Obama, Sunstein, Dewey and the Pragmatic Cost-Benefit State
Chair and Associate Professor
Department of Philosophy
The Obama Presidency, Cass Sunstein, Dewey and the Pragmatic Cost-Benefit State
Since everything which is demanded is by that fact a good, must not the guiding principle for ethical philosophy (since all demands conjointly cannot be satisfied in this poor world) be simply to satisfy at all times as many demands as we can? That act must be the best act, accordingly, which makes for the best whole, in the sense of awakening the least sum of dissatisfactions. In the casuistic scale, therefore, those ideals must be written highest which prevail at the least cost, or by whose realization the least possible number of other ideals are destroyed (James 205).
The central feature of the laissez faire doctrine is that human reason is confined to discovering what antecedently exists, the preexistent system of advantages and disadvantages, resources and obstacles, with the intent of conforming action strictly to the given scheme. It is the abnegation of human intelligence save as a bare reporter of things and as a power conforming to them (Dewey MW:7 58).
One of the most important of Obama's acts as President might be the appointment of self-described pragmatist Cass Sunstein as "regulatory czar," that is, as head of the Office of Management and Budget's (OMB) Office of Information and Regulatory Affairs (OIRA). Currently, the OIRA reviews federal agency draft regulations under executive order 12866 (issued by President Clinton). On January 20, 2009, Obama issued a memorandum directing the Director of the OMB to investigate the relationship that should hold between the OIRA and the agencies. Because of its central position in the federal regulatory regime, policies adopted by the administration through executive order, and by the head of the OIRA, have a significant impact on the type of regulations allowed and on the ability of federal administrative agencies to regulate.
As a foremost scholar on administrative law, Cass Sunstein has developed a clear philosophy for implementation in this position. Sunstein has not only developed an argument for the central place of CBA in administrative law, but has worked out details for every branch of government. In this paper I will narrow this focus, and investigate Sunstein's conception and justification of what he labels “pragmatic” CBA. This can help construct a picture of what type of regulation is likely in an Obama regulatory regime centered upon Sunstein's conception of the pragmatic cost-benefit State. Of course use of CBA is not unique to the Obama Administration and therefore a pragmatic construction of CBA has more general application. In fact, CBA is now the "lingua franca of policy discourse in Washington (Shapiro and Schroeder 462)." In this paper I will first set out the background and present practice of OIRA review. Second, I will examine the invited and public comments that were offered in response to a Proposed New Executive Order on Federal Regulatory Review and the notice of this issue published in the Federal Register. Third, I will outline Sunstein’s pragmatic conception of CBA and analyze whether he has effectively noted the virtues of CBA while properly adjusting for its vices. Finally, I will offer suggestions as to how CBA should be used if it is to be offered under the banner of pragmatism as conceived of by John Dewey. Dewey's philosophical methodology, I claim, offers an important set of tools useful for the construction of a CBA that allows for the inclusion of broader issues and greater awareness of the limits of the central concept of "cost."
The central position of the OIRA and CBA in federal regulation is the result of an accumulation of Presidential acts. In 1971 President Nixon established a quality of life reviews to help critique and coordinate agency regulations. This process was centered in the OMB. President Ford expanded this process with Executive Order 11821. Carter, with Executive Order 12044, strengthened the review by requiring more detailed analysis of proposed rules. Reagan's Executive Order 12291 (1981) furthered this trend. It also pushed further in focusing upon cost-benefit analysis. Reagan's order listed CBA as a requirement accompanying any "major" agency rule making. Further, it included a mechanism for OMB oversight. Federal agencies were required to send draft rule proposals as well as final rules to the OMB for review in the OIRA before publication in the Federal Register. Because of this, the OIRA became the central gatekeeper of all agency rulemaking. Four years later this power was further expanded with Executive Order 12498. According to Sunstein this order "increased the authority of OMB by giving it supervisory power over plans by making it hard for agencies to proceed without OMB clearance ("Cost" 10-11)." Clinton's Executive Order 12866 limited the reach of OIRA review to "significant" regulatory actions. On the other hand, 12866 also extended the use of CBA, and required much more explanation of the reasoning behind each rule from the agency in question. Further, while CBA was required, Clinton's order added considerations of equity, distributive impacts and qualitative factors. Finally, the wording was changed so that rather than benefits having to outweigh costs, they were required, instead, to "justify" them. Bush issued Executive Order 13422 on January 18, 2007. This order's most significant changes were: (1) to require specification in writing of the specific market failure or other problem that warrants regulation; and (2) expansion of OIRA review to significant agency documents, and not just "actions." This, once again, furthered the power of the OIRA. To show the effect of this, on the same day that Bush issued his order, the OMB issued rules to the agencies that required them to include certain standard elements in their guidance documents. Finally, on January 30, 2009, President Obama issued Executive Order 13497 revoking the Bush Administration's amendments to Clinton's EO 12866. So, at least as of this moment, the Clinton order stands as the official policy of the Obama Administration and CBA continues to be the dominant determinant of policy in the federal government (Shapiro and Schroeder 462). Indeed, in the 2009 OMB/OIRA Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local and Tribal Entities the use of CBA in regulatory review is central and dominant (42).
