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0:01
Good afternoon, everybody. Sorry there are not enough seats. There are some empty seats scattered at the tables. So if you're at a table with an empty seat, raise your hand, and maybe some of our friends in the back can find their way to a seat. I see a couple seats here. Good afternoon. I'm Jocelyn Kennedy. I'm the Executive Director of the Harvard Law School Library. Thank you all for coming today's book talk. Before we begin, I want to thank the dean's office for lunch,
0:26
and let you know that copies of the book are for sale. Although they're getting low, right? So if you want one, make sure you get out there. And I also want to let you know that today's talk and the Q&A period is being recorded, so you're on notice that you are being recorded. It's my pleasure to introduce the author of today's book. Cass Sunstein is the Robert Walmsley University Professor of Harvard and the Founder and Director of the Program on Behavioral Economics and Public Policy here.
0:56
He was the 2018 recipient of the Holberg Prize, which is one of the most prestigious prizes for research. So congratulations, again, on that. Professor Sunstein has published numerous articles and books, including Risk and Reason, Why Societies Need Dissent, Laws of Fear: Beyond the Precautionary Principle, Nudge: Improving Decisions About Health, Wealth, and Happiness, and Conspiracy Theories and Other Dangerous Ideas. He joins us today to discuss and I
1:24
think to read from his new book, The Cost-Benefit Revolution.
1:30
[APPLAUSE] Wow. I'm amazed that so many people are here. But the book does have revolution in the title, so how boring can it be? This is actually something I've been working on for about 25 years. It went slowly. And it started out as one kind of book and became another kind of book. It was originally a book about the importance of focusing on human consequences. So the idea was that we often, in thinking about law, including things that involve fundamental rights, focus on values.
2:17
And that's essential. You can't think about consequences unless you know what values you hold. But to think about what the concrete impacts on actual human beings are is kind of the beating heart of the book. And that is connected with something maybe a little more jarring, which is a claim that in this week and next year and the 2020 election, we will be thinking that what separates us are values. But across a very wide terrain, what really separates us are judgments about fact.
3:02
And the book highlights that, and that is almost the secular equivalent of a religious conviction on the part of yours truly. And that is kind of the original theme of the book. It gets, I think, a little more detailed, but that's the idea. As I did the book-- that is, in the last three years as the book became a book-- something poked out, which I didn't expect, and that is a series of objections to cost-benefit balancing. And kind of against my wishes, there
3:42
was a ghost book that was an insurgent, a rebel that was saying, this is not adequate. And by 2020 whatever, we'll do better. And so it's two books in one, and they're kind of fighting with each other. I'm just going to-- with your indulgence, I'll try to give you a sense of what the core claims are. And in some ways, I'm extremely alert to the fact that in American government today, there are kind of loud things going on. But daily, people are working on environmental policies.
4:26
The Trump administration has recently reaffirmed some really important health and safety and environmental policies by its predecessor administration quietly, but in part on the grounds that the human consequences-- it doesn't matter if you're Republican or Democrat. They justify what was done. And that quiet, often central work, which is crucial to whether people are going to live and die in the next five years, that's done under the framework of let's call it the first book.
4:59
That is the celebration. OK. Here's two epigraphs. One is from John Stuart Mill. "I must again repeat what the assailants of utilitarianism seldom have the justice to acknowledge." So Mill's mad to talk in those terms. "Seldom have the justice to acknowledge?" That's personal. Mill's on fire. "I must again repeat that the happiness which forms the utilitarian standard of what is right is not the agent's own happiness, but that of all concerned. As between his own happiness and that of others,
5:36
utilitarianism requires him to be as strictly impartial as a disinterested and benevolent spectator. In the golden rule of Jesus of Nazareth, we read the complete spirit of the ethics of utility." Now that's Mill going back to the New Testament. "To do as you would be done by and to love your neighbor as yourself constitute the ideal perfection of utilitarian morality." That's Mill. The second the epigraph is from Emma Goldman. "If there won't be dancing at the revolution, I'm not coming."
6:19
OK. "Americans Europeans South Americans Chinese Russians often have clear intuitions about social problems. They might be alarmed about illegal immigration, unsafe drinking water, genetically modified organisms, terrorism, climate change, or sugary drinks. They might want a measure like a wall or a sugar tax that will reduce the risks. They might not feel strongly. They might not be concerned about some of these issues at all. They might be puzzled about why other people are so worried.
