Does Regulation Kill Jobs?

14: Rationing Analysis of Job Losses and Gains: An Exercise in Domestic Comparative Law

Chapter 14 Rationing Analysis of Job Losses and Gains An Exercise in Domestic Comparative Law E. Donald Elliott The issue of whether to quantify, monetize, and include the job losses (or gains) in the benefit–cost analysis conducted prior to adopting major rules is hardly unique in American law. Many analogous situations exist in which a policymaker must decide in advance of conducting an analysis which factors to include and which to leave out. This is called “scoping,” and the American legal system has experience with it in the regulations created by the Council on Environmental Quality (CEQ) to implement the National Environmental Policy Act (NEPA), as well as in scientific risk assessments. I call the process of looking for analogous policy problems and learning from them “domestic comparative law.” The essential idea is to apply the methods of legal precedents to policy questions, by way of analogy to similar situations with which the law has coped successfully. We may gain guidance for how to scope Regulatory Impact Analyses (RIAs) and when to include quantitative, monetized estimates of net job losses or gains by comparison with other areas in the U.S. legal system. The “precedents ” that I draw on are scientific risk assessments, environmental justice, scoping under NEPA, civil procedure, and analyses of “green jobs” created by government subsidies for renewable energy. The common lesson—the “common law,” if you will, of how to ration analysis—is that the analyst ought to spend resources analyzing a problem if but only if one judges that the additional analysis is likely to affect the decision , or its legitimacy or public dialogue, by more than the costs of doing the analysis. Having abstracted this principle from the “precedents,” I then apply it to the issue at hand. The phrase “job-killing regulations” Rationing Analysis of Job Losses and Gains 257 has recently become prominent in our political discourse (Corum 2012; Howard 2012), but there is scant empirical evidence to confirm or refute it. That in itself is a strong reason to analyze the effects of significant regulations on jobs. Because I am trained as a lawyer, the domestic comparative law approach comes naturally to me: what lawyers and judges do is to abstract principles from precedents and apply them from one situation to another (Levi 1949). There are five key steps in legal thinking: (1) perceiving resemblances between past situations and the situation at issue; (2) determining that the salient features of the two situations are sufficiently similar; (3) deciding that the precedent is “successful” in the sense that it is working tolerably well and should not be “overruled”; (4) abstracting the key lessons or principles from the precedent; and (5) applying those principles to the situation at hand. All five steps involve judgment (Elliott 1984) and cannot be reduced to an algorithm or programmed into a computer (D’Amato 1977). In suggesting that we should approach the problem of quantifying job losses or gains in RIAs in the same way that parallel problems have been solved in environmental impact analysis, or risk assessment, or civil procedure, I am not suggesting that an agency like the Office of Information and Regulatory Affairs (OIRA) is bound to follow the decisions made elsewhere in the way that a lower court is bound to follow the decisions of a higher court. Rather, it is more like the way that the courts in one state look to the decisions of courts in other jurisdictions for guidance, taking the other state’s decisions for whatever value that it may find in them. Common law precedents are a storehouse of accumulated wisdom as to how others have balanced competing values (Elliott 1984). Domestic comparative law is a method to tap into that wisdom and experience. Context-Dependent Analysis of Job Losses (or Gains) Whether to include anticipated net job losses (or gains) from a proposed rule in an agency’s benefit–cost analysis depends on the circumstances: in some situations, anticipated net job losses (or gains) from a new regulation may be a material factor that may tip the decision one way or the other. In those situations, net anticipated job losses (or gains) should be weighed in the balance and quantified and monetized to the extent possible to factor into the benefit–cost analysis. In other situations—perhaps even in most situations—net job losses or gains are not likely to affect the decision, and in those situations, job losses or gains can generally be relegated to...