Current OIRA Review
Executive Order 12866, the order currently in force in OIRA review, directs agencies to follow certain principles in rulemaking. These principles include considering alternatives to rulemaking and analysis of the rule's effects upon society. According to the factors enumerated in the order, these effects are generally to be categorized as benefits and costs. The OIRA reviews drafts of agency regulations before publication to ensure compliance with the Executive Order. If the OIRA finds that regulatory actions do not comply with the provisions of the Executive Order those orders may be returned to the agency for revision. The President resolves disputes between the OIRA and the agency promulgating a regulation. Therefore, if the OIRA is backed up by the President's power, the decisions made from its office can be dispositive. Clearly, the director of the OIRA wields enormous power in a position virtually invisible to the public.
On January 30, 2009, President Obama issued a Memorandum directing the Director of the Office of OMB to investigate the relationship that should hold between the OIRA and the agencies. More particularly, the OMB should "provide guidance on disclosure and transparency; encourage public participation in agency regulatory processes; offer suggestions on the role of cost-benefit analysis; address the role of distributional considerations, fairness, and concern for the interests of future generations; identify methods of ensuring that regulatory review does not produce undue delay; clarify the role of the behavioral sciences in formulating regulatory policy; and identify the best tools for achieving public goals through the regulatory process." In an important and laudatory attempt for more public accountability, the OMB had public notice made of this issue by publishing a memorandum in the Federal Register in February of 2009 requesting public comment on these issues. Allowing public comment on this matter is a first. The aim is, presumably, for Obama to issue a new executive order along the lines of 12866, but one that incorporates the knowledge learned since 1993 when Clinton's memo order was issued. If Obama's Executive Order modifying or superceding 12866 retains the central role of the OIRA (and Sunstein argues in his academic works that it should probably be strengthened even further) CBA's role in the regulatory scheme will remain very important.
Some Public Comments to 74 Fed. Reg. 8819
In the invited and otherwise submitted comments to the Proposed New Executive Order on Federal Regulatory Review, of which there were 183, a large number were voices advocating for a central role of cost-benefit analysis in the regulatory review power of the OIRA. Many of these voices are, interestingly, current or former colleagues of Sunstein. For example, Adrian Vermeule was asked to submit a comment. A colleague of Sunstein's at both the University of Chicago and Harvard, Vermeule co-authored with Sunstein an article in the Stanford Law Review, which argues that under plausible assumptions capital punishment would be morally required under CBA (750). In his comment to the OMB, Vermeule makes the plausible argument that CBA can help create more uniformity of approach across agencies. More specifically, he recommends that standardization of discount rates and values of statistical life (VSLs) would greatly help to coordinate regulations of the various agencies. Finally, he cites Amartya Sen (a somewhat skeptical expert on CBA notable by his absence among those officially commenting) to argue against the critique that CBA requires an assumption of full commensurability of goods. All CBA needs, according to this, is partial ordering. Under partial ordering, while all the elements of each option may not be able to be completely ranked, it still may be able to clearly and uncontroversially rank one option over another (Vermeule 1-2).
As another example, there is the requested comment of Eric Posner, a Law Professor at the University of Chicago Law School and co-author with Adrian Vermeule of Terror in the Balance: Security, Liberty, and the Courts (2007). In his argument, Posner argues that CBA: (1) helps ensure resources are allocated to solve problems at the lowest cost possible; (2) promotes transparency in decision-making; and (3) “reveals the assumptions of regulators” in a way that enables interested parties to better critique regulations. Posner argues that the new EO should require point estimates in all cases, even where agencies previously would have decided against offering such estimates because of claims of infeasibility. Next, he argues that willingness to pay (WTP) should be used, but that the results of surveys should be defeasible if OIRA, and the OIRA alone, determines that the WTP measures do not "approximate actual affects on human well-being." Finally, he allows that some legitimate agency rule making is aimed at wealth transfer and that CBA is inappropriate in this context, so cost effectiveness analysis should be used instead (Posner 2-4).