6:59
They might think that their fellow citizens or people in other nations are off the mark, even nuts." And I did get the word nuts through the editor. I think that's-- university presses don't like that word, but there it is. There might have been another worse word in an earlier draft. "Arguments about public policy are often expressive. People focus on their values. They use simple cues. They like initiatives that reflect the values they embrace, or that reflect their conception
7:35
of their identity. And boy, we're seeing a lot of that. If the issue involves the environment or immigration, many people are automatically drawn to one or another approach, and many others are automatically opposed. When they think about immigration or the environment or labor, they might ask, what side are you on? In this light, it's tempting to think that Americans, people in Germany or France or Italy, aren't divided about facts at all, but about values.
8:11
If so, it's no wonder we have a hard time overcoming divisions. Kind of the demon of this book, what I mean to combat is expressive approaches to policy issues, including issues of law. Contrary to appearances, the issues that most divide us are about facts, not values. Not always, but often enough. Take the question of highway safety. In 2016, over 35,000 Americans died in motor vehicle crashes. That number is crazy high, and some imaginable approaches would help.
8:50
If we could agree on the facts, we should agree on what to do, or at least our disagreements should be narrowed greatly. Climate change is a tougher one for me, isn't it, on this round? It seems to be about values. But agreement on the facts would surely help identify reasonable paths forward.
9:13
If in climate change we all knew that a warmer globe is going to happen if we don't do things, and if we knew that the warmer globe would cause human devastation, or not, if we knew the opposite, than we'd find it much easier to agree on how to proceed. Cost-benefit analysts ask, what are the good and bad effects of regulation? If we know that an effort to increase highway safety is going to save 500 lives annually and cost very little, who would possibly be against it, whatever
9:48
our theoretical commitments? If we knew it would save two lives annually and cost hundreds of millions of dollars, we might not want to go forward with it, whatever our theoretical commitments. Cost-benefit analysis reflects a firm and unashamed commitment to a technocratic conception of democracy." It's hard to write the word "unashamed" before "a technocratic conception of democracy," so the author struggles to be unashamed. Proud proud. "The public is ultimately sovereign,
10:23
but for good reasons, people who know, who have specialized expertise are given authority by the public itself. Citizens know, and we actually have data on this, that they lack the background or the time to answer tough questions about food safety, carcinogens in the workplace, and air pollution. Cost-benefit analysis insists that the hard questions of fact should be answered by those who are in a good position to answer them correctly. Scientists and economists can help us
10:55
get a handle on consequences." I'll confess that in the US government, two of my favorite offices might have been the Office of Science and Technology Policy and the Council of Economic Advisers. And the reason is that they were extremely unpredictable. The scientists in the Office of Science and Technology Policy could come in on Tuesday and say, you know, that carcinogen reducing policy is dumb, because the science behind it is weak, and it's not going to do much for human health.
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And they said that in White House meetings. The Council of Economic Advisers might say, you know, this one, it looks kind of like left-wing mania. But if you look at the data, it's really solid. The facts suggest that the costs are low, and it's going to save 400 human lives every year. Go for it. And then on a Friday, they could flip sides. It was fact-based policymaking. "These claims, I know, raise doubts. Who are the experts? Can we trust them? Aren't they vulnerable to interest groups?
12:07
Might they be ignorant or foolish too? Fair questions. But let me offer two suggestions. The cost-benefit revolution--" which President Obama as well as President Reagan-- they're probably the two heroes of the revolution-- "requires regulators to demonstrate a genuine need for government action. They have to identify a market failure that means the government should act. The cost benefit revolution has the advantage of forcing officials to ask the right questions in domains
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in which it's been on the ascendancy--" that is, that form analysis-- "including energy policy, obesity, food safety, and occupational health. Whether or not an analysis of costs and benefits tells us everything we need to know, at least it tells us a great deal that we do need to know." A little tale from the White House. There was one period under President Obama when the regulatory foot was on the brakes, and for good reason. The economy was struggling greatly.
13:15
And we all had a meeting with a regulation that I quite liked, and the tenor of the room was inhospitable. The idea was, you know, we're trying to get over a terrible recession, and economic growth is the goal. Not more regulations. And I completely agreed with that. But this one seemed to be a winner. The room was very unwelcoming, my argument. And then I pulled out some numbers which showed it would save hundreds of lives and the costs wouldn't be very high.
13:48
And the room stayed not that excited, but one of the president's advisors-- the president wasn't there personally-- said, what are we here for? And then said, it's going to save 300 human beings every year looks like, and it's not going to cost that much. And that completely turned the room around. What was noteworthy was the numbers drove the decision. And I'm told that in Republican administrations, when the regulatory foot is on the brakes, the same thing happens not infrequently. OK.
