Software Solutions for Regulatory Reform?

Last week the C. Boyden Gray Center for the Study of the Administrative State held a fascinating conference, “The Administration of Democracy,” which covered issues like campaign finance law, apportionment, and the president’s tax returns. The fourth panel of the day, “The Democracy of Administration,” featured a discussion of the public comment process on proposed regulations, now accessed by most people via the web portal regulations.gov.

The regulatory process is notoriously complicated and recondite for non-experts to engage with, so I especially enjoyed when Maleka Momand, CEO of the technology company Esper, took the floor and introduced her company’s recommendations. One of the most interesting items was the suggestion that agencies keep their dockets open even after final rules were published, so that people who are affected by the rules would be able to react to them once they’ve been implemented. Small business owners, for example, could report on unexpected compliance burdens, or what I call the “synergetic burden” of having to comply with all previously existing rules while also implementing a brand new one. For more on the cumulative costs of regulations piling up, see the 2018 Mercatus Center policy brief “Regulatory Accumulation and Its Costs” by Patrick McLaughlin, Nita Ghei, and Michael Witt.

Keeping dockets open after agencies publish their rules can also assist in retrospective review, which many policy experts have long endorsed. If we have standard notice-and-comment procedures for new rules, it makes sense for the Office of Management and Budget to at some point to institutionalize the equivalent for existing rules that have been in force for, say, three to five years. Should the industry or process that is currently being regulated be set free, or should it stay subject to federal authority? Advocates of a strong regulatory state will naturally fear that necessary rules might be suspended or sunsetted without due consideration, so they can think of themselves like witnesses at a parole hearing. If they think there’s a real threat to loosening or eliminating curret rules, they’ll be welcome to submit comments describing why.

Legal scholar Adam White, the host of last week’s conference, wrote a great post on the Yale Journal of Regulation’s “Notice and Comment” blog about retrospective review back in 2016. He emphasized the value not just of rendering a verdict on past rules but about helping regulators prepare better for future ones:

Proponents of retrospective review tend to think of it as a means for clearing away outdated or unduly burdensome regulations. And, true, that is among the virtues of the exercise, as [the Administrative Conference of the United States’] last report on retrospective review shows.

But I think retrospective review’s greatest virtue actually has nothing to do with repealing regulations. Rather, retrospective review’s greatest value is forward-looking. That is, by forcing agencies to look back at their previous rulemakings and analyze their costs and benefits today, the Administration would force agencies and the public to confront how accurate or inaccurate the agencies’ own projections were in forecasting the rules’ impacts in the first place.

As we know all too well, agencies’ forecasts of costs and benefits are woefully inaccurate. As former [Office of Information and Regulatory Affairs] Administrator Susan Dudley colorfully notes in her article on the subject, agencies too often “perpetuate puffery” by exaggerating rules’ benefits and understating their costs. She’s not alone in making these claims. In testimony this year before the Senate Committee on Homeland Security and Government Reform’s Subcommittee on Regulatory Affairs and Federal Management, I summarized several other reports—from ACUS to the [Commodity Futures Trading Commission]’s Inspector General—criticizing agencies for haphazard analysis. And as Resources for the Future’s scholars observed a few years ago, independent agencies’ cost-benefit analyses are especially questionable.

Here’s to hoping that software like Esper’s will help future regulators improve cost-benefit calculations and serve as a way of introducing non-experts into the regulatory process.

Disclosure: the Mercatus Center’s Patrick McLaughlin, cited above, is listed on Esper’s website as an Advisor. I don’t know if that signifies a financial relationship or not.