Eric Posner, indeed, is an expert in CBA. With Matthew Adler he has recently published an anthology of articles on CBA, entitled Cost-Benefit Analysis: Economic, Philosophical, and Legal Perspectives (2001) (which includes an article by Sunstein entitled "Cognition and Cost-Benefit Analysis") and a co-authored book, New Foundations of Cost Benefit Analysis. In his invited comment, Adler advocates CBA, but argues that traditionally the tool has been somewhat insensitive to distributional issues. So, in response to this criticism, Adler list a set of tools within that can help CBA be more sensitive to equity issues. These tools include inequality metrics, poverty metrics, incidence analysis, environmental justice/social gradient metrics, and social welfare functions with distributive weights (Adler 3-6). Richard Zeckhauser, Professor of Political economy at Harvard, in his invited letter, argues that the new executive order should give "significant attention" to issues of "risk" and at least mention cost-effectiveness analysis (1). The letter by Peter Strauss, another colleague, advocates for a broader lens than strict CBA (1-2).
Not all letters from Sunstein's colleagues are equally supportive of CBA. For instance, Martha Nussbaum comments that the goals pursued in regulatory policy are properly diverse and heterogeneous. Nussbaum argues that using CBA as a metric for all these values would be like the Supreme Court giving the U.S. citizens a very large amount of one right in order to compensate for the loss of another. She argues, further, that some costs being paid for today were created by unwise choices in the past. It is an important question as to the nature of CBA's relationship to problems of path dependency. Because of this, treating costs as fixed entities ignores the larger contexts of how the costs were created. Therefore, CBA might fail both because it tries to treat as commensurate what is incommensurable, in her terms will be blind to potential tragedy, and because it might accept as given a chosen end or a cost estimate that is unwise but unwise in a way that CBA is unable to acknowledge (Nussbaum 1).
Among other notable voices that submitted comments are Susan Rose-Ackerman, Frank Ackerman, Daniel Farber, Michael Hanemann and Mark Sagoff. Susan Rose-Ackerman argues that emphasizing CBA "forces analysts to make controversial assumptions simply to produce an answer that "maximizes" social benefits." Further, she states that CBA may obscure the "deep philosophical questions" involved in debates over such central CBA aspects as discount rates. Even so, she argues for "technocratic analysis" that uses CBA, but argues against using it to find single best policies because this aim "forces analysts to make controversial assumptions" in order to produce final answers. In direct response to Adler's letter, Rose-Ackerman argues that the attempt to add "distributive weights" to standard CBA is "fundamentally misguided" and should be resolved transparently by political appointees (Rose-Ackerman 2-3).
Frank Ackerman argues that a holistic analysis of costs and benefits is a better alternative than CBA. In this type of analysis, costs are directly compared to benefits "expressed in natural, typically non-monetary units such as lives saved, illnesses avoided, and environmental resources protected." This is a virtue, he thinks, because it is deliberative and more comprehensible and avoids the creation of "pseudo-prices" (Ackerman ). Farber and Hanemann's comment offers six explicit recommendations: (1) eliminate the use of CBA where statutes mandate a different standard; (2) acknowledge the limits of CBA in the context of climate change; (3) eliminate the required 7% discount rate (they argue it should be closer to 1%); (4) endorse the use of stated preference surveys to measure non-use value in CBA; (5) require transparency in CBA as to distributional implications; and (6) encourage agencies to use more sophisticated methods in situations of high uncertainty (3-17). Finally, Mark Sagoff offers four arguments against any "significant role" for CBA in OMB's regulatory reviews. First, Sagoff argues that there are better alternatives to CBA (these include economic impact analysis, cost-effectiveness analysis, etc.). Second, Sagoff argues that CBA offers no plausible method to measure "benefit." Further, he argues that CBA conflates consumer values with those that are made by citizens, and finally, that "CBAs as experiments are not replicable (Sagoff 6)."
Sunstein's Defense of CBA
Sunstein's “pragmatic” conception of CBA in relationship to administrative regulation is developed in books such as The Cost-Benefit State, Risk and Reason, Free Markets and Political Justice, The Cost of Rights, Nudge, Laws of Fear, Worst-Case Scenarios and various other books and articles. In these works he argues that regulation due to "1970s Environmentalism" did a lot of good but also had a lot of foundational problems. So, while such regulation generally could pass a CBA analysis, specific policies and their coordination showed poor priority setting, irrational allocation of resources and blindness to serious problems. Further, there was a lack of investigation as to the substitute risks that regulation might create ("Cost" 4-6). In light of this, he claims that CBA is useful "pragmatic instrument" to help ameliorate these regulatory problems ("Cost" 6). For Sunstein use of CBA is not in service of an idea of efficiency, but instead as a way to counteract predictable problems in cognition such as mistaken use of heuristics, informational and reputational cascades, and selective attention. In adopting CBA, and through the use of "return letters" for regulations that cost too much in relation to benefits and "prompt letters" that encourage to regulate where costs are low and benefits are high, Sunstein claims that the OIRA can make sure regulations are more justifiable and effective ("Cost" 6-7). So effective is CBA, in his estimation, that Sunstein argues it should command full public consensus as a presumptive baseline for evaluating federal regulations ("Cost" 20).