14:20
"Consider a question that's attracted a great deal of attention in the United States after the election of President Trump. Should the United States, in fact, build a wall between itself and Mexico? One issue-- it doesn't have to be a key issue-- is the cost of building the wall. Let's not be expressive either way. Another question has to be the benefit. What's the wall going to do in terms of crime and other adverse effects? We might not be able to obtain full answers
14:54
to these questions, but how can we possibly assess the wall without asking those questions? OK, celebrations are backward-looking." And the book does a lot of looking back. "But it's more important, yes, to look forward? Here are three concerns about the cost-benefit revolution. The first involves distribution and distributive justice. Suppose we knew for a fact that an occupational safety and health regulation is going to cost a ton, meaning the consumers are going to have
15:28
to pay a lot because the goods are going to be more expensive. Not individual consumers, but on balance, let's say it's a billion dollar regulation. Let's suppose the benefits are smaller, because workers are going to enjoy increased safety in a monetized amount that just doesn't justify that billion dollar expenditure." I'm bracketing for now the difficulty of how to monetize. Let's just bracket that. "In terms of overall cost-benefit analysis, it's not looking very good.
15:59
But suppose consumers, the relevant consumers start off pretty well, and the workers don't. Maybe they're struggling in terrible ways. If a regulation is going to hurt those who are doing just fine and help those who are doing extremely poorly, maybe it's justified on distributive grounds, even if it fails the cost-benefit test. That seems right to me. It's a complicated set of justifications that would earn that conclusion. But it's not a fundamental objection to cost-benefit analysis.
16:35
It just suggests that we want to supplement the analysis with consideration of who's being helped and who's being hurt." Here's a practical point that stunned me. I confess, I didn't expect this at all. I went into the White House excited about the point you've just heard. In my four years in the White House when about 4,000 regulations were under discussion, I saw very few that failed cost-benefit analysis but look good on distributional grants. I can't think of four that fell in that category.
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A surprise. It suggests that the point has immense theoretical importance, but is less important in practice than you think. That I would have thought. OK, here's the second concern. Let's called it the knowledge problem, which means that the government just doesn't know. OK, suppose you have a disclosure requirement by which people are going to be informed about the fuel economy of cars or about the caloric content of food at restaurants.
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How can the government know what the economic or health impact of fuel economy labels or calorie labels are? It's really difficult. That is something which will be, I think, increasingly soluble over time as machine learning and data collection gets much, much better. But often, government is facing an epistemic problem, a serious one. And a big challenge for the next 20 years is what to do. When I was working on an advisory group at the Defense Department, there were someone from Silicon Valley
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who was there. And I said to him for Defense Department initiatives, we should look at costs and benefits, the best we can. And I thought he'd nod happily. Silicon Valley. That's what they do, yes? He looked at me as if I was from the 1920s. Said no. I thought, what? Is he a zealot of some kind? He said, that's all not what we do. I said, well, what do you do? And he said, we measure and react in real time. He said, we can't project costs and benefits. We don't know enough.
19:00
So we do something, we pilot it, and we check. Measure and react. Increasingly, the government is going to be in a position to pilot things, test things, and not rely on speculative, before-the-fact expostulations about what's going to happen. OK, the third problem, a little more academic but the most fundamental, which is the possible disconnect between focusing on human welfare and focusing on costs and benefits. If we had a welfare meter by which we
19:33
knew whether people's lives are being made better by what government does, that would be much better than a before-the-fact specification of costs and benefits. If this seems bookish, I'll give you an example from real life. The Trump administration recently agreed with the Obama administration's requirement that all cars in the United States should be equipped with rearview mirrors so you can see behind you and avoid backover crashes. I'm on a little bit of a mission right now,
20:06
I confess, in nations all over the world if it's economically reasonable for them to adopt the backover crash rule. Cameras in all cars. And the reason is that it reduces accidents and it saves lives. But on cost-benefit analysis grounds strictly, in some countries, it's going to be a little shaky. And here's why. And this is true of the United States also. On plausible assumptions, the costs are higher than the benefits. The reason is the number of lives saved isn't that high.
20:43
We're talking dozens, not hundreds. The number of accidents averted is high, but it's usually property damage, and it's not that expensive. And there's a shortfall. So on strict cost-benefit analysis grounds, it's not a clear winner. But on human welfare grounds, it starts to look better, and here's why. The people who are killed in backover crashes disproportionately are children between the ages of 1 and 4. The people who are killing those kids typically are their parents.
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The standard assessment of the benefits of saving a human life are missing two things. One is the unspeakable anguish of a parent killing his or her own kid, and also second, the unspeakable anguish of a child of the age of 2 dying in a driveway. I'm here to tell you that the Council of Economic Advisers consisting of the technical people was not skeptical of this rule. They said, we don't know how to turn that into an economic equivalent yet, but that's a human welfare gain, and it's big.
