Risk Regulation at Risk: Restoring a Pragmatic Approach

Risk Regulation at Risk: Restoring a Pragmatic Approach

Page, Talbot

Sidney A. Shapiro and Robert L. Glicksman. Risk Regulation at Risk: Restoring a Pragmatic Approach Stanford University Press 2.88 pages 2003 ISBN 080474 $59.35 cloth

This book is about environmental, health and safety regulation. The first “risk” in the title comes from the common purpose of regulation in reducing “human and environmental injury before it occurs” (p xi) by reducing their risks-“risk regulation” is the authors’ shorthand for “environmental, health and safety regulation.” The second “risk” in the title comes from the authors’ central concern that this regulation, developed mainly in the 1960s and 1970s, is itself at risk. The authors discuss at length the increasing criticism of risk regulation and the increasing acceptance of this criticism. The authors counterargue that the present risk regulation, which is mainly command and control, is not “excessive or irrational,” as the critics claim, and that the main tool of the critics, cost-benefit analysis, is inappropriate. This much will be familiar to many readers.

The authors go further to offer two contributions to the ongoing regulatory debates. First, they offer a diagnosis of why risk regulation is losing the battle and second they suggest a way that risk regulation can be better defended and improved. Their diagnosis and possible remedy is fresh, interesting, and thought provoking. In the authors’ diagnosis, the critics have an advantage of a unified philosophical perspective, utilitarianism, and a quantitative analytic tool that derives from this perspective, namely cost-benefit analysis (CBA). There is little doubt that CBA has been used advantageously by critics of regulation. Risk regulation abounds in numbers, numbers carry weight, regulators need numbers to define how much or how little the regulation should be, CBA provides numbers, and many people agree that a regulation should have benefits that exceed the costs. It is hard to beat a number without producing another number, or at least making an argument why the number is incorrect or inappropriate. Thus an argument against CBA, or a particular number in CBA, tends to draw the defenders of risk regulation into the intricacies of CBA. All this takes time and resources, and this expenditure results in less regulation.

It is less obvious why something as abstract as utilitarian philosophy would have much effect on regulatory debates. But the authors suggest that the critics’ philosophic perspective makes these critiques more coherent and systemic while risk regulation, lacking a unified philosophic perspective, is less coherent and more vulnerable to attack. Just as it is hard to beat a number without a number, it is hard to beat a philosophy without having another (better) philosophy. And what philosophic perspective would the authors offer as a better replacement? The pragmatism of William James, John Dewey, and Oliver Wendell Holmes.

On the face of it, pragmatism seems an unlikely prospect. The administrative law of risk regulation shares a hodge-podge quality with tort law, which Prosser called an “impenetrable jungle.” Could pragmatism tame the jungle, give risk regulation coherence, and fend off the attacks of the utilitarian critics? After all, pragmatism is out of fashion and unsystematic.

But it turns out that pragmatism is making a comeback. Shapiro and Glicksman point out that Daniel Farber has used this philosophic perspective as a guide to judicial review. Shapiro and Glicksman extend the application to environmental, health and safety regulation. In this way the book is fresh.

As the authors explain, pragmatism has characteristics that fit the nature of risk regulation problems. In pragmatism, knowledge is provisional, and comes from experience, discussion, and experimental testing. Pragmatism is a consequentialist philosophy, where the “cash value” of an idea or policy alternative is determined by its practical results. The world is full of uncertainty, and one does better by owning up to it. We live in a world of bounded rationality, where full knowledge may not be possible, and decisions must be made under uncertainty. There are multiple goals, and it is important to strike a balance between them, even when there is no perfect way of doing so. In our pluralistic world, tolerance is an important social goal, and transparency and openness are important in government decisionmaking, and especially important in risk regulation, where there are likely to be multiple goals, conflicting interests, and high levels of uncertainty. This brief list, while not doing justice to the discussion in the book, nonetheless suggests a coherent view.

Much of the book is taken up with a large number of short examples in administrative law where the application of CBA seems inconsistent with these tenants of pragmatism. The examples also illustrate cases where CBA is not mandated or mandated against in the legislation but is required by the regulatory agency anyway. The authors find that CBA, by focusing solely on efficiency, neglects other social goals, such as fairness. The authors find that cost-benefit analysts often assume more rationality than is realistic in a world of bounded rationality; uncertainties are mistreated, and transparency and openness shortchanged.

The authors include examples of risk regulation they find consistent with a perspective of pragmatism and other examples inconsistent. One of the latter cases inconsistent with pragmatism is Corrosion Proof Fittings, in which EPA banned asbestos products under the Toxic Substances Control Act (TSCA). The Fifth Circuit Court of Appeals decided against EPA partly on the grounds that “EPA failed to demonstrate that the adverse effects of commercial substitutes for the banned products would not exceed those attributable to continued use of the banned products, even though EPA explicitly indicated that, given the known dangers of asbestos exposure, it was unwilling to defer the ban pending the availability of more information about the risks of exposures to likely substitutes” (p 199). The court’s requirement places a heavy burden on CBA, especially as CBA was not required in the original TSCA. (The judgment seems a little like voiding a speeding ticket on the grounds that the policemen failed to first demonstrate that slowing down the speeding driver might not create a space for an even faster car.) In any case, the court’s requirement appears inconsistent with the tenet of bounded rationality. Shapiro and Glicksman suggest that this judgment was the final straw that led EPA to abandon further use of TSCA altogether, which in turn suggests a pretty low “cash value” of the court’s decision.