Sunstein's "pragmatic" conception of CBA starts off pretty simply. Basically, government should attempt to translate benefits and costs incurred from regulations of a "certain magnitude" into monetary equivalents (taking notice of qualitative factors) ("Cost" 20). To survive the test, the agency "should be required to conclude, in ordinary circumstances, that the benefits justify the costs, and to explain why ("Cost" 21)." This, though, is only a presumption and not a straitjacket. If an agency wants to regulate, though the monetary benefits do not justify the costs, then the agency has to justify its decision on other grounds. For example, the agency might argue that incurring the cost is justified because those at risk are children, therefore looking at distributional and autonomy issues. The aim is to utilize scarce resources in a manner that allocates them to the most important problems in the most effective manner.
Once again, Sunstein’s use of CBA is based “on an understanding of human cognition, on democratic considerations, and on an assessment of the real-world record of such balancing ("Cost" 9)." As for the area of human cognition, CBA is claimed to help overcome, or at least bring to light, systematic mistakes in everyday reasoning due to the use of heuristics. For instance, there is the problem of availability cascades where the salience of some event creates the mistaken impression that the event is much more likely than another event that is represented only in a statistical manner. Further, this may be combined with emotional reactions that are, from a CBA standpoint, all out of proportion to their cause. As for democratic considerations, Sunstein argues that CBA accounting creates greater transparency through exposing systemic consequences to the public in a manner that makes inter-regulation comparisons meaningful. In addition, by making CBA analysis mandatory in all cases where the enabling legislation allows it, and requiring it to be publicly disseminated, this policy also helps to avoid the problem of "congressional fragmentation ("Cost" 28)" in that it puts the lights to the back-room reasoning and decision-making out of various congressional committee decisions.
Most central to Sunstein's argument, though, is that CBA creates the possibility of more clearly accounting for risk-risk or health-health trade-offs. Here, once again, the idea is that in a situation of limited resources, regulation in one area might have such high costs that it creates substitute risks in other domains. For instance, costs can come about due to the use of substitutes for the regulated item. Or, the costs might accrue because of the need for various enforcement measures. The problem is that the high costs of risk prevention can actually create risks, potentially even greater risks than those targeted ("Cost" 21). Sunstein argues that when this problem is viewed through the lens of the mistakes in reasoning associated with everyday use of heuristics, the presence of intense interest group lobbying, and the problem of inter-regulation comparisons, CBA becomes a welcome tool in making the whole system more consistent and transparent.
One example of regulatory policy that Sunstein thinks is wanting is a proper acknowledgment of risk-risk tradeoffs is in the realm of environmental law. In Laws of Fear, Sunstein offers a sustained argument against the use of the very popular "precautionary principle." The idea behind the precautionary principle is that in areas of potential harm, and where the results of action is uncertain or unknowable, legislation should be enacted that takes precaution as its underlying goal. But this is, indeed, where CBA shows its true usefulness. As Sunstein Notes, other options such as "prevention" and the "precautionary principle" cannot reasonably account for health-health or risk-risk trade-offs. In fact, once the ever-presence of risk-risk tradeoffs is faced, adoption of the precautionary principle is seen as a recipe for paralysis because there are risks on every side of an issue ("Laws" 14).
To be fair, Sunstein is sensitive to potentials problems with CBA as well and the OIRA has responded, very briefly, to a few of the public comments in later documents. (US/OMB/OIRA 4). He describes his type of CBA as “inclusive and humanized” and emphasizes that it should include qualitative considerations and “soft variables” such as moral, distributional and aesthetic values. Therefore he agrees that CBA should not be used as a arithmetic straitjacket. Further, he notes, as did Lieberman at Sunstein’s hearing, that special interest groups have used often CBA as a way to undercut broad popular and legislative agreement to further their self-interested aims or, more often, to obstruct any regulation. And there is much scholarship that shows that CBA has traditionally overestimated costs of compliance and underestimated benefits. In this light it is repeatedly claimed that CBA is inherently an anti-regulation tool. Of course the fact that CBA analysis was made official in the Reagan EO relating to OIRA would seem to help substantiate this claim. Sunstein, though, thinks that this was a bias of certain specific regimes. Further, through the use of prompt letters, he thinks that the OIRA can actually encourage needed regulation through application of CBA analysis.
