000 new non-defense employees have boon added at | the 18 most active rulemaking departments and agencies. ‘Ten Thoutond Commandment: Regulatory Trends 194-92 and the Propet for Reform Figure 9. Federal Cl 18 Most Active Rule-Pr 1046.71 030,41080.2 224 016.8 992.6 1008.81005.51002.4 997.7 1014. agencies and departments are the “Taces” behind the general surge? Fully in accord with Pareto's unofficial law of nature, roughly 20 percent of the federal agencies account for 80 percent of the rules reviewed by OIRA each year. More specifically, and for example, tho top ton rule-producing agencies in 1990 comprised 19 percent of the 53 agencies whose activities were monitored that year. They also accounted for 81.5 percent ofthe total number of rules issued, This 17 Journal of Regulation ond Seta! Cote ‘general relationship was equally valid back in 1981, ‘when the top ten's share of rules was 86.1 percent. Even more revealing, the top five rule producing agencies in 1990 —Health and Human ‘the Environmental Protection Agency — accounted for 62.9 percent of the total number of | ear. The top five accounted for soroughly 20 percent of | the total in 1981. (See Figure 19) Health and Human the federa Services, which waa not in the top five in 1981, ‘account for 80 percent of | increased in prominence over the decade while the ‘the rules reviewed by | Department of the Interior dropped aside, While the O1RA each year. proportion of total rulemaking declined over the decade percent of all major rules reviewed in 1981, and increased their share to 76.8 percent in 1990. Concentration in rules reviewed is useful for gaining a loose perspective on which agencies are the ‘engines of regulation. One must be cautious (as with ‘unwarranted inferences about reg concentration. For example, ia umber of rules reviewed dramat from 26.5 percent in 1981 to only 8.1 percent in 1990 — ‘yet the casts EPA imposes are rising in both absolute ‘and relative terms. (See Figure 10) Note that concentration in overall rules has decreased while decade. Concentration isa serviceabl never be wholly descriptive of regulatory ‘beeause all rules do not have equal im from EPA are not necessarily compar | equivalent number of rules from the Oecapationl ‘Ten Phusand Commandments: Regulatory Trends 1881-2 and the Prospects or Reform Figure 10. The Top Five Agencles Account for Most OIRA Includes All Proposed and Final Rules Shown in Percentages (Snapshot of 1981 and 1990) ‘oer 1990 Reviews: 2,139 Et 1981 Reviews: 2,765 {quickly be squeezed out of position in the top five, Beyond Regulatory Review — Overhauling the Process Regulatory review as conducted by recent | ‘administrations has been unequal to the taak of rolling ourna of Regulation and Social Cote nowledge about their benefits. back the regulatory entorprise. What then are the prospects for reform under the new Clinton adm knowledge about their ‘management ofthe regulatory enterprise calls for changes both internal and external to the executive branch's review functions, ‘agencies must relinquish the power to regulate with demonstrating a genuine need for a rule, a power which ‘now unquestionably exists, While lative handful of agencies are responsible for the bulk of new regulatory burdes ‘Meaningful executive or legislative regulatory reforms must carefully heed the rediseributive nature of regulation. Such reforms should: jovernment’s solution may have unintended tan the market gedly being corrected by ‘en Thousond Commandment: Reglolary Trends 1961-82 and he Propt for Reform + emphasize the efficacy of property rights assignment in the preservation of resources and the elimination of externalities; + recognize the desis alternatives over c + attempt to increase agency co secure more informative risk assessments; and ize governments exploitation of regulation as.a means of escaping the necessity to “tax-and-spend” openly, Greater force of law could be marshalled behind benefit-cost analysis, though it i @ highly imperfect technique subject to manipulation, and therefore one in benefit-cost analysis, Optimally binding regulatory budget should be enacted since it would create {incentives that indirectly promote many of these incremental reforms. Any one, or combination, of these measures would tend to promote the cost-effective ‘outcomes which have beon the goal of regulatory review. Some of them — particularly the regulatory budget — would tend to decentralize the review process, yot they would likely preserve a coordinating ‘and cost-monitoring role for central reviewers like oma. ‘Changes within OIRA increasing the resources devoted to regulatory review, OTRA management might shiR personnel and funds to ‘concentrate on 10 key agencies (or some subset of the — | Optimatty, a binding regulatory budget should be enacted... 