Many economists and other professionals looked on in dismay when President Trump issued executive orders and supporting guidance documents that appear to target regulations for elimination based primarily on their costs rather than a balanced assessment that includes benefits.
Accordingly, we joined 94* economists and lawyers in signing a letter to high-ranking officials of the Trump administration, including Office of Management and Budget Director Mick Mulvaney, who issued the orders and guidance and is responsible for monitoring and enforcing them.
The plain wording of Executive Orders 13771 and 13777 and the related guidance places an outsized focus on regulatory costs—but we hope, as some have suggested, that is not what the administration intends. The letter explains these concerns and offers constructive suggestions for improving regulatory analysis and implementation. The views expressed by the signatories are their own and should not be their attributed to their respective institutions.
We urge the Trump administration to take this letter seriously and act accordingly.
Read the full letter including signatories below.
May 22, 2017
Subject: Economists and Legal Scholars address Executive Order 13771
Dear Director Mulvaney, Director Cohn, Acting Administrator Mancini, Administrator Pruitt, Secretary Perry, Secretary Perdue, Secretary Acosta, Secretary Ross, and Secretary Chao:
We write as economists and legal scholars who have devoted our careers largely to research and public service on the effects of regulation. We share the goal of improving regulation and believe that the recent guidance from the Office of Management and Budget on implementing Executive Order 13771 substantially improves upon the administration’s interim guidance. Nevertheless, we are concerned that because Executive Order 13771 focuses exclusively on the costs of regulation, while ignoring its benefits, the order is misguided and, if not implemented properly, will likely harm the American public. We offer specific suggestions for improving regulatory review and pursuing regulatory reform.
Executive Order 13771 requires any agency imposing a new regulation to identify two existing rules for repeal for every new rule issued, and to find cost savings from eliminated rules at least equal to the costs imposed by the new regulation. In addition, each agency will have an annual regulatory cost limit—or “budget.”
Since President Reagan issued Executive Order 12291 in 1981, executive branch agencies establishing significant new regulations must show that the benefits of that regulation exceed or justify its costs and, if possible, that such regulations maximize net benefits, which are the total benefits to society minus costs. These principles, currently reflected in Executive Order 12866, have disciplined federal regulation since the 1980s. They mean that government should not regulate too much, but also not too little.
This does not mean that regulations, once issued, should endure forever. Many factors can lead to reasoned calls for change. New information or analysis often emerges that supports changing existing regulations. Over the past decade, for example, the stunning rise of natural gas production from shale formations has contributed to a cleaner electric power sector, reducing the costs of regulations helping to meet air quality goals. There may also arise reasonable disagreements about the measurement of benefits and costs.
For nearly 40 years, both Democratic and Republican administrations have called upon regulatory agencies to identify improvements to existing regulations, including through the rescission of regulations that are no longer necessary or net-beneficial. In doing so, each administration has emphasized that consideration of both costs and benefits should guide such retrospective reviews of existing regulations.
The new Administration has endorsed the requirements of Executive Order 12866 to do cost–benefit analyses on significant rules. However, Executive Order 13771 lays on top of 12866 an approach to eliminating existing regulations that emphasizes costs and retreats from the long-accepted principle of maximizing net benefits. By tying new regulations to the elimination of existing regulations, and by not requiring consideration of the foregone benefits of the eliminated regulations, Executive Order 13771 opens the door to arbitrary and haphazard regulation that could harm the public.
For example, consider the possibility that new science emerges showing that the effects of air pollution on infant health are much greater than was previously believed. The benefits of reducing air pollution would thus be much greater than had been believed. But under the principles in Executive Order 13771, the Environmental Protection Agency could issue a new regulation to reduce air pollution only if it could find offsetting regulations that were sufficiently costly—and only if the new regulation didn’t exceed the agency’s overall regulatory cost budget. As a second example, consider new vehicle automation technologies that are making cars safer to drive. Executive Order 13771 could be used to prevent the Department of Transportation from issuing a new regulation that reduces traffic accidents and fatalities unless it meets the terms of the order. Thus, Executive Order 13771 could stand in the way of the net public benefits of reducing air pollution or traffic fatalities, departing from the long-standing practice of adopting regulations when benefits justify the costs.
We recognize that the Administration has preserved Executive Order 12866. Further, Executive Order 13777, which focuses on modifying or eliminating existing regulations, includes net benefits as a criterion for such changes. However, without requiring the analysis of the foregone benefits from deregulatory actions called for by both 13771 and 13777, agency actions taken to comply with the order may end up harming the public on balance.
We make three suggestions for improving both new and existing regulations:
First, we urge the Administration to consider further steps that would rescind the cost-only approach contained in Executive Order 13771, such as amending or eliminating the order itself.
