Regulatory costs and benefits

There’s something of interest in this piece by Cass Sunstein, Obama’s chief of regulation (It has become common to call him ‘Regulatory Czar’ for some reason – not ‘Regulatory Strongman’ or ‘Regulatory Hulk Hogan’, but ‘Regulatory Czar’).  It speaks not just of the costs of regulation but also of benefits. As part of summarising what’s good about the regulatory policy that he is ‘Czar’ of he quotes not only the extent to which they’ve been able to cut the cost of regulation (if you pay close attention to the numbers quoted they’re pitifully small by the way), but also the benefits of regulation.

This insistence on pragmatic, evidence-based, cost-effective rules is what has informed our regulatory approach over the past two and a half years. We have helped to bring highway deaths down to their lowest level in 60 years; promoted airline safety while protecting passengers from tarmac delays, overbooking and hidden charges; sharply reduced the risk of salmonella from eggs; dramatically increased the fuel economy of cars and trucks, promoting energy independence while saving consumers money; and curbed air pollution that kills thousands of people each year. At the same time, we are eliminating unnecessary regulatory burdens and tens of millions of hours in annual red tape.

So there you have it: a social democratic approach to talking about regulation.  The other thing is that Sunstein talks about lowering the costs of overregulation and bad regulation not just for businesses and organisations generally (which is where we focus our energies on regulation review), but also on individuals.

We are taking immediate steps to save individuals, businesses, and state and local governments hundreds of millions of dollars every year in regulatory burdens.

Very sensible too.  It’s hard to see the downside.


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18 Responses to Regulatory costs and benefits

  1. Paul Frijters says:

    do you believe this, Nick? All those accomplishments in 2,5 years? I would guess that even after you think up a good regulation it takes 5 years to implement and measure any effect. I smell a sales job.

  2. Nicholas Gruen says:

    Yes, absolutely I smell a sales job (and/or a rebadging job). I was simply referring to the sales job. It’s important in my view that sales jobs – and all sensible discussion about regulation – speak about costs and benefits. That’s what we do elsewhere, but somehow we only talk about costs with regulation. I think that’s dumb for anyone, but particularly dumb if you fancy yourself, as the government does, as left of centre – or even if you fancy yourself as centrist.

  3. john says:

    Relative poverty = less activity , driving less = less prangs, buying smaller cheaper cars= less fuel consumption , less driving to the air port= less air travelers = lower numbers of planes on tarmac= less tarmac waiting times. ( have no idea about how raw egg transport and consumption fits in this one at all …. do you?)

    Wouldn’t just saying “we are eliminating unnecessary regulatory burdens and tens of millions of hours in annual red tape.” have been enough?

  4. Ken Parish says:

    Sunstein’s quote unavoidably reminds me of the Monty Python “how to do it” sketch (but is possibly even more question-begging). I wouldn’t dispute that politicians (and their advisers/czars) should seek to frame discussion in terms of the benefits of regulation rather than just their costs, but you’d imagine it might be a good idea to avoid being quite as fatuous if not downright fallacious as these assertions. it lowers my regard for Cass Sunstein.

  5. Nicholas Gruen says:

    “avoid being quite as fatuous if not downright fallacious as these assertions”. You’re setting a pretty high bar there Ken.

    Correct me if I’m wrong but this is the early 21st century and we are talking about a large organisation aren’t we?

  6. john says:

    I profess, in the sincerity of my heart, that I have not the least personal interest in endeavoring to promote this necessary work, having no other motive than the public good of my country, by advancing our trade, providing for infants, relieving the poor, and giving some pleasure to the rich. I have no children by which I can propose to get a single penny; the youngest being nine years old, and my wife past child-bearing.

  7. Ken Parish says:


    I may not be following your point. Sunstein is not a large organisation, he’s a senior legal academic turned super-regulator. As such one would have hoped, as Paul Frijters pointed out, that he would know that claiming extraordinary successes for a wide range of regulatory changes after just 2.5 years in government is just PR puffery. I expected better.

  8. Ken Parish says:

    “by 1990 no Australian child will be living in poverty …”

    (Bob Hawke/Swift/Sunstein)

  9. Nicholas Gruen says:

    I was referring to Sunstein as a Govt official.

  10. Nicholas Gruen says:

    I always remember ‘no child will live in poverty’ with a pang. It is sad that one of the Hawke Govt’s proudest boasts – that after their policy changes no child would need to live in poverty was so drowned out in the public consciousness by Hawke’s ‘error of judgement’ as I think they’re called these days in deciding to change just one word of his speech for effect. One could hear the captive and certified friendly audience’s silent intake of breath just after he said it.

    But the policy changes to which it refers is probably the finest thing the Hawke Govt did – and it did a lot of good things – especially by contrast to what came before and after – and by contrast to other governments around the world.

  11. Ken Parish says:

    “But the policy changes to which it refers is probably the finest thing the Hawke Govt did …”

    And the same might conceivably end up being true of some of the Obama initiatives of which Sunstein boasts. But he’s boasting prematurely and over-claiming. Under-claiming and over-delivering mght have been a better idea. Emphasising the positives from policy reform is PR 101 but so is avoiding boosterism that just about anyone can see through with 5 seconds thought.

  12. Tom N. says:

    I am happy to have the benefits of regulation publicised as well as their costs, but my gripe with the statement is that it fails to recognise the marginality point. Thus, “reducing highway deaths” is only good is we’re above the optimum level thereof, or at least, if the mechanism that reduced the deaths generated more benefits than costs. You could of course eliminate all motor vehicle deaths by enforcing a zero speed limit, but the health and safety benefits would not warrant the reduction in the utility of driving. John at comment #3 touches on this point too.

    I would also questions Nick’s concern that we only talk about the costs of regulation. First, I don’t think that’s true, at least of governmental policy advisers – as reflected in official publications on regulation or even in the regulation review requirements issued by the Department of Finance and Deregulation. Secondly, even if there were some truth in it, it could be argued that that’s not a bad counter-balance to the automatic assumption of many people that if there’s a problem, government should regulate it.

  13. Patrick says:

    Heckuva sales job for the most regulatory-intensive government in memory…look, it’s a plane, no wait its the NLRB telling you where you can build them!

    Or in other words, roflshmsh.

  14. Pedro says:

    “It has become common to call him ‘Regulatory Czar’ for some reason” They also have/had a drugs czar and no doubt others too.
    In the great Republic you get labelled Caesar if you are put in charge of anything.

  15. john says:

    How did salmonella from eggs ( eaten raw) get in the list?

  16. stephen says:

    on the Ken v. Nicholas debate:

    we can probably agree that yes, Sunstein is over-claiming. The question is whether this is a good or bad thing. In an academic context would undoubtedly be poor form. In the US political context, not. Budgeting academic Irene Rubin makes the point in relation to budget reform that reform proponents always have to overstate their case, in order to get even a little bit of attention from legislators. It applies more weakly here than in the US, but there is a bit of that in relation to reform in Australia. In the US though the capacity of the legislature to stymie even modest reform is huge: so there has to be a fair bit of overstatement in order to get them onside.

    on the other point Nicholas makes, that we need to look at both costs and benefits of regulation, undoubtedly true: there is though a big disjunction between the popular press commentary, which always looks at costs, and the way in which regulatory impact statements are prosecuted through the bureaucracy, where the proponents will often exaggerate claims of benefits. It would be good to see the two brought closer through more open debate on both costs and benefits; unfortunately, when I see the Tele doing that I’ll also invest in flying bacon futures.

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