1st Journal of Regulation ant Sota! Coste Costs of minor rules ean easily be downplayed since explicit analysis is not required and review ia ceccordingly les rigorous. 192 | greater assurance that more complete benefit-cost 10, such as the top five), and perhaps acquire additional help by “dotailing,” or borrowing, omployeos from the federal agencies artments, However, since OTRA already grants special attention to maj rules, and since the top few agencies characteris ‘account for most major rules, OTRA already concentrates its resources for the most part, so this is a limited or even naive option. Alternatively, economists at the targeted agencies whose job it isto assess ‘benefits and costs of regulations and propare RIAs | could be increased by moving economics divisions or | personnel out of other leas active agencies. This could amplify the scrutiny afforded to new regulations without expanding the resources at OMB." Even ‘analyses were being carried out, ‘ignored. Recall that minor rules percent of the absolute number of re Even during the Cs {$100 million major permits the Director of OMB to order rules to be ‘treated as major even when, ‘administration, it could be invoked more liberally to Ten Thousand Commandments: Regalatry Tends 181-90 ond the Prospect for Reform | force agencies to demonstrate, on paper, that all rules satisfy a minimal benefit cost calculus. On the other hand, future reviewers should recognize Hopkins’s concern that some aggressive agencies may strategically adapt their behavior to the likelihood of review, and present major rules larger ‘than what they would actually 1 t acceptin order to preserve room for negotiation and give the ‘Since benefit eale 1992's expected final major rules were absent, adoption ‘and enjoyment of the moral high ground by regulators gained from B.0. 12291. Future executive orders can ‘also require greater regulatory scruti ournal of Regulation and Social Cuts ‘Common unite of measurement for benefits and costs should be established. No ive OIRA or any subsequent review tive benefit cost analysis ry to everyone. Do benefits outweigh costa if Aepend upon the accepted role of government, the extent of other risks, what alternatives the resources could have been used for, the wealth ofthe nation, the ‘means of financing the reduction in risk, ‘effectiveness, the source of the hazard, and many more | factors. These complexities partly explain agencies’ indifference to rigorously ealeulating benefits beyond a ‘minimum quantitative assessme rtones of such questions, of expressing the nuances of relative risks to the public, have kept the eritics of regulation on the defensive, Tie posture naturally benefits those who favor greater regulation even when, 8 are highly dubious. Translating benefits to common units of measurement, however, the playing field and underscore relative agency effectiveness, ippreciate. The abstract notion that experienced primarily internally — as tion — by each affected individual and ‘Ten Thousond Commandment Regualry Trends 1961.2 andthe Propet for Reform are therefore not subjoct to measurement by the ecisionmaker, and the facts th ‘are created by the decision are impoasl ‘communicate, let alone translate into coherent Astempta to approach the necessary precision will not be esteemed by regulators, who ‘engineering or compliance costa ae sufficiently Aescriptive ofthe burdens imposed by rules. Even #0, ‘securing universal recognition among regulators ofthe legitimacy of benefit-cost tradeoffs, and of the need to communicate benefits and ‘common terminology to. lay public would be a giant atep forward. At Present, many policymakers do not accept such notions in rulemaking at all, nr do they ace a preasing need to balance their rules against those of other agencies. Common units of me ‘approximated, by ether ‘comparable neross agenci benefits and costs in term: saved or lost. Benefits could be framed in terms of “life- of members of an affected population, about 70 years, Brian Mannix motional way of comprehending a complex reality at the same time it more accurately presente : ‘against those of other agencies, Journal