*This post is part of a symposium on Modernizing Regulatory Review. For other posts in the series, click here.

“The perfect is the enemy of the good,” a wise old saying cautions.  That aphorism captures the fundamental human predicament of limited cognitive capacity, an often overlooked point for which my favorite polymath, Herbert Simon, won the Nobel prize in economics in 1978.  

On the other hand, government programs, including OIRA’s Circular A-4, have an innate tendency to become more and more complicated over time.  This tendency has been called “Kludgeocracy,” an awkward term drawn from computer programming.   It means the accumulation of inelegant fixes to address previously unanticipated problems that arise in the course of experience, which computer programmers call “kludges.”  But at some point, the cure is worse than the disease and the whole system becomes less effective because it is so complicated that no one understands it anymore, except perhaps an expert who focuses on that particular sub-field of knowledge.

As a former political appointee at EPA who served as liaison to OIRA and has been a long-time supporter of the OIRA review process, that’s my concern about the proposals to “modernize” Circular A-4.  They read like they were written by a graduate student in economics who was asked to review the developing literature on benefit-cost analysis over the last few decades.  There is nothing wrong with most of them individually, and some of them (such as the proposal to correct benefits estimates for income discrepancies) are downright useful, but I worry that collectively they will make benefit-cost analysis so complicated and esoteric that OIRA will lose its audiences and undermine its influence.    

The preamble to the proposal begins by stating, “Assessing benefits and costs of alternative regulatory options through analysis helps agency policymakers arrive at sound regulatory decisions. It also helps the public, Congress, and the courts understand the effects of those decisions.”  Those target audiences rarely have PhD’s in economics, much less a subspeciality in the details of benefit-cost analysis.  By overly complexifying the analysis, OIRA runs the risk of losing its intended audience of generalists in a welter of technical detail.^[1]

Moreover, the proposed “reforms” are deaf to the fact that Regulatory Impact Analyses (RIAs) are not academic PhD theses, but advocacy documents in which an agency or department tries to convince the White House and other agencies via the inter-agency review process to sign off on what its career staff have already decided that they want to do.  By providing numerous and sundry endpoints, the proposed reforms may undermine the more neutral criterion of net social benefit by providing justifications for regulations that may benefit particular constituencies to the detriment of society as a whole.  

By contrast, an excellent 1990 report by Adam Finkel explains how to use a “value of information” approach to simplify the presentation of uncertainty to busy political appointees.^[2]  One searches the preamble to the proposed changes in vain for any examples of backcasting to illustrate where the proposed refinements would have actually made a substantial changes in the outcome.  At a minimum, OIRA should provide examples of circumstances in which various refinements to benefit-cost analysis are likely to be worth the costs, including not only the direct costs but the indirect costs in terms of loss of intelligibility and influence.  It is bitterly ironic that OIRA, which specializes in asking whether the benefit of regulatory changes by other entities outweigh their costs, does not seem to ask that question of itself.

A wise philosopher once wrote: “Every reform, however necessary, will … be carried to an excess, that will itself need reforming.”  That may be why many government programs tend to wear out and become less effective over time.  I worry that is now happening to the OIRA review process.

E. Donald Elliott is a Distinguished Adjunct Professor, Antonin Scalia Law School, George Mason University.

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^[1] For a more general exploration of the confusion in our polity about the proper roles of experts and generalists, see E. Donald Elliott, Lessons for the Law from COVID-19: Alternative Histories to Define the Roles of Politics and Expertise in the Administrative State, SSRN U.S. ADMINISTRATIVE LAW eJOURNAL

Vol. 11, No. 16: Mar 31, 2022, http://dx.doi.org/10.2139/ssrn.3978967.  

^[2] See also A.M. Finkel and J.S. Evans, Evaluating the Benefits of Uncertainty Reduction in Environmental Health Risk Management, Journal of the Air Pollution Control Association 37: 1164-1171 (1987).  The basic idea is that a rational policymaker wants to minimize the sum of error costs and transaction costs; i.e. that one wants to improve accuracy of prediction if possible, but only if the benefits in terms of making and applying policy are not outweighed by the costs of acquiring greater precision, including the costs of transition.