Another problem that Sunstein notes is the controversy over proper discount rates. Factors that are unclear are whether one should use investment rates, or highlight pure time preference. There is also the problem of projecting monetary values into realm of non-monetary benefits and deaths ("Cost" 84). Here it appears that CBA can often be used to cover up assumptions rather than clarify them. The argument seems to end up being between two clear numbers, for instance whether the discount rates should be 3% or 7%. This gives the impression that the real disagreement is over the appropriate and "objective" numerical assumptions. This appearance, in turn, helps make invisible that thick assumptions as to value are involved.
Further, Sunstein acknowledges that there are problems with the "willingness to pay" standard - such estimates can be full of serious errors ("Cost" 77). For instance, willingness to pay is a function of ability to pay, thus leading to strange and seemingly unjust results such as that the lives of wealthy people are found worth more that those of poor people. In light of this others have proposed different measures. Richard Posner, for instance, advocates a "willingness to accept" standard because it is more protective of property rights. But, of course, this has its own problems and is the result of given entitlements as well. This debate, in and of itself, is very important and has large implications for the viability of CBA. In standard economics WTP and WTA should be the same in a competitive market, and therefore result in the same costs. But in empirical testing the willingness to accept often diverges greatly from the willingness to pay. And Sunstein argues that there might be good reason for this. For instance, if a person believes they are entitled to make decisions about a forest they might feel justified in setting a WTA much higher than a WTP that results from the alternate assumption that another person is properly entitled to the forest (Sunstein "Free Markets" 250). This, in turn, shows the great influence of baseline assumptions of entitlement and the importance of the conceptual location of the person being surveyed as to values. For instance, as Sagoff notes, a person situated in the conceptual space of "citizen" might come to greatly different conclusions as to value from the same person situated in the conceptual space of "consumer." Importantly, even such a market fundamentalist as Richard Epstein acknowledges an important distinction between "use value" (as the subjective value an owner attaches to their own property) and "exchange value," therefore noticing a type of value that the market ignores (Epstein 91).
Sunstein notes that other factors can drastically change WTP numbers; factors such as involuntariness and uncontrollability of the risk, risks to children, the number of life years (instead of the value of a statistical life (VSL)), "dread risks," relative economic position, who bears costs and who enjoys benefits ("Cost" 77-82) all are important, and all effect WTP numbers. It is unclear how CBA is to incorporate these numbers.
In relation to this type of issue, a part of Adrian Vermeule’s argument offered in his invited letter can be taken as representative. Vermeule argues that “in principle, different people attach different values to life producing different VSLs…However, because agencies’ resources are limited and because tailoring makes it difficult for outside monitors to assess what agencies are doing, the institutional costs of individuating VSLs radically outweigh the benefits.” This point is an empirical one, and is disputed. It may very well be that OIRA's review process would fail a CBA. But, of course, even on more formal terms Vermeule's argument assumes too much. First, it assumes that a type of "meta" cost-benefit analysis is the proper tool to evaluate the “costs” of focusing upon the different VSLs. This is viciously circular, and therefore more an unquestioned assumption than an argument. The question is whether or not the concept of cost in relationship to VSL captures all of the important distinctions. This type of circular reasoning, appealing to efficiency in order to justify the standard of efficiency, is endemic in CBA literature. More directly, Vermeule’s argument ignores the counterargument that his claim of costliness of more discriminating VSLs actually offers more weight to the argument against centralized decision-making. This is because it is exactly the different agencies that are, at least in theory, sensitive to the VSLs of their respective areas of expertise. Indeed, this is the standard argument for administrative rule-making in general. Dorf and Sabel argue for this opposing picture of a "decentered" strategy for regulation very effectively in their article A Constitution of Democratic Experimentalism (283-284). Indeed, this might be thought to be the main reason all regulations are not best made by one centralized agency using a generic "one size fits all" CBA analysis. Localized knowledge is often important and the use of CBA to standardize might thwart expertise in each specific area.
The pragmatic and humanized description of CBA that Sunstein advocates is already showing up in official OMB/OIRA documents. For instance in the 2009 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities CBA is described as a "pragmatic tool" that helps create government transparency, especially when the results of behavioral economics (such as the diagnoses of heuristics) and social norm analysis are included (35, 40).
