The Rule of More

February 29, 2012

Over the course of President Obama's years in office, the creation of new federal regulations has accelerated unabashedly, consistently leveling new costs on consumers and businesses alike in the name of aggregate benefit.  However, further investigation finds that justifications for new regulations are increasingly concentrated into two areas that are untrustworthy, says The Economist.

  • Co-benefits via reduced fine particles -- regulations controlling emissions of certain compounds also claim the side-benefit of reducing overall particles, thereby claiming substantial health benefits.
  • Private benefits of energy efficiency -- net gains of private actors, including regular consumers, from a given regulation insofar as it augments the efficiency or ease of their regular activities.

This first type of benefit can be seen in the justification for the new U.S. Environmental Protection Agency-mandated standards for mercury emissions.  The policy claims benefits worth $90 billion, yet less than .01 percent of these benefits actually stem from reducing mercury -- the rest is supposedly attained by reducing fine particles.  This demonstrates several dangers of these co-benefit claims:

  • Regulations can be proposed that ostensibly target a given contaminant while they have little intention of achieving that end in reality, misleading the public.
  • This inherent lack of transparency is compounded by the lack of supporting data quantifying the net health effects of these policies.
  • Two-thirds of the benefits of economically significant final rules in 2010 were thanks to reductions in fine particles brought about by regulations that were actually aimed at something else, according to Susan Dudley of George Washington University.
  • That is double the share of co-benefits reported in President Bush's last year in office in 2008.

Private benefits from energy efficiency also stand on dubious grounds, relying on overly generous benefit assumptions while downplaying economic costs.

  • Ted Gayer of the Brookings Institution notes that private benefits such as reduced fuel consumption account for 90 percent of the $388 billion in lifetime benefits claimed for last year's new fuel-economy standards for cars and light trucks.
  • They also account for 92 percent and 70 percent of the benefits of new energy-efficiency standards for washing machines and refrigerators, respectively.
  • The problem is that, provided the information, these benefits would have been chosen by consumers with no government prodding -- the fact that regulation is necessary suggests that consumers do not want to participate, undermining the justification.

Source: "The Rule of More," The Economist, February 18, 2012.

For text:

http://www.economist.com/node/21547772

 

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