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And the Council of Economic Advisers people also said, look. People are going to be parking and driving more happily because they can see in back. Even if there's a lower bound that's, like, $7, let's say, a year for that ease of driving, multiplying that times the number of cars that have the cameras, it's starting to look really good. We're making up the shortfall. These are academic exercises that occur in government offices, but they are driving home a pretty fundamental point.
22:31
That is, the outcome of cost-benefit analysis in some cases won't tell us all we need to know about costs and benefits. I'm sorry, of welfare. Welfare is the champion here. Cost-benefit is a proxy for welfare. OK. Here are some words from the conclusion. "Writers of fiction say that their stories take unanticipated directions, that their characters seem to have wills of their own, producing plot developments they could not possibly have expected." Writers of music say exactly the same thing.
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I wrote a song this morning in the shower. It's really good. It's a rock song. OK, it's a rap song. And I didn't expect-- no, you're feeling really embarrassed for me. I did not write any such song. But on the rare occasions when people I know write songs, they're sometimes surprised by where they go. "Sometimes the hero turns out to be a bad guy. The fiction writer didn't intend that. Sometimes he falls for the wrong woman. Writers of nonfiction say the same thing.
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They begin with an argument in which they have a lot of confidence, but as they develop it, they learn that it's fundamentally wrong. This book, as noted, was supposed to be an essentially unambivalent celebration of the cost-benefit revolution. It turned out to be something different from that. Economists like to say that the perfect is the enemy of the good. John Dewey responded, 'The better is often the enemy of the still better.' After a while, celebrations get dull,
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there's too much work to be done. For now and for the future, the real questions are the limits of the cost-benefit revolution and where we go from here. There are two points that emerge above all. The first and the biggest is cost-benefit analysis is a proxy for welfare effects and can't tell us everything we need to know. If a regulation creates job losses, it will have devastating effects on people's well-being, even if cost-benefit analysis does not recognize that fact.
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People lose their jobs, suffer serious harms, psychological as well as economic. Right now, cost-benefit analysis ignores that. Perhaps it should be amended to take that harm into account. Perhaps regulators should accompany cost-benefit analysis with an analysis of unemployment effects. It's tempting to rest content with the proposition that a cost of $1 billion just is a cost of $1 billion. But in welfare terms, there's probably a big difference between a situation in which that cost is
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imposed on a small number of people and a case in which 250 million people have to spend $4 each. The latter is in terms of welfare a modest impact. The former is crushing. I'm not sure how to figure out exactly how to treat the case where 250 million people spend $4 each, but it's clear that the welfare effect is likely to be much smaller than the cost. If a workplace safety regulation imposes $900 million in annual costs and delivers $700 million in annual benefits, it seems unjustified, yes?
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$200 million to lose. But the welfare losses might be dwarfed by the welfare gains. The people are winning $700 million in annual benefits. Maybe they're alive, maybe they're not sick. Their lives might be much better. And the people who are spending $900 million might be just a little bit worse off. In cases of this kind, the monetary figures might give us the wrong answer, even if we're focused on the actual-- if we're focused, as we should be, on the actual effects on people's well-being."
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Can I tell you a little story from the White House? I think it's in the book. There was a regulation from the Department of Justice. It turned out to be the most important Americans with Disabilities Act regulations in two decades. President of the United States personally announced from the Rose Garden the regulations. That doesn't happen a whole lot. That shows the magnitude of the regulations. One part of the regulation was very questionable on cost-benefit grounds.
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It allowed people who use wheelchairs access to bathrooms in new buildings. Expensive, and the monetized benefit of getting those good workers there, it was real, but there was a couple hundred million dollar gap. It didn't justify the cost. The Department of Justice said to the rest of us, this is what we want to do. And you know, working under a cost-benefit executive order I said, it's a problem. It doesn't look justified. And the Department of Justice official said to me, well,
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what about human dignity? President had personally called out human dignity, an executive order. And they said, you know, these are people who are going to be able to use bathrooms without asking their colleagues to help them. That's a benefit. We can't monetize it. Now that sounds-- and I bet some of you are reacting as if it is-- a decisive response, a completely convincing response. It's important, but it's not decisive, because dignity doesn't have infinite value.
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If there are two people in America who are going to be able to use bathrooms now and the expense is a billion dollars, dignity is good, but it doesn't justify that expenditure. So as the discussion worked, the Justice Department had to get back to paper. Meaning, do some analysis. And what they ended up doing was saying that if the dignitary value for wheelchair users was basically in the pennies, couple pennies, maybe less, it was worth it. That would justify the shortfall.
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And when everyone saw those numbers, given the number of users, we thought-- we don't know what dignity's worth, but pennies to be able to use the bathroom yourself, that sounds very reasonable. And that was a way of showing the cost-benefit figures did not capture the welfare effects. OK. I've mentioned also the knowledge problem. Cost-benefit analyses are predictions, and sometimes they're wrong. For those of you who are fans of Hayek-- and we all should be fans of Hayek.
