# Presentation: 356771

## Rule-Making from a Decision and Policy Process Perspective

- William Ascher
- Valuation SAB
- June 2004

## Premise 1

- Once the implication of the analysis is known, in terms of whether it supports the rule or not, the analysis will be perceived as “promotional,” whether intended or not.

## Premise 2 

- No firm boundary between “guess” & “estimate”
- “Guess”: would increase CBA error
- “Estimate”: would decrease CBA error
- In principle, whether estimate increases or decreases error is knowable
- In practice, difficult to determine

## Premise 2 cont.

- Uncertain information does not necessarily degrade the analysis
- Leaving information *out* of the analysis also introduces uncertainty.

## Premise 3

- Direct economic costs are easier to estimate than the benefits of environmental improvements
- Therefore bias of excluding estimates reduces appreciation for ecosystem protection

## Process of Rule Making

- Rules adopted or rejected
-    ↑
- Analysis assessed by decisionmakers
-    ↑
- Analysts estimate benefits & costs with sufficient credibility and plausibility↑
- Analysts must choose thresholds
-    ↑
- Preliminary examination of rule possibilities

## Process (Working backwards)

- 1. Rules are adopted or rejected
- Both public interest and political considerations.
- 2. Decisionmakers assess analysis
-  credibility and plausibility
-  assailability by those opposing the rule

## Process (Working backwards)

- 3. Analysts  intuit the subsequent steps and the criteria of acceptability
- They have their own professional standing (credibility) to preserve
- Higher-level officials provide input as well

## Process (Working Backwards) 

- 4. Analysts must determine:
- which effects to include
- which value (or value range) to use
- the right balance in conveying how much uncertainty is entailed in the estimates:
- underplayed uncertainty jeopardizes credibility
- but so does overplayed uncertainty

## Speculation:  

- If analysts believe that the evidence to support a rule is strong enough without adding additional, more difficult-to-estimate considerations, they will eliminate those elements from the formal analysis, but may mention them as “icing on the cake.”

## From RIA supporting NOx SIP Call:

- “Present analytical tools and resources preclude
- EPA from quantifying the benefits of improved
- forest aesthetics in the eastern U.S. expected to
- occur from the NOx SIP call...  However, there is
- sufficient supporting evidence in the Physical
- sciences and economic literature to support the
- finding that the proposed NOx SIP call can be
- expected to reduce injury to forests, and that
- reductions in these injuries will likely have a
- significant economic value to the public.”

## Process (Working Backwards) 

- 5. EPA officials, other officials, & analysts consider rules to propose
- Some preliminary assessment of how strong the rules should be
- Some sense of costs and benefits must be obtained, along with a reading of political feasibility

## Emerging questions:

-  What threshold of certainty for accepting a particular method?
-  Who decides on this threshold?
-  Who decides on the threshold of certainty for an estimate?
-  Who decides on this threshold?
-  How is uncertainty conveyed?
-  Are stronger rules adequately considered?