Two Regulatory “Dumbfounders”

The editor of this publication is often asked  to name several of the most significant surprises which he observed over the past half century working on issues dealing with the administrative state.

In the wonky world of regulations the resultant answer would hardly ring an audible chime with the general populace. Nonetheless the question is challenging and is  recast to identify  regulatory “dumbfounders”.  Answers change with the passage of time and  rebranding the question as the identification of “dumbfounders” is  appropriate because  the use of the term “dumb” implies, incorrectly, to some readers that the answer is self evident and we were also in search of a noun in lieu of a verb to designate a specific event  as a surprise.

Dumbfounder # 1  Applying Benefit-Cost Analysis to Regulations

 Benefit-cost analysis had its origins in the evaluation of water resource development projects such as dams and waterways. The idea of applying the techniques unique to the analysis of the benefits and costs resulting from the pouring of tons of concrete to build massive public works projects to the analysis of the benefits and costs emanating from  piles of paper which compel  changes in the social or economic behavior of individuals  was dumbfounding to a wide range of personnel within the administrative state; see this post for additional background.

 Dumbfounder # 2  Regulatory Guidance is Binding

 Regulatory agencies routinely issue statements that are not published as regulations and are frequently referred to as guidance. Some inhabitants of  the regulatory state believe that the term guidance means exactly what the dictionary says it means:  “the act or function of guiding” with an emphasis on to “guide” not to “compel” which when translated into the parlance of  the regulators means that the regulators  would be extremely deferential to guidance but not necessarily bound by it.

Nothing could be farther from the truth; agency guidance is binding upon the regulated community until which time a party convinces senior management of the agency to the contrary.  See this report of the Administrative Conference of the US which sets forth the views of interviewees in agencies, industry, and NGOs on circumstances that discourage regulated parties from seeking departures from guidance, as well as factors that can incline agencies against departing from guidance. See subsequent action by DOJ: DOJ Guidance Documents

N. B. Heretofore the second dumbfounder was  the claim that the President did not have the authority to initiate centralized regulatory review in the White House Office of Management and Budget.

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