Pareto Policy Solutions, LLC

advancing innovation through smart regulation

Pareto Policy Solutions, LLC is a policy analysis and advocacy firm committed to advancing sustainability through “smart” regulation: regulation that rewards, and does not penalize, superior performance.  Often, such actions leverage advances in science and technology and make the regulatory program itself more effective as well as more efficient.

Regulation and Crowdsourcing

crowdsourcing

Crowdsourcing refers to leveraging the collective wisdom of large numbers of people, often but not necessarily through on-line means, to solve problems. First coined in 2006, crowdsourcing is typically used to solve technological tasks, design creative works, or fund startup ventures.  To some, crowdsourcing seems antithetical to regulation. The purpose of regulation is to harness the wisdom of experts—bureaucrats—residing in an agency, divorced from politics and insulated from public opinion. That is, after all, what I and thousands of others were (and still are) taught in graduate school.

But as important as expertise is to a regulatory agency, the public influences federal regulation to an even greater degree. At every stage of the regulatory process, the public yields considerable power.

Elections.  The public influences regulatory programs through elections. The 2010 election, which put Republicans in control of the House of Representatives, was impacted by debate over new regulatory programs. According to at least one study, vulnerable House Democrats were hurt due to their positive votes on legislation establishing new regulatory programs on climate change and health care reform.

Legislation. A public outcry can spur legislation creating new regulatory programs. For example, news accounts of tragedies relating to medicines or purported medicines led to the establishment of modern pharmaceutical regulation. Many environmental regulations can trace their origin to the early 1970s, when Congress enacted several statutes as a consequence of the environmental movement. More recently, the Dodd-Frank Wall Street Reform Act, enacted in the public outcry over the financial crisis of 2008-2009, is responsible for dozens of rules to prevent a similar collapse in the future.

Congressional Disapproval of Rules. Under the Congressional Review Act, Congress can disapprove a federal regulation. A Department of Labor regulation to address workplace injuries attributed to repetitive motion (i.e., ergonomics) was disapproved in early 2003, after considerable public backlash about the high cost of the rule to businesses.

Initiation of Regulation. Some agencies announce when they start thinking about a potential new regulation, giving the public an opportunity to provide ideas for agency consideration. Today, some regulatory agencies (e.g., the Environmental Protection Agency and the Department of Transportation) provide such information on-line.

Proposed Regulation. Typically, a regulatory agency will propose a regulation for public comment. These public comments can have a profound effect on the design of a rule. According to a report from the Sunlight Foundation, the proposed rule drawing the most public comments was a proposal requiring medical coverage for female contraceptive care. Nearly 150,000 comments have submitted comments on this particular rule.

Judicial Review.  Even when regulations are challenged in court, judges take notice of public opinion. In last week’s oral arguments before the Supreme Court, several justices questioned the wisdom of a Supreme Court review over gay marriage. An NBC News report indicated that the Court seemed reluctant to decide an issue that is being actively debated and decided (often through public referendum) at the state level.

Enforcement.  Regulatory agencies often determine which regulations to enforce based on public complaints. Such agencies include the DOL wage and hour division, the Consumer Product Safety Commission, the Federal Trade Commission (FTC), and the Federal Communications Commission (FCC).

Retrospective Review.  When determining which long-standing regulations are in need of review and possible change, the public plays an important role. Last July, the White House created an on-line portal for public recommendations about which regulations are in need of modification or elimination. Then regulatory “czar” Cass Sunstein asked for recommendations from the public in a YouTube video.

So the next time when some suggests that the President is the puppet master of the regulatory state, or that faceless bureaucrats are controlling our destiny, remember that the most powerful force is the one no person has absolute control over—the public. The wisdom of crowds often drives regulation.

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