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He was the greatest critic of socialism ever. He said, there's a knowledge problem that planners face, and socialism is bound to fail, not because it's poorly intended or people are corrupt, but because price setters can't possibly know what markets know. That was high [INAUDIBLE] objection to socialism. Not as Oscar Wilde said, it'll take "too many evenings." But instead, you're going to screw it up, because you don't know what markets know,
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because markets incorporate the knowledge of so many people. There's a similar objection to cost-benefit analysis. "I never saw not even once evidence on behalf of the widespread belief that agencies cook the numbers. I just read officials in the Trump administration and in the Wall Street Journal saying that agencies cook the numbers. I confess, I didn't see it once. I don't believe it's true that they do, at least not after the numbers go through the process that produces the things
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that the public sees. At the same time, agencies definitely make mistakes. We know they sometimes overestimate costs and they sometimes underestimate them. Sometimes benefits turn out to be much bigger than they thought, sometimes much lower. Unintended consequences are common." Can I give you an example that I know a lot more about now than I did when I was in government? The electronic health records required by the Affordable Care Act we all anticipated as a fantastic thing for doctors
31:13
and patients where everyone in this room who consults a doctor here, there's going to be an electronic record so that we can know health situations accurately and so that people don't have to guess what things were like way back in 2018. It's there. It's recorded. And it could be shared and make health outcomes better. It looks like the law is working. Basically, it is working. But what we missed was the problem that doctors are finding that they
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have to spend less time with their patients and more time entering information into the damnable computer. I was involved in countless discussions of that issue in government, and not one person raised that problem. We didn't see it. How can the knowledge problem be addressed? First, public comment is essential, not because of some big abstraction called legitimacy, but because the public will often have valuable or even indispensable information. The doctors knew that.
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Now after we put it out for public comment, then the information started to pour in, and that was really important. Both President Trump and President Obama have been enthusiastic about after-the-fact retrospective review of regulations, and it's generated substantial savings. It should be much more systematic. The most exciting and intriguing approach is what I learned from Silicon Valley. That is, tracking the outcomes of highway safety or food safety rules in real time.
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Measure and react is a great model for business and political campaigns. It directly addresses the potential crudeness of before-the-fact projections. For some issues, it's not possible, like increases in heart disease and cancer produced by air pollutants, but maybe we'll be able to get better on that too with machine learning. Even when measure and react isn't feasible, we are increasingly able to get a sense pretty quickly of important variables including cost and proxies
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for long-term effects. Modern technologies are offering astonishing opportunities for using measure and react to overcome Hayek's problem. OK. Since the 1980s, when President Reagan started all this stuff--" and I'm almost done-- "cost-benefit analysis has made governments work much better than they did before." I dealt with European governments, by the way, and I was struck by extremely well-motivated initiatives involving energy efficiency where the explanation would
34:12
often be, this was a compromise among relevant interest groups. That we got them in the room, and this was what they agreed to. And this was said enthusiastically, as this was a good process. But how do we know that the point arrived at by the compromise is the right point from the standpoint of the various things that energy efficient appliances do? We can't. "When the analysis is done properly and when high-level officials are acting in accordance
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with it, we're getting closer to the point that maximizes human well-being. In terms of saving money and lives, the cost-benefit revolution has produced immeasurable improvements. It stopped bad things, spurred good things--" remember my story of the 200 or 300 live regulation-- "and turned good things into better things. But the revolution is unfinished. In the fullness of time, it's going to be a transition to something far better, focused more directly on the measurement of human welfare
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and enlisting unimaginably ambitious strategies to catalog and improve the real-world effects of law and policy. There's going to be dancing at that revolution, and I'm coming." Thanks. [APPLAUSE]
35:56
Thank you. Very interesting presentation. I was wondering, to pick up on the last point you made about the European Union where you had the feeling that they didn't engage in a very good cost-benefit analysis. But I think the point is broader, and the question is, how can you make sure that you have institutions in place that good cost-benefit analysis is present? And I'm thinking, is it just that you need better experts and spend a lot of money on it? Or is it that the political institutions
36:29
are ignoring what the experts are saying, and you need a better political process? So there's a terrific book called Switch, which is about making change when change is hard, roughly. And it says when things aren't going great, we often think, where's the problem, and how to fix it. And one of the ideas is, don't do that. Think, where is it working well, and then try to replicate that. So what President Reagan did in the early 1980s was to charge the Office of Information and Regulatory
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Affairs with the authority to mandate cost-benefit analysis on the part of government actors. So Reagan said if the Environmental Protection Agency is going to issue a regulation, it has to do that. And the benefits, unless the law says otherwise, have to outweigh the costs, or unless there's some other factor that makes it worth doing. And that's been a bright spot. By all means, not imperfect. And my understanding is that in Europe, there are better regulation entities which
37:37
have somewhere between an advisory role and a capacity to embarrass, which can be quite important. We don't have this in our Congress, which is extremely unfortunate. And the better regulation entities, as I understand it in Europe, do have a legislative role, and that can be very helpful in spurring and stopping things. I'll tell you a story about where this would have been extremely helpful. The rear visibility rule, it's basically just make it so that people can see in back better.
