I am a supporter of the Better Regulation because after working on passing, drafting, and campaigning for some laws I ask myself 4 questions:
- Is there a well-reasoned case, backed by the best available evidence, to support the proposal?
- Will the law work on the ground – will it be implemented and enforced – a key question in Europe
- Will it benefit the public, rather than benefit the interest groups screaming for or against the proposal
- What are the likely costs and benefits – the intended and unintended – both positive and negative. It’s important to go beyond first order impacts and look at second and third order impacts.
The simple case for Better Regulation
I guess I don’t want to spend a lot of time and energy working on something that I know, from the start, won’t deliver.
I have worked on legislation where a lot of thought and evidence was brought to the table before it went out the door. That proposal got quickly adopted. Yet, I have worked on some that gave the impression of being drafted over-night on the back of a napkin.
For me, better regulation is good because it helps to make sure that ordinary and secondary legislation from the Commission is well thought out, based on the best evidence, and will, if adopted, deliver and help the people.
As with any system, I know it is not full proof. It’s a lot better than systems of political or technocratic control we have had in the past. President Juncker signed up to it, and asked First Vice-President Timmermans to implement it.
Will Better Regulation continue in the next Commission
I doubt it will survive President Juncker’s term. There are too many interests inside the Commission who object to procedural and substantive constraints on their margin of manoeuvre. Indeed, if Better Regulation were more rigorously enforced as in the USA, it would set up a countervailing source of power that some officials may object to.
Yet, whoever the next President of the Commission is, she, or her advisors, may want to read Cass Sunstein’s ‘The Cost Benefit Revolution’for possible improvements.
I have cited from Sunstein extensively below. I have missed out “” I apologise in advance.
Look to America
The USA has been running their own version of Better Regulation since Ronald Reagan. Government action needs both a cost benefit analysis and a Risk Impact Analysis before a proposal can be looked at. Both Republican and Democratic Presidents have continued it.
When cost benefit analysis was introduced in the US, progressives criticized it, and industry rejoiced. Much the same happened in Brussels. Yet, it clear from Sunstein’s 215 pages, that too few really understand the ideas behind it.
The key ideas are:
- “No action may be taken unless the benefits justify the costs”
- “American Presidents have been loath to allow federal officials to proceed unless the benefits justify the costs. And if the benefits do justify the costs, they have often insisted on going forward, whatever the political price. …. The cost-benefit revolution bans some actions, but it compels others – and they often save lives.” The same can be sent of Commission President.
The American System
The American system and the EU system are similar. They both require a cost benefit analysis and a risk impact analysis.
Executive Order 12291– Principles
In 1981 President Reagan introduced Federal Regulation that required:
- Administrative decisions shall be based on adequate information concerning the need for and consequences of proposed government action
- Regulatory actions shall not be undertaken unless the potential benefits to society for the regulation outweigh the potential costs to society
- Regulatory objectives shall be chosen to maximize the net benefits to society
- Among alternative approaches to any given regulatory objective, the alternative involving the least net cost to society shall be chosen
- Agencies shall set regulatory priorities with the aim of maximizing the aggregate net benefits to society, taking into account the condition the particular industries affected by regulations, the condition of the national economy, and other regulatory actions for the future.
Prepare an Impact Analysis
These are not just principles. Officials have to account for their proposals. Regan required executive agencies to produce, for every regulation, a Regulatory Impact Analysis (RIA), which is a written document with four central elements:
- A description of the potential benefits of the rule, including any beneficial effects that cannot be quantified in monetary terms and identification of those likely to receive the benefits
- A description of the potential costs of the rule, including any adverse effects that cannot be identified in monetary term and the identification of those likely to bear the costs
- A determination of the potebial net benefits of the rule, including an evaluation of effects that cannot be quantified in monetary terms
Technocrats will stop you
And, third, he established a regulatory agency to police this. The requirement that regulations come from a regulatory impact analysis is key. If OIRA concluded that the regulation or the analysis was shoddy or that the agency had not complied with Reagan’s requirements, it would not approve the regulation.
In Europe
The EU’s Better Regulation Guidelines and Toolbox are similar. The establish general requirements and a need to provide and publish the analysis.
However, the EU’s system lacks the tough enforcement mechanisms. It’s unclear how many of the proposals for ordinary or secondary laws this Commission drafted have been stopped by the Better Regulation enforcers. The Secretary-General’s staff are too few to get into every detail. And, when they advise a Vice-President who is backing a proposal, their interests strained.
The President’s Will
As Sunstein notes “OIRA was put in charge of the regulatory state. If the benefits did not outweigh the costs, there would not rule, unless Congress required it”. This group of officials have a lot of power. They can, and do say, “The President told us to tell you no.”
As “ no Secretary of state loves the idea of having to face new constrains, procedural or substantive from the White House”. Yet, the system was designed to create a countervailing force, with a single-minded focus, to police the rules.
This system did not happen by accident. Sunstein gives four reasons.
“First, they (Reagan’s senior staffers) trusted technocrats to focus on what really matters ‘human consequences’.
Second, they wanted to reduce the flow of new regulations. They wanted less of it.
Third, the federal bureaucracy was sprawling, massive and uncoordinated, and that different agencies have overlapping missions. What if they produce inconsistent or redundant requirements. Any President wants and needs to set priorities The OIRA process is extremely helpful.
Fourth, the regulatory proses should be overseen by the president and his closet advisers. The White House is in the position to decide what matters most.”
In the absence of an EU OIRA, it is hard for President Juncker or his closet advisers to know what the Commission Services are proposing, let alone ensure they comply with the Better Regulation guidelines, let alone mirror his priorities.
What better regulation is not
On both sides of the pond, Better Regulation has been seen by NGOs as a mechanism to stop environmental proposals. I don’t think there is any evidence to support this view.
Sunstein provides a number of examples of proposals – air and chemicals – where cost benefits analysis helped a proposal get through.
He mentions how “Reagan backed and promoted the Montreal Protocol phase out ozone-depleting chemicals. The cost benefits analysis showed that the economic costs would be pretty low and that the benefits – in terms of skins cancers and cataracts avoided – would be high”
Is it in the people’s interest
The US Administration and EU Commission put out a lot of regulations. Better Regulation/costs benefit analysis provide the Presidents with a means of controlling this output.
If we can agree that governments should be developing Policies should make ‘people’s lives better’ “officials should not rely on intuitions, interest groups, polls or dogmas.”
Better Regulation/ cost-benefit analysis forces officials to “ask the right questions – it directs them to ask: Are people’s lives being improved, or not, by the relevant initiative?”
This is something most people can agree on is a good thing.