of Regulation and Seca Cote Regalolry Trends 198-92 ond the Propet for Reform comparisons and selections among rogulatory alternatives, even across agencies, easier and more meaningful. Ultimately, the p sake betterinformed regulatory choice through ita lected representatives. Other methods of making forced to forego preventive food, safety apparatus like extinguishers, cara with air bags, and adequate ‘more deaths than it provents. While the “break-even” point may be open to intense debate, the concept is not. 1e Bush regulatory morato 1992 nove spprocebly or permanently red hard evidence of Adaitionally, topping. “weeding” is a much me appreciated by sustained program, ‘books requires following the same Inborious public ‘notice and comment procedures required of a new rule, “Going back and reviewing stu is as hard aa drafting regulations." Short of a moratorium, instituting some form of mandatory periodic review at the agencies is a becoming bogged down in scentifie leputes over risk assessment? Is the reported data being used at all? ‘Where can risk tolerances be raised? Does the rule justify the healt ‘imposes (such as the health costs of advertising restrictions on some badly needed rules, the problems of agency selfpolicing will peraist, and the inability to alter statutory mandatas still could lead to legislative “gaming.” An energetic executive could lower RIA thresholds and “sunset” non-statutory rules. Even without wading hip-deep into the regulatory process by reinstating a regulatory moratorium or dovising criteria for a mandatory periodic review, to a limited extent, the president could automatically by lowering the threshold at which written Regulatory Impact Analyses are required. As shown, the current {$100 million threshold translates into written analysis President Clinton can set certain standards by which agencies routinely ‘evaluate outstanding rules. 1st Jownal of Regulation and Sota Coste Rules failing a benefit cost teat on the second go- round or rules that Become outdated would beautomatically eliminated. Itisa policy rather than require that risks be expressed by agencies as best estimates rather than entirely a9 worst: ase assumptions, for only a handful of rules. More rules would be Drought within that reviow umbrella simply by lowering tho threshold to $50 million, $2 costs and especially benefits are currently computed in .proving the calculation and presentation of tolerance is appropriate in a given circumstance ‘as whether a risk of one in million or one i reasonable). Science merely describes the level hhazard; it does not reveal or spec reductble risks a society ‘example, so long as pul policymakers should rather than entirely as worst-cas Focusing on the latter ea concealing probable risks while emphasizing less likely {Tex Thousand Commandments: Realoary rend 196-82 and the Propet for Reform Logislative initiatives Any of the executive-initiated process reforms ‘covered above could be implemented with greater effect such as sunsetting requirements and a moratorium or periodic regulatory housecleaning ebviously would have far more impact a logislativo actions. Other eritial legislative measures that would enhance the executive successor) and reinforcing the Paperwork Reduction Act by closing loopholes that allow agencies enactment ofa regulatory budget that would cap the twtal amount of regulatory compliance coats that process — the most powerful regulatory policing tools the Congress can require short of abolishing preemptive regulation altogether. Benefit-cost standards with due process or “takings” provisions for all new regulations ‘Measures such a8 aunsetting requirements ‘and a moratorium or periodic regulatory housecleaning obviously would have far more impact as legislative ‘actions. Journal ef Regulation and Social Coste | externally observable in any meaningful sense — will always elude the best intentions of any third-party governmental decision-maker, Arbitrarily high ‘intensities assigned to benefits experienced or assumed benefits can theoretically make any proposed regulation viable if costs are not taken seriously, which ‘is exactly what has been happoning to major rules under B.0, 12291, Benefiteost analysis that focuses on societal not benefita alone, auc work to gain benefita for itaelf by forcing a few unfortunates to shoulder regulatory costs, A benefit- cost standard that systematically can impose the entire ‘The net public benefit standard, then — the goal