38:13
And it doesn't give the Department of Transportation guidance about what to do. It says, you can do mirrors, like Europe has better mirrors than we do, so you can see back. Or sonar so it goes beep, beep, beep if there's someone in back, or cameras. It says you can do one of those. Not only does it not say which, it doesn't even give a rule of decision. It doesn't say what your criterion is. Do you maximize lives saved? Do you do cost-benefit analysis? How do you value a life? Nothing.
38:43
So there isn't an institution that got Congress to focus on this, and this is very unfortunate. So to have something like the Congressional Budget Office in the United States, which consists of neutral analysts-- neutral I put in quotation marks, neutral enough-- who are charged routinely with doing this kind of thing, any country should do that. I think our states should be doing that. Now whether the outcome of the cost-benefit analysis is decisive rather than an input, that's a fair question.
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I love the start of your question, which was about institutions, because in Washington, there is an institution. If it were just, you know, what do people in the White House or the Department of Transportation want, it would be much weaker.
39:47
Thank you. Professor, if I may ask two questions, one a bit more theoretical and another practical. Would we be right considering that the cost-benefit revolution or the cost-benefit analysis is a practical-- well, if not a consequence, then is the practical side of the theory of John Stuart Mill, of the theory of utilitarianism. And if so, then would it be just to say that it is subject to the same objections that would be made against utilitarianism? Secondly, given that the government would
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seem to be both the one producing the numbers and the one complying with or drawing the conclusions from them, would it not be possible to say that based on that, one may argue that the numbers may be made to go in the direction that he who produces them want them to go? In the hands of Humphrey Appleby, the results will be something completely different in the hands of Jim [INAUDIBLE].. And finally, also drawing from that, is it then the case that-- could it be fairly said that while when
40:56
we argue over tangible points, ordinary people and others who are not in government would be able to respond? Whereas when the government comes at us armed with such numbers and their debate could only had in terms of these numbers, it will be quite hard for us to be able to put a check on that, because hardly anyone would be, at least from common people, would be able to understand, let alone to criticize the conglomeration of figures. Yeah. Those are terrific questions, so Thank you.
41:29
And I'll take them in order. So I think it is fair to say that Mill is the kind of great theoretical figure for the cost-benefit revolution. And then the question is, if you don't like utilitarianism of Mill's sort, would you not like the cost-benefit revolution? And it's possible, though we want to specify the grounds on which we don't like Mill's utilitarianism. Mill criticized Bentham for reducing all human goods to a single metric, saying that the love
42:05
of beauty or love of loyalty or the love of a person is not the same as the love of dollars or those other things, so that our values have different metrics for them. And the cost-benefit revolution need not question that point. It might say that, you love your own health in ways that are different from-- unless you're kind of a science fiction person-- in ways that are different from how you love your own wallet. But there's a certain amount that you'd pay to reduce a risk of 1 in 100,000.
42:44
It isn't infinite. And that is an ingredient into how we figure out how much to value risk of 1 in 100,000. Something like that. So what I'd wonder is, in what concrete setting would be an objection to Mill's-- would an objection to Mill's utilitarianism be an objection to cost-benefit balancing? I'll give an example that maybe will resonate, which is the prison rape rule in the United States, which was designed to reduce the incidence of prison rape. Now I think a nonutilitarian would
43:24
think of rape in a different way from, let's say, many commodities, that it's a fundamental violation of personhood. Maybe the defining violation of personhood in one view. And then the question would be, what kind of challenge is that to do in cost-benefit analysis of the present rape elimination rule? This is not the most fun topic for many reasons, but it's a good topic, I think. And we wouldn't want to say, I think, that no cost is too high to pay for the Prison Rape Elimination Act.
