Cost-Benefit Default Principles

In an important but thus far unnoticed development, federal courts have created a new series of “default principles” for statutory interpretation, authorizing regulatory agencies, when statutes are unclear, (a) to exempt trivial risks from regulation and thus to develop a kind of common law of “acceptable risks,” (b) to take account of substitute risks created by regulation, and thus to engage in “health-health” tradeoffs, (c) to consider whether compliance with regulation is feasible, (d) to take costs into account, and (e) to engage in cost-benefit balancing, and thus to develop a kind of common law of cost-benefit analysis. These cost-benefit default principles are both legitimate and salutary, because they give rationality and sense the benefit of the doubt. At the same time, they leave many open questions. They do not say whether agencies are required, and not merely permitted, to go in the direction they indicate; they do not indicate when agencies might reasonably reject the principles; and they do not say what, specifically, will be counted as an “acceptable” risk or a sensible form of cost-benefit analysis. Addressing the open questions, this Article urges that the principles should ordinarily be taken as mandatory, not merely permissive; that agencies may reject them in certain identifiable circumstances; and that steps should be taken toward quantitative analysis of the effects of regulation, designed to discipline the relevant inquiries. An understanding of these points should promote understanding of emerging “second generation” debates, involving not whether to adopt a presumption in favor of cost-benefit balancing, but when the presumption is rebutted, and what, in particular, cost-benefit analysis should be taken to entail. “Courts should be reluctant to apply the literal terms of a statute to mandate pointless expenditures of effort. . . . Unless Congress has been extraordinarily rigid, there is likely a basis for an implication of de minimis authority to provide exemption when the burdens of regulation yield a gain of trivial or no value.”1 “It seems bizarre that a statute intended to improve human health would . . . lock the agency into looking at only one half of a substance’s health effects in determining the maximum level of that substance.”2 * Karl N. Llewellyn Distinguished Service Professor, University of Chicago Law School and Department of Political Science. I am grateful to Elizabeth Garrett, Robert Hahn, Eric Posner, and Richard Posner for helpful comments on a previous draft. 1 Alabama Power Co. v. Costle, 636 F.2d 323, 360-61 (DC Cir 1979). 2 American Trucking Association v. EPA, 173 F.3d 1027, 1052 (DC Cir 1999). 2 Cognition and Cost-Benefit Analysis “It is only where there is ‘clear congressional intent to preclude consideration of cost’ that we find agencies barred from considering costs.”3 "In order better to achieve regulatory goals for example, to allocate resources so that they save more lives or produce a cleaner environment regulators must often take account of all of a proposed regulation's adverse effects, at least where those effects clearly threaten serious and disproportionate public harm. Hence, I believe that, other things being equal, we should read silences or ambiguities in the language of regulatory statutes as permitting, not forbidding, this type of rational regulation."4 “The rule-implicit valuation of a life is high – about $4 million – but not so astronomical, certainly by regulatory standards, as to call the rationality of the rule seriously into question, especially when we consider that neither Hepatis B nor AIDS is a disease of old people. These diseases are no respecters of youth; they cut off people in their working years, and thus in their prime, and it is natural to set a high value on the lost years.”5