of benefit-cost as currently construed — is in no way synonymous with fairness, but representa @ crude form of nearsighted utilitarianism, or a policy of “greatest good for the greatest number,” which must be carefully guarded against. The resulting taking of private resources without compensation ean be one of the more pernicious aspects of regulation, whether it occurs aa wealth transfers between competing interest ‘roups or as outright losses to individuals and society Compensation for property owners in appropriate circumstances is not only fair; tempers knee-jerk regulation by requiring regulatory advocates to share in the costa of their demands rather than shifting all those costs to others. Compensation should be a core component of any enhanced benefit-cost standard. Ten Thousand Commandment: Reulatry Tends 1981-92 and the Propet fr Reform Annotable example ofthe compensation principle in action is the efforts ofthe group Defenders ‘of Wildlife to proserve wolves on Western ranches by paying $5,000 to landowners who successfully rear wolf ups on their property.” Another example is Iinois's proposed Cash for Clunkers program, whieh allows firms to delay certain afr pollution controle when they purchase pro-1980 automobiles from their owners and junk them. Such old cars, while they account for only 10 percent of the road fleet, generate an eatimated 30 percent of auto emissions." With little abstraction, similar componsation or buyback principles ean be tailored to preservation of wetlands, spotted owls, and ‘tm numerous other ecological concerns A regulatory budget that statutorily prohibits input or product bane should be ‘enacted. A comprehensive regulatory budget would probably be the single moat effective mechanism for inaging the regulatory enterprise, because it would, it the total amount of regulatory costs imposed upon the economy and perhaps indirectly force agencies to the process. The weightiosteriticiam loveled againet ‘he regulatory budget — interestingly a criticiam most often heard from advocates of regulatory reform — is that the budget’s compliance coat calculations would become intractable. How would we know that an agency is within its budget? (Compliance coat allowances would presumably be based upon the compared to by critics? Airtight benefit-coat an 140 ua Journal of Regulation and Socio Coste Agencies must be permitted only to set standards for effective exponurs in given instances where risks are resent, rarely should agencies have the ability toban outright. 1 *perfeet” version of the current review program would necessitate separate cost and benefit calculations for ‘every single rule. Budget cost information would be far easier to manage. Moreover, agency incentives to hide or understate compliance costs by simply banning products or inputs ean be eliminated by prohibiting agencies from banning altogether, except in the most. ‘There is abundant reason for euch reatraint on agencies. An age notomniscient. The mere fact 1g context of knowledge an agency “think” of a way to render a certain ‘input, or product safer does not preclude the -above-tolerable level. Agencies’ ‘the stealth force behind such current initiatives as toxics uso reduction, source reduction, pollution prevention, and “non-uso" values. ‘Regulatory reformers stand to lose a major war if they ive posture on this matter. domly to set standards for Instances whore risks are do not assume an ‘Agencies must be perm effeetive exposure in gi present, rarely shoul ‘outright; there are no non-hazardous substances under the stn.” and admitting that a rule has no benefits, regulatory budget, agencies would concentrate on properly assessing the costs of their initiatives (though, it would be to thefr advantage to monitor benetite to keep their alloted budget from being revoked or benefits would automatically eut ageney workloads (conceivably) by up to half that required of them under the alternative of a hyperatringent benefit-cost regime, ‘This frees agency resources to focus on keeping costa within budget and selecting only the most urgent targets for regulation. ‘The task of allocating the compliance costs that 1 given agency or department could impose within the strictures of its individual budget would necessarily competitive endeavor. Since agencies have regulatory budget would be the“ saved” ata given agency. The caleulation of euch figures by outsiders for the purpose of erose-agency ‘comparisons would likely become