Editor’s Note: It’s the quality of comments that matters, not the quantity. The study, “Do U.S. Regulators Listen to the Public? Testing the Regulatory Process with the RegRank Algorithm” asserts “that the government adjusts its final rules almost entirely in response to comments from industry insiders.” Unfortunately, the study does not examine the quality of the comments being considered by the agency. A comment which raises a substantive issue, such a violation of a “good government law” that regulates the regulator, needs to be taken in consideration to a far greater extent than a simple cheer or boo for a proposed regulation—no matter how heartfelt.
Andrei A. Kirilenko, Massachusetts Institute of Technology (MIT) Sloan School of Management
Shawn Mankad, University of Maryland Robert H. Smith School of Business
George Michailidis, University of Michigan at Ann Arbor
According to the U.S. Constitution, the government cannot harm a single individual without “the due process of the law.” Things are different, however, if a government action affects multiple individuals. The U.S. Supreme Court ruled that the government can issue a regulation that can greatly harm many businesses and individuals “without giving them a chance to be heard.” A federal statute called the Administrative Procedure Act mandates that federal regulatory agencies give the public a chance to comment on proposed regulations before they become final. We propose a new analytical tool called RegRank that can be used to measure and test whether government regulatory agencies actually adjust final rules in response to comments received from the public. We use RegRank to analyze the text of public rulemaking documents of the Commodity Futures Trading Commission (CFTC) – a federal regulatory agency in charge of implementing parts of the Dodd-Frank Wall Street Reform and Consumer Protection Act. We then test whether the regulatory agency adjusts final rules in the direction of sentiment expressed in public comments. We find strong evidence that it does. We also find, however, that the government adjusts its final rules almost entirely in response to comments from industry insiders. This begs a question: If the government only listens to industry insiders, does it even mater if the public has an opportunity to comment? We find that the answer is a resounding yes. A proposed regulation is much more likely to become final after a public comment period if there is a stronger consensus among the commenters and if there are comments that reflect organized public efforts. We posit that the RegRank algorithm can empower the public to test whether it has been given the “due process” and to keep an alphabet soup of government agencies in check.