IV. Dewey and CBA
It may be that Shapiro and Schroeder are correct in arguing that CBA has no real justified place in regulatory analysis and that it just remains entrenched because it serves powerful special interests (446). Indeed, Dewey noted in 1933 that free market ideology has been "constantly combined" with "pork-barrel" government (Dewey LW:8 57). Further, we might want to be very cognizant of the way that use of markets shape both society and the individuals within it - possibly creating "moral deficits" (Stiglitz 276-278) or a defeatist psychology due to the belief in a type of economic determinism (Dewey LW:5 46, LW:8 63). That being said, it seems more justified from a Dewey-inspired pragmatic, incremental and pluralistic perspective to accept that CBA has some place in evaluation of regulations and, at the very least, can help coordinate regulations across the Federal Government's administrative realm. First, as Dewey states "interest in technique is precisely the thing that is most promising in our civilization (LW:5 55)." Further, as Sunstein claims, and as James and Dewey would certainly agree, there is a pragmatic justification for trying to coordinate agency rulemaking through the use of CBA as a tool. "Cash value" must be noticed and "those ideals must be written highest which prevail at the least cost, or by whose realization the least possible number of other ideals are destroyed (James 205)." This also relates to Dewey's characterization of a "public" as being necessitated by the externalities of associated behavior (Dewey LW:2 252). In addition, as Jayne Tristan notes, according to Dewey's own philosophy the use of measurement, of quantification, marks "a fundamental difference between ancient Greek conceptions of science and scientific practices today." Indeed, for Dewey measurement is very important in producing secure knowledge (Tristan 202). As Dewey puts it, "No scientific proposition which records the processes and results of observation and experiment is complete unless process and results are stated in numerical form (Dewey LW:12 201)." But even here, if CBA is accepted as a central tool, as a preemptive baseline, there are potentially serious problems. Measurement must be properly related to the subject matter investigated and tools of measurement are subject to revision in light of results (Tristan 206). And, as James' quote makes clear, we are dealing with ideas, not just the purchase of inert (non-conceptualized) goods and services. A good example of the fact that knowledge and ideas drive how markets signal prices is the, until recently at the very least, obvious economic undervaluation of environmental resources (Stiglitz 192, see also Dewey LW:2 251). Issues such as these (in addition to the standard market problems of transaction costs, monopolies, and limits to human rationality) need to be addressed if CBA is to be legitimate in its role of policy workhorse that it has come to be within the OIRA, the OMB and, therefore, within the US government as a whole.
For instance, distributional issues are very difficult to handle using standard CBA. First, this is because when transferring goods from one entity to another in crude CBA terms no costs or benefits have been incurred. But, of course, in the real world there are transfer costs and issues of social uncertainty. Further, there is a larger and more conceptual issue, due to the fact that under standard CBA, market entitlements are taken as given in the calculation of cost. That is, a distribution must be taken for granted in order to generate costs at all. But, as Dewey notes in the quote at the beginning of this paper, this takes a constructed system as a given and therefore represents an "abnegation" of human intelligence if accepted without critique. Dewey does not accept that markets are by definition rational or "natural" and thought such ideas a type of pernicious myth (Dewey LW:4 169, Hands 264). By using the language of law and nature, economists were wrongly treating hypotheses as unchanging truths (LW:12 499). But for Dewey, markets, and the entitlements within the markets, are human constructs. And, if markets are constructed, the "givenness" of accepted entitlements and their "natural" results in cost terms should be held suspicious. Because of this a pragmatic use of CBA should incorporate flexible means with which to identify and analyze distributional effects. Market costs are plainly insufficient to note the full nature of distributional issues.
Further, and as highlighted by distributional matters, the controversial nature of the assumptions used to justify decisions under CBA needs to be intentionally fore-grounded. For instance, some advocates argue for the use of CBA, and against the use of more substantive values because, as Susan Rose-Ackerman states, many of these values are thought to turn on “deep philosophical questions” and, therefore, do not have “right” answers.” As opposed to these deep and contestable values, it is assumed that CBA values are more readily accepted. This assumption seems quite dubious. First, assuming that CBA is non-controversial over a number of public issues is empirically false. In fact, in the U.S. at least, human beings often see themselves in the role of citizen as opposed to consumer. In the role of citizen some values are accepted almost universally, and a stance that is properly controversial from such a "citizen's" perspective is that of seeing everything as rightly structured by market transactions. In other words, that some human interactions are best not thought of in terms of contract and sales seems generally accepted. Indeed, the conclusion that CBA uses less controversial values gives ways too much away to the CBA side of the argument. Both the idea that CBA values are non-controversial and the idea that most other values that could be used in regulatory decision making are deep and therefore essentially contested is simplistic and empirically false. For instance, a "wrongful death" is universally accepted as a moral harm, and not because of the loss of market value. Indeed, often times moral values are uncontroversial - in fact it may just be because selection bias that moral values seem less agreed upon than market values (moral theorists, that is, generally look to moral controversy in order to construct arguments whereas market theorists generally emphasize areas of agreement so as to advocate a specific analytical tool). A pragmatic use of CBA would take notice of this, and not use cost as an unquestioned and neutral baseline concept. Dewey is helpful here because his philosophy starts with a social baseline of democratic habits and allows for the use of market ideals within a larger and more experimental, constructive and pluralistic conception of social activity. The "public" comes into being when social actions create effects that are perceived as needing control, some of these effects might be thought of as costs, but it is not necessarily true that all can be cognized properly under this rubric (Dewey LW:2 252).