44:03
That is, there's a bounded cost, of course, and we wouldn't want to say that the value of prison rape is trivial. And then what do we do? And there's going to be some implicit assignment-- are you with me? And I hope this gets more interesting and inspiring than [INAUDIBLE]. Because the fact is that even if you really lowball a prison rape's value, the Prison Rape Elimination Act is going to start to look really good, because it's going to eliminate things that even if the value is lowballed
44:40
they are, whoa, good in terms of value. So another way to put it is that even relatively low valuations of things that on one view of the right theory of the right-- non-Millian theories, let's call it-- those things are considered extremely high-priority items under a cost-benefit approach like not being dead or not having chronic bronchitis. And there's recent work showing that the legal system is full of undervaluation of things like life and health
45:25
where the courts and the agencies in terms of fines, they're giving tiny fines. There's a new paper-- I think it's available online-- about sexual harassment, which suggests the sexual harassment fines are crazy low in courts and elsewhere, given that the standard methodology for valuing benefits. And the upshot of the paper, by a very excellent and also very kind of staring at numbers economist is sexual harassment, the numbers have to go way up. And this is a utilitarian framework.
46:04
We're protecting a good which isn't standardly thought to be like a commodity. That is, we're talking about something like bodily or, broadly speaking, human integrity. Something like that. OK. You're right it's the government's numbers. And I would have felt more comfortable with a confident kind of rejection of the question than I do today. And I'll give you where I would have been a few years ago and where I am now. So we would have said a few years ago that the government
46:40
does do the numbers, yes. But under Republican and Democratic presidents both, the internal processes and the processes of external correction, which include a public comment process and a possibility of judicial correction and technocrats in the government who hold people's feet to the fire, they are sufficiently robust that the government's numbers, it's not like, you know, a Republican administration says, we're Republicans, so this is the numbers we want,
47:12
and this is how we're going to do it, and a Democratic administration says the same. I knew people who were in meetings, high-level people in meetings in which some agency was looking political in its numbers. Low-level people in agencies looking political. And the high-level people said, I don't want to work in a government that does that. We're going to play this completely straight. And that's the basic pattern, I think. So the idea, it's the government's own numbers,
47:40
so the government is going to be skewed in its favor. The Bush administration did plenty of things that were contrary to Republican, let's say, ideology, and the Obama administration did plenty of things that were contrary to Democratic ideology because the numbers so required. There's that. The reason I want to be a little more in agreement with the question-- and I regret this very much-- is that some of the numbers I've seen in the last, say, 12 months are not what we would expect
48:17
from Republican and Democratic administrations. And they're all going in the line with the political orientation of the government. Now under a very liberal, Democratic administration, I think we might well observe the same thing. But it fits with what you say. And I'll give you one that it looks like it's going to come out. And maybe reasonable people can differ on what I'm about to say. I hope so, but I don't see a reasonable difference yet. And that is-- and it's very important,
48:46
and I hope it won't seem technical. The mercury regulation that the Environmental Protection Agency did reduces exposure to mercury. It's a very expensive regulation. With respect to mercury itself, there are two views out there. Some scientists say, the adverse effects of mercury on human health are real, but in monetary terms, even on a generous value of the health effects, doesn't come close to justifying the expenditure. That's a reasonable view.
49:20
Another view which is reasonable is, that's probably right, but we don't know a whole lot about mercury, so it might look a lot better than it seems. OK, what the EPA said was somewhere between those two views. And then said, but look. The thing that reduces mercury also reduces other air pollutants. What they have to do to reduce mercury goes hard after other air pollutants, and that's going to save thousands of lives every year. And then it's really worth it, even though it's expensive.
49:50
And the Trump administration reportedly is going to refuse to consider the co-benefits. I don't understand that. Why would you refuse to consider real benefits? To its credit, the Trump administration has put a spotlight on the possible health risks or safety risks introduced by health and safety regulation. So it said, if a fuel economy regulation is going to make cars more dangerous, we will consider that. Loud applause. The negative effects were considered, even if they're incidental.
50:25
The positive effects should be considered too. And the fact that they're all going in a single direction-- I say this with regret, because an Obama administration employee should be, I think, very cautious in-- you know, there's obviously reason that's motivated to be critical of a successor. But this hasn't been what Republican and Democratic administrations alike have generally done. Nonetheless, my basic, more optimistic answer, I'm going to stick 90% with that.
51:06
Another question? [INAUDIBLE]
51:17
Thank you. Thank you very much. There must be some set of cases where if we had the information for free, the cost-benefit analysis would be [INAUDIBLE] policy, rather than the cost of finding information or coming [INAUDIBLE].
51:34
How does [INAUDIBLE] cost-benefit analysis [INAUDIBLE]? OK. That's fantastic. So if everyone didn't hear that, there are cases where it's possible or likely that the cost of the regulation would exceed the benefits, but the cost of finding out the information is too high. I mean, for I think the conscientious government official or lawyer working in the government, the idea is-- the first thing, is the cost really too high? And then you'd want to think, what
52:10
is the probability that the cost exceeds the benefit? And if the probability is like 70%, you'd ask by how much. And if it's $10 billion, then you'd think, how much does it cost to get the information? And it costs $10 billion or 70% of $10 billion. We have a $77 billion shortfall. It's worth it. So in other words, I saw no case that took that form, though I did see cases where the government's thinking, we don't know what's our best projection. And that may involve a guess.
