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.

Do Regulations Work As Intended?

Rumor is that the White House will soon start requiring a plan for retrospective review when each new major regulation is issued.  The idea is simple:  make sure that the most costly regulations are working as intended.  I expect the White House will announce the new effort with some fanfare.  And I expect the response to include praise from Democratic pundits (“see how President Obama is prudently managing the regulatory process”), wariness from the regulatory community (“business groups cautiously optimistic about this new effort by OMB”), and some degree of ire or at least irony from conservative groups (“another empty promise from the President who has done more to grow the regulatory state”).  But the true value of this new effort can only be assessed after seeing how it is “baked in” to the new regulation itself.

By all metrics, the size and scope of federal regulation continues to grow, as it has under the last several Presidents.  Although great attention is already spent on scrutinizing and debating the merits of new major regulations (e.g., to control coal-fired power plant emissions) and new regulatory programs (e.g., Obamacare, Dodd-Frank), very little attention is spent evaluating –years from now—whether these regulations and regulatory programs work as intended.

In a few well-known cases, regulations have provided substantial benefits compared to their cost (e.g., removal of lead from gasoline, the phasing out of chlorofluorocarbons that destroy the ozone layer).  Some programs have long been suspect of providing negative net benefits (e.g., agricultural marketing orders to promote certain crops), yet continue to survive as a result of political considerations and persistent lobbying by special interests.  But the vast majority of regulations and regulatory programs are never evaluated.  Policy and policymaking is focused on the here and now, the next big rule, the new, soon-to-be-implemented law.

If this new Administration effort is to succeed, much depends on how the evaluation will be conducted, and whether the evaluation has “teeth”.   Will the evaluation be conducted (and the data collected) by a third-party organization rather than the regulatory agency itself?  Are resources being set aside for this evaluation?  Will the evaluation take a careful look at advances in science and technology (e.g., our understanding of the underlying problem being addressed) since the rule was promulgated?  Will the regulation change (e.g., sunset or grow, as appropriate) in response to the (e.g., negative or positive) evaluation?

These are the questions that should be asked when the White House unveils its new regulatory initiative.  A “yes” to all of these questions warrants a big “thumbs up” to the Administration.

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