A problem with the philosophic perspective of pragmatism, as discussed in the book, is that it is expressed as general principles (I called them tenets, the authors call them themes). But the principles need to be made more specific to guide policy decisions and judicial review. To see the non-specificity, let’s see if we can apply the general principles to CBA. In CBA knowledge is provisional and uncertain. A good cost-benefit study will carefully lay out the uncertainties, undertake sensitivity analyses, and adjust to new information. CBA is consequential, and the value of a policy alternative is defined by the predicted results of the alternative. Good analysts will apply CBA to CBA itself, finding that CBA should not be carried too far, because of the increasing costs of information and the decreasing returns in obtaining a more refined decision. Good analysts understand that when there is much uncertainty, which is nearly always the case, decision making should be done without heroic attempts to resolve every uncertainty (thus understanding the idea of bounded rationality). Good analysts agree that there are multiple goals, so that CBA, which focuses on efficiency, should be just one ingredient of the decision process, and one that is not too time and resource consuming. Good cost-benefit analysts will realize that transparency and openness are important procedural goals, and will work towards these goals, with varying success.

This brief sketch depends a lot on a “good analyst,” but the point is that a good CBA shares with traditional command-and-control regulation some of the perspective of pragmatism. This idea goes beyond the book itself but is an example of how the book is thought provoking. It suggests, pragmatically, we go back and rethink the initial diagnosis. Instead of CBA being the principal villain, it may be a symptom of larger diseases. Perhaps the real threats to traditional, command-and-control risk regulation come from a free-market ideology that minimizes environmental, health and safety problems because they do not fit nicely into a free-market-perfectly competitive world view. Perhaps the threatened rollbacks of risk regulation come from the larger deregulation movement, which started with rollbacks of “economic regulation” (airlines, banking, etc.) and then spread to environmental, health and safety regulation.

With this diagnosis, the free-market animus is the deeper source, and CBA is a convenient tool for it. In this interpretation, CBA is a way of “choking the beast.” I hasten to add that there are plenty of economists who believe environmental, health and safety problems are serious problems and substantial regulation is necessary because of market failures.

Thinking of the free-market animus reminds us of when unregulated free markets were called “laissez-faire.” This was in the 1880-1910 period, the very time that pragmatism developed. It was also a time that the old verities were shaken. The cultural historian Louis Menand says that the Civil War and Darwin’s Origin of Species were the greatest influences on pragmatism. After seeing first-hand the horrors of the Civil War, Holmes could no longer rely on absolutes; instead he saw them leading to violence. It seems that when the verities are shaken, some move away from absolutes (like the pragmatists) and some cling to the absolutes ever more strongly. This polarization is part of our own times, so maybe pragmatism has a chance. But Menand thinks that the post-modern, relativistic form of pragmatism that was fashionable in the 1990s has already died in 9/11, because things are now too serious for relativism. The subtitle of Shapiro and Glicksman’s book is restoring a pragmatic approach. This restoration does not look like an easy task, but still one well worth considering. Perhaps a pragmatic form more grounded in the sciences still has a chance.

I have a few concerns with the book which is chopped up into many little sections, in writing that lacks color. This gives a feeling that the book is not really building as it goes along, but it is really worth reading. The authors write about “incentive-based regulatory instruments” in contrast with other forms of regulation. But to economists, all regulation is incentive based. Even the old style command-and-control, with its threatened fines, bans and plant shutdowns, is incentive based. The more constructive question is which incentives work better in the alternative forms of regulation. There is some discussion of how incentive systems work, but some of it seems superficial. For example, the alternative of marketable allowances creates incentives to reveal information on true abatement costs (the price of an allowance is an indicator of the cost of abating by the same amount), and this information tends to undermine arguments that it costs too much to abate, favorite arguments in negotiation and lobbying over command-and-control regulation. This type of incentive analysis gets little attention in the book.

The book does not discuss how the adversarial system of administrative law tends to lead to ever more complicated procedures, with higher administrative costs and delays. Richard Sandor, who runs the Chicago Climate Exchange, finds that is takes far fewer people, including monitors, to run a marketable allowance program than it does to run a program of command-and-control regulation, including monitors, for a comparable level of environmental protection.

In Chapter 8, the authors address the criticism that command-and-control tends to be inflexible (and thus inefficient) by pointing to adjustments in this form of regulation, of deadline extension, waivers, negotiated adjustments, enforcement discretion, and periodic review. But in the detailed examples, it is hard to tell whether these adjustments lead to better regulation or are just caving in. Some evaluation of the results of this flexibility would be helpful.

Finally, in defending traditional regulation and seeking more effective regulatory approaches, it would be helpful if Shapiro and Glicksman addressed more explicitly a basic fact of regulatory life-that the risk imposers, who work in the plants and have their own teams of experts and lawyers know far more about their processes, costs, abatement opportunities, and ways of evading controls than do the regulators who are spread much more thinly.

How do we get regulation to work better under this condition of asymmetric knowledge? How do we get better results (“cash value”) during this period of deregulation and absolutism? If we can, we can put risk regulation less at risk.

Copyright Journal of Public Health Policy 2004

Provided by ProQuest Information and Learning Company. All rights Reserved.