52:51
We've got one more. I have a somewhat twisted question to which I don't think there is an objective answer, but I'm really interested in hearing your policy response, if you have one. I worked for an organization that advocated for cost-benefit analysis in legislation for many years, and the main argument against it-- You're a hero. [LAUGHTER] --continuously was that there is no time to do cost-benefit analysis because it requires us to calculate stuff, and we don't have time to do it.
53:21
So you are stalling the entire legislation with your demands for cost-benefit analysis. So in a way, the question is, what's the cost-benefit analysis for the cost-benefit policy? And what sort of policy responses would you propose in that case? OK, it's completely fair to ask whether cost-benefit analysis survives cost-benefit analysis.
53:46
But suppose it's proposed that there should be better braking systems so that cars stop quicker or railroads stop quicker. How would you possibly know whether that's a good idea unless you've investigated the effects? Now if the cost of investigating the effects is zillions, then don't. But since investigation of costs and benefits, both in Europe and the United States is common and it's not that costly-- it does delay, but it's not that big a delay-- it's looking OK on those grounds.
54:29
You want to talk about the Supreme Court, or about-- [LAUGHTER] Yes. I had a question on Congress. So recently, I read a study coming out Yale that illegal immigration is actually 22 million, not the [INAUDIBLE]. NPR recently debunked the Department of Education where they said, you know, out of the 200 school shootings that were reported by the Department of Education, we can only confirm three of them. So these are [INAUDIBLE] order of magnitude.
55:00
How does that play into cost-benefit analysis and sort of tie into [INAUDIBLE]? There's an old Persian [INAUDIBLE]..
55:15
Yeah. OK. So it might be that the specialists can only say there's a range. So they might say the lower bound benefit is $100 million and the upper bound is $900 million. And it may be that that will help you, because you know that the costs either are lower than the lower bound or higher than the upper bound. If the costs are in the category of the range, then you need to get the best experts you can to say, where in the range is it most responsible to be?
55:54
A thought is that in some of the popular accounts-- I'm writing an academic paper now looking at some issue, and the only thing I could find was by some Washington interest group, which comes out-- spits out some numbers on something. Help. [LAUGH] To put that in my footnote, that's not the best, yes? So you want either the government itself or the government to sponsor research that will give you something closer to a point estimate. But what I'm thinking a little bit is that--
56:31
and this bears on the cost-benefit analysis of cost-benefit analysis. In the business world or in law firms, there are sometimes formal and sometimes rough-and-ready cost-benefit analyses. And that's true for all of us, like, within the next six months. And we do think about the costs and benefits of quantification, and it's to be hoped it's not self-serving. If you're a company that does self-serving, meaning rather than straight, then you're going to drive your business into the ground.
57:04
And in ordinary life, you're not going to do great. So ranges can often be fantastic. And I'm sure you've all looked at the annual cost-benefit reports from the US government. They're riveting reading. [LAUGH] They have ranges which acknowledge the point.
57:25
Can I just ask you one more? Yeah. OK. Thank you very much. Are there any areas of policy you think should be off limits for cost-benefit analysis? Because I also worked in an organization using and advocating cost utility analysis in health care. But I ask, because I would personally be uncomfortable using cost-benefit analysis for sort of civil rights or equality cases. But the example of disability accommodations you used suggests that there's still some use around the edges. Yes.
57:59
I mean, disability where to figure out exactly what to do without being informed at least by this stuff is hard. The sexual harassment case, which I would have thought before this paper is a really tough one for cost-benefit analysis, there are numbers. The most obvious-- and the numbers are supportive of the views of those who are skeptical of doing cost-benefit analysis, which is a pleasant irony. Yes? The case where I wouldn't want to make cost-benefit analysis,
58:33
the rule of decision, is where you have a clear transfer of resources from one group to another. So if you're transferring resources from people who make $500,000 a year to people who make less than $50,000 a year to do cost-benefit-- it's a transfer rule. It's not about maximizing that benefit. It's about giving some people money and taking it from others. Whether or not that's justified, the analysis wouldn't be about social benefits and costs.
59:03
And it may be there are some regulatory choices that have that form. I'm not sure. We are now out of time. So on behalf of the Harvard Law School Library, once again, I'd like to thank Professor Sunstein for his wonderful talk today. And we will be a few minutes behind here for-- Great. --signing. Completely. We have only about six copies left out by the Coop. So run fast. There are actually 60, but it's a great marketing strategy to say there are six copies left. [LAUGH] [APPLAUSE]
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