For instance, it may be that there is a significant and important distinction between the concept of "cost" and that of "harm" that CBA cannot handle (Simpson 20). That is, not all harms can be thought of as costs, and not all costs are renderable simply as harms. It seems quite different to say "I had to pay the costs for x" as opposed to "I had to pay the harm for x." Once again think of the example of wrongful death. It seems much more apt to describe a wrongful death as a tremendous harm rather than a cost (especially to the person killed). Further, it is important to acknowledge that the concepts of “benefit” as well as that of “cost” are not as clear as normally represented by advocates of CBA and that not noticing this has the potential for creating significant blind spots. For support of this, there is Sagoff’s claim – which is that CBA analysis, in reality, offers no plausible method to measure “benefit.” Certainly benefits come in other forms than money? Further, he offers telling evidence that CBAs are not empirically robust in their conclusions in that inconsistent results - that is inconsistent measurements of both costs and benefits - are the norm. This should be a pretty telling objection.
Indeed that the concept of “cost” is difficult to satisfactorily pin down comes out clearly in The Cost of Rights, where Holmes and Sunstein define costs simply as “budgetary costs” to avoid the acknowledged conceptual difficulties. But even here there are problems. These arise due to the obvious fact that budgetary costs are largely if not totally constructed through the system of rights (and therefore entitlements) that are being assumed by the theory. The concept of “cost” is, therefore, anything but neutral, and markets are not given Platonic entities that the world can ascend to in order to analyze rights from a more unassailable position. Entitlements will create the ownership traits of specific markets, which in turn produce cost measurements, and cost measurements will in turn affect the creation and protection of entitlements. This is just to admit that there is no entity called “the” cost (as opposed to a simple physical event) unless society recognizes a disutility as such - and, as Dewey emphasizes, effective recognition requires conceptual recognition. And to admit, more narrowly, that monetary costs are a function of assumed and enforced entitlements highlights how important baseline assumptions are to the whole CBA enterprise. Otherwise, once again, WTP and WTA would function identically. In addition, if costs are defined broadly and inclusively (as Sunstein does in many of his writings), then we have to acknowledge the fact that costs will be a function of present knowledge and of present conceptualizations, neither of which is static and unchanging. Further, a pragmatic use of the term "cost," as Dewey would allow, would have to look to the historical evolution of the concept and not treat it as timeless; by contextualizing the term "cost" and then looking at the purposes to which it had been put in earlier contexts, a more nuanced conception of the term can be constructed. Finally, as Nussbaum emphasized, a historicized and contextualized understanding of costs and benefits would have to look at earlier decisions and other factors that caused present costs and benefits to have come about. This would at the very least bring into consciousness in the CBA process the inherent path dependency and historically constructed aspects of cost measurements.
Further, and just as fundamentally, explicit recognition should be made, as Nussbaum argues in agreement with the pragmatic tradition, that values are heterogeneous, diverse and often incommensurable (Dewey would also add "unique" to this list). Nussbaum's example is very important; It would indeed be thought absurd if the US government were to give various CBA values to the rights protected in the Constitution in order to play them off each other in terms of willingness to pay, accept, etc. For instance, it seems absurd to allocate free speech and voting rights upon WTP. While slightly less absurd, it might be thought equally mistaken to think that agency regulations are all to be “rationalized” by using CBA, WTP, etc. as the way to coordinate regulations between them. Yes, a complete ordering is not necessary, but this doesn't answer the question as to how to come to the necessary amount of ordering, of arriving at the proper "cost" units for measurement. If commensurability is questionable, any ordering along the lines of one metric becomes questionable. Further, Nussbaum's insight that the "costs" of today are due to choices of yesterday is also important. Dewey would add that values are historically constructed as well (Dewey LW:2 335). If market activity is (rightly) seen as a worldly process and not just a simple mathematical/theoretical combination of demand and pricing, historical analysis becomes essential (see also Boettke, , Lavoie and Storr 330). Tellingly, Nussbaum's critique is ignored (as are many others) in the only US/OBM/OIRA published response to the public letters critiquing OIRA's use of CBA (85-86).