fixtures of public health and public poliey literature. These findings ay would fuel a competitive arena in which regulatory “benefite” are personnel rather than primarily the agency. Pressure ‘would be placed on an agency to save lives at low cost or have its budget transferred to another agency that ‘ean do better with the same resourees, Put simply, a regulatory budget would force health and safety agencies to compote with one another on the most another agency's rules do. Ideally, the overall regulatory budget (say as a percentage of GDP, for ‘Ten Mousand Commandment: Regulatry Trends 1981-92 end the Prospect fo Reform ua Eee ural of Regulation ond Seca Cote to another agency. Conclusion ‘The regulatory histor totaling mgs en tal moratorium, Costs of regulation are up efits are more ambiguous (or conspicuously Final rule documents, though they had i in the late 1980s, reflect increased {Tex Thousand Conmandments:Raglatry Trends 198182 and the Propet fr Reform regulatory activity, And, ageney employment up Any: are mounting without any guarantee of concurrent benefits: in 1992 alone, 57 now major regul ‘expected tobe finalized. agency eatim ‘benefits to health are “known” only 28 percent of | them, and benefits of any kind “known” for enly 33 pereent. declining economic regulation in some sectors. Yet ‘environmental and health and safety regulations — But, an improved regulatory review process in the ‘xceutive branch constraints on what. ‘unmanaged process, fundamental in their recognition ofthe recent regime's failures, and therefore far more politically contentious, ‘institutional changes that tightly epecfy the purpose ‘and reach of regulation while preventing ‘uncompensated wealth transfers away from non- negligent parties. Regulatory reform, as opposed to tinkering, will require a perhaps unprecedentod —_—__. suthese trends point to a regulatory process the itself i in need of greater regulation. Jounal of Regulation and Social Cote ‘Ten Thowsand Commandmants Reguleory Trends 1 he Prospect for Refrm Endnotes 2 Thin ei reminicent of Harald Pleming, Tex Thousand 2 See for example, Robert Crandall, “The Clean Air At a Twenty? Commandmenta’A Stary ofthe Antitrant Lor, Now York: ‘Journal of Regdation ond Soil Cots, Volant 3, Namiber 1. rence Hal, 1051. Walls the sbjet mater has hanged, September 1980. 7 ‘evodain repletion renew ite appropriateness. * quoted in Tatts of Relations” Pata in the Orange County Tegutr,Wriday, Decor 27, 1981 * Chri Debuts, “Coostrnning Regulater Cet, Part One:The ‘White House Review Program? Regulation, JanuaryPebronry 1880, 9p IS and 20 A.B lathe XA Cat mining Rey BS. Conn are presotadn 1888 ler * ied for Monitoring Federal Regulations Continues, Quale Saye,” Daily Report for Bucusiver, Buren of ater Alcs, Asgoet, 10,1552 748, * 1968 ODP date rm Esonomis Report of the President, Pbraacy 1992, £992 Lli'%4900. blion = 08 Journal of Regulation and Sea! Cots Ten Theusone Commandments Regulatory Trends 181-92 andthe Prespcts er Referm ‘Bush to Ratand Rogultory Mortoriom for 90 Daye of Longe, Daily Report fo Beecutces, Boros of 1882,» A Fact Sheet onthe Presents Regultory efor Inia, Toe ‘White Haase, Ari 29,190, 9. % “Memersnt fo Cartan Department and Agony Heads, © summaviand ia “Bxacotive Order No, 1201: Anal Report far 1880? Regulatary Program ofthe Unlied States Government, Append Vs 70, * -Rafoing Regulation and Managing Risk Reduction” Budget of ‘he Unled States Government for Fiscal Yeor 1993, Fart One 9p. rto8 His! Det nd Aerator the Pare Seer) 1983, pp leis. 1990.99 Regulatory Program of the Unie State Government, “Introduction p36 ‘tude ana componet offal rue pages (although there may ‘some cnreladon wide love other fn] rule danrmenta % Aan Cala, neirouentalIvetinents: The Cost of Clean Enuronment,A Summary, EPA-13012.00-08, December 1290, 1961, pv. Seo aso Chris DeMth etc 3 above, p rene De weme cancer, Buchanan, Cast ond Choice. pp 3850, fran impertant eripton ef the nbjeciviy of ota 148 49 urna of Regulation and Social Cote einen eee dames. Mile IT and Philip Mink, “The Tak of the Oetapoe: An "Arvo for Deroplation Ply Revie, Sommer 1992, pp 4-12. Try Le Anderton, “Welvenia he Marble” Wall Strat Journal 1988 “+ suvenuo Swann, “Slate Program Geta Ie Boater OT Road? (Chnag Tribune, Grab 29, 199, Seton 2, 2 snshetancer —nuch aa eofee and celery — are often many ties ‘Siler than nape manmade earenogens oe Lawrence J, Whit, “Tra ia Regulatory Bodeting” ‘egulation, Marci April 180, pp 48.