Second, even if Executive Order 13771 is not amended or rescinded, we urge that the Administration issue further guidance directing that all deregulatory actions taken under the order be shown to pass a benefit–cost test. This approach should also apply to Executive Order 13777, which appropriately directs agencies to eliminate “unnecessary” and “ineffective” regulations whose “costs … exceed the benefits,” but also includes other criteria that could encourage agencies to eliminate net-beneficial regulations. We urge an approach to implementing these executive orders that will ensure that agencies will focus on eliminating regulations for which benefits fall short of costs and that cannot be justified on other reasonable grounds.
Third, when engaging in the retrospective review of their existing regulations, agencies should look for regulations for which costs and benefits differ substantially from what was originally expected—and then change their regulations accordingly. Such an approach will mean that, rather than focusing exclusively on eliminating a regulation or lessening its stringency as directed under Executive Order 13771, sometimes agencies should make their regulations more stringent if supported by new analysis.
Finally, we endorse the overarching objective, advanced by both the Administration and Congress, of making regulations more flexible and efficient—and more market-oriented. Such regulations can often reduce the costs without sacrificing the benefits that they deliver to the public.
Signatories to this letter are listed below.
Matthew D. Adler
Richard A. Horvitz Professor of Law; Professor of Economics, Philosophy, and Public Policy
Duke University
Joseph E. Aldy*
Associate Professor of Public Policy, John F. Kennedy School of Government
Harvard University;
Visiting Fellow
Resources for the Future
Soren Anderson
Associate Professor of Economics
Michigan State University
Alan Barreca
Associate Professor of Economics
Tulane University
Scott Barrett
Columbia University
Lori S. Bennear
Associate Professor of Environmental Economics and Policy;
Co-Director, Rethinking Regulation
Duke University
Antonio Bento
University of Southern California;
National Bureau of Economic Research
Severin Borenstein
Professor
University of California, Berkeley
James Boyd
Senior Fellow
Resources for the Future
Daniel Brent
Assistant Professor of Economics
Louisiana State University
Stephen P.A. Brown
Professor of Economics
University of Nevada Las Vegas;
Visiting Fellow
Resources for the Future
Zachary S. Brown
Assistant Professor, Department of Agricultural and Resource Economics
North Carolina State University
Ryan Bubb
Professor of Law
New York University School of Law
Dallas Burtraw
Darius Gaskins Senior Fellow
Resources for the Future
Meghan Busse
Associate Professor, Kellogg School of Management
Northwestern University
Cary Coglianese
Edward B. Shils Professor of Law;
Director, Penn Program on Regulation
University of Pennsylvania
E. Mark Curtis
Assistant Professor, Department of Economics
Wake Forest University
Joel Darmstadter
Senior Fellow (Ret.)
Resources for the Future
Lucas Davis
Associate Professor
University of California, Berkeley
Tatyana Deryugina
Assistant Professor
University of Illinois at Urbana-Champaign
J.R. DeShazo
University of California, Los Angeles
Peter Diamond
Professor Emeritus
Massachusetts Institute of Technology
Katherine L. Dickinson
Research Scientist
University of Colorado Boulder;
National Center for Atmospheric Research
Mary F. Evans
Jerrine and Thomas Mitchell ’66 Associate Professor of Environmental Economics and George R. Roberts Fellow
Claremont McKenna College
Eli Fenichel
Assistant Professor
Yale School of Forestry and Environmental Studies
Paul Ferraro
Bloomberg Distinguished Professor
Johns Hopkins University
Nicholas E. Flores
Professor and Chair, Department of Economics
University of Colorado Boulder
Meredith Fowlie
Associate Professor of Agricultural and Resource Economics; Class of 1935
Distinguished Chair in Energy
University of California, Berkeley
Matthew Gibson
Assistant Professor of Economics
Williams College
Ben Gilbert
Assistant Professor of Economics
University of Wyoming
Kenneth Gillingham
Assistant Professor
Yale University;
Former Senior Economist,
Council of Economic Advisers
Elisabeth Gilmore
Associate Professor
Clark University
Corbett Grainger
Associate Professor
University of Wisconsin–Madison
Laura Grant
Assistant Professor, Robert Day School of Economics
Claremont McKenna College
Wayne B. Gray
Professor of Economics
Clark University
Michael Greenstone
University of Chicago;
Former Chief Economist, Council of Economic Advisers
Therese Grijalva
Weber State University
Timothy L. Hamilton
University of Richmond
James K. Hammit
Harvard University
Merlin M. Hanauer
Associate Professor, Department of Economics
Sonoma State University
Michael Hanemann
Professor and Julie A. Wrigley Chair in Sustainability, School of Sustainability;
Director, Center for Environmental Economics and Sustainability Policy, W. P. Carey School of Business