Finally, there is a further and exceedingly important claim that standard CBA rules out "exploratory choice behavior" - that is, learning what we want to want through exploration (Blaug 231). CBA, according to this critique, relies upon the idea of given fixed ends that are specified clearly enough to be evaluated as discrete options. But, it has been argued quite convincingly by Henry Richardson (in agreement with a central insight of Dewey) that this assumption is a fantasy. Most practical reasoning involves both a choice of means and a clarification/evaluation of ends. Inquiry affects both the means and the aims and both are uninformed without the other. Informed desires are essentially different from raw desires. And, once again, desires are not to be taken as a static given. In actuality when in pursuit of an aim, that aim gets informed through an awareness of the means necessary. Conversely, means can often times become so important as to be converted into an aim desired in and of itself. Of course at other times the means are so burdensome that the end will be greatly modified or rejected. Further, as Dewey continuously emphasizes, creativity is important for both recognizing social responsibilities as well as for constructing more enriched and inclusive futures; "Imagination is the chief instrument of the good (Dewey LW:10 350)." In that CBA might tend to encourage the acceptance of the given in entitlements, methods of evaluation, and objects of valuation, its adoption as a "presumptive baseline" for federal regulations could harm the chances of more proactive and constructive legislative solutions. By accepting the given construction of costs - of trade-offs - the potential to harmonize, meliorate, to reconceptualize or to imaginatively construct other options is greatly discounted. Active inquiry is, therefore, converted into passive counting. Ironically, this might represent a huge cost entailed by the adoption of CBA as a presumptive baseline tool to evaluate federal regulations. At the very least it might point towards a willingness to be less attached to a CBA ex ante, as opposed to ex post. If CBA is used more as a tool for harmonizing and analyzing regulations after they have been tried out then CBA becomes a tool within a more experimental regulatory regime. This, of course, would also make CBA more empirical in application.
The above argument points to the need for the construction of a Dewey-inspired CBA (or at the very least a Dewey-inspired critique of CBA). This project would accept the basic pragmatic framework of experimentalism, historicism and fallibilism. It would also accept the basic premises offered for the adoption of CBA analysis: the need for systemic tools in governmental regulation, the ever-presence of tradeoffs and the need for some general and quantified metric of evaluation in order to further governmental transparency. Given these aims and the noted limits to the use of CBA as a central tool there should be some attempt to list many of the multiple and diverse values recognized in the political context so that the whole regime does not get divided up into cost/benefits and “other values" (including so-called qualitative and "soft variables" so important to legal scholars such as Laurence Tribe (1329)). The "humanized" CBA that Sunstein advocates offers a good starting point from which to construct a proper CBA informed by the insights found within Dewey's pragmatism. For example, Sunstein's investigations of behavioral economics as well as his emphasis upon the power of transparency and utilization of the internet are excellent examples of how a more experimental and creative CBA might be constructed. But Sunstein doesn't fully acknowledge the critical insights offered or utilize the tools developed by Dewey's philosophy, and therefore his version of humanized and pragmatic CBA is not nearly pragmatic enough.
Because Cass Sunstein is head of the OIRA, and is backed by Obama, the United States might take another step towards becoming more centralized around CBA principles. This has far-reaching consequences in health, welfare and environmental law. Indeed, the central place of CBA in federal governments was reiterated in Executive Order 13514, "Federal Leadership in Environmental, Energy, and Economic Performance," 74 Federal Register 52117, Oct. 8, 2009, where Obama emphasized the centrality of CBA, stating that it is the policy of the United States that "agencies shall prioritize actions based on a full accounting of both economic and social benefits and costs and shall drive continuous improvement by annually evaluating performance, extending or expanding projects that have net benefits, and reassessing or discontinuing under-performing projects." It is to be celebrated that Cass Sunstein has done so much work investigating the virtues and limits to CBA in the realm of agency rulemaking. Further, Sunstein's humanized and pragmatic CBA is a great improvement upon standard CBA practices. On the other hand, CBA as a tool has real limits, and awareness of these should not be relegated to afterthoughts and footnotes. A pragmatic construction of CBA informed by the insights offered in Dewey's philosophical work must combine the virtues of CBA analysis with a recognition of diverse and possibly incommensurable values, the need for flexibility, and a context-driven, creative, exploratory and experimental attitude attached to a world in the open-ended process of construction. From a pragmatic stance this all might be summed up by stating that markets can signal, but they cannot learn. Or, from another perspective it might be best described as the difference between a means-end conception of rationality and rationality as experimental. In this case CBA might have to become more retrospective, allowing for creative legislation as experiment and then collecting data after the fact (Viskovatoff 285). This would also help avoid the "innocuous falsification" problem that Blaug thinks endemic to economic method (111). Either way it seems clear that a pragmatic conception of CBA loses some of the perceived neatness and certainty of CBA constructed along the lines of dogmatic free-market or, as Dewey would put it, laissez faire doctrine, that sees CBA as an mechanical method with which to derive objective and fully quantified costs and benefits. What CBA gains, though, is empirical accuracy as a tool used in making important decisions in the complex arena of the contemporary regulatory state.
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 Hereafter references to Dewey's works will be cited as follows: MW for The Middle Works and LW for The Later Works and then volume number. These are the divisions made within The Collected Works of John Dewey.
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