Arizona State University
Garth Heutel
Assistant Professor of Economics
Georgia State University
Mun S. Ho
Visiting Fellow
Resources for the Future
Stephen P. Holland
Professor, Department of Economics
University of North Carolina at Greensboro
Richard Horan
Professor, Department of Agricultural, Food, and Resource Economics
Michigan State University
Paul M. Jakus
Professor, Department of Applied Economics; Director, Center for Society, Economy, and the Environment
Utah State University
Sally Katzen
Professor of Practice and Distinguished Scholar in Residence
New York University School of Law
Matthew Kotchen
Professor and Associate Dean
Yale University;
Former Deputy Assistant Secretary,
US Department of the Treasury
James E. Krier
Earl Warren DeLano Professor of Law
University of Michigan
Alan Krupnick
Senior Fellow
Resources for the Future;
Former Senior Economist, Council of Economic Advisers
Benjamin Leard
Fellow
Resources for the Future
Derek Lemoine
Assistant Professor of Economics
University of Arizona
Arik Levinson
Professor of Economics
Georgetown University
Shanjun Li
Associate Professor of Applied Economics
Cornell University
Joshua Linn
Senior Fellow
Resources for the Future;
Former Senior Economist, Council of Economic Advisers
Michael A. Livermore
Associate Professor
University of Virginia School of Law
John Loomis
Professor, Department of Agricultural and Resource Economics
Colorado State University
Gary Marchant
Regents’ Professor of Law
Arizona State University
Mywish Maredia
Professor
Michigan State University
Donald B. Marron
Urban Institute;
Former Member, Council of Economic Advisers
Nicole M. Mason
Assistant Professor, Department of Agricultural, Food, and Resource Economics
Michigan State University
Jonathan Masur
University of Chicago
Gilbert E. Metcalf
Professor of Economics
Tufts University;
Former Deputy Assistant Secretary for Environment and Energy, US Department
of the Treasury
Erich Muehlegger
Associate Professor
University of California, Davis
Nicholas Z. Muller
Associate Professor of Economics
Middlebury College;
National Bureau of Economic Research
Matthew Neidell
Associate Professor
Columbia University
Richard G. Newell
President
Resources for the Future;
Former Administrator, US Energy Information Administration
Jennifer Nou
Neubauer Family Assistant Professor
University of Chicago Law School
Paulina Oliva
Associate Professor
University of California, Irvine
Karen Palmer
Research Director and Senior Fellow
Resources for the Future
David Popp
Syracuse University
Maria Porter
Assistant Professor
Michigan State University
Eric Posner
University of Chicago
Richard L. Revesz
Lawrence King Professor of Law and Dean Emeritus
New York University School of Law
Heather L. Ross
Visiting Fellow
Resources for the Future;
Former Deputy Assistant Secretary, US Department of the Interior;
Former Vice President, BP America
Arden Rowell
Professor of Law and University Scholar
University of Illinois
Ivan Rudik
Assistant Professor, Department of Economics
Iowa State University
Richard Schmalensee
Massachusetts Institute of Technology
Howard Shelanski
Georgetown University;
Former Director, Bureau of Economics, Federal Trade Commission;
Former Senior Economist, Council of Economic Advisers
Hilary Sigman
Associate Professor
Rutgers University
Michael Springborn
Associate Professor
University of California, Davis
Sarah Stafford
Professor of Economics, Public Policy, and Law
William & Mary
Robert N. Stavins
Albert Pratt Professor of Business and Government, John F. Kennedy School
of Government
Harvard University
Betsey Stevenson
Associate Professor of Public Policy and Economics, Gerald R. Ford School of Public Policy and Department of Economics
University of Michigan
David Tschirley
Professor, International Development, Department of Agricultural, Food, and Resource Economics
Michigan State University
Arthur van Benthem
The Wharton School
University of Pennsylvania
W. Kip Viscusi
University Distinguished Professor
Vanderbilt University
Roger H. von Haefen
Associate Professor
North Carolina State University;
Co-Editor-in-Chief, Journal of Environmental Economics and Management
Christian A. Vossler
Professor
University of Tennessee
Margaret Walls
Interim Vice President for Research and Senior Fellow
Resources for the Future
Quinn Weninger
John F. Timmons Professor of Environmental and Resource Economics
Iowa State University
Sarah E. West
Professor of Economics
Macalester College
Jonathan B. Wiener
William R. and Thomas L. Perkins Professor of Law, Duke Law School; Professor of Environmental Policy, Nicholas School of the Environment; Professor of Public Policy, Sanford School of Public Policy;
Co-Director, Rethinking Regulation
Duke University
Roberton C. Williams III
Professor
University of Maryland;
Senior Fellow and Director of Academic Programs
Resources for the Future
Yichen Christy Zhou
Clemson University;
Resources for the Future
Joshua Graff Zivin
Associate Dean and Professor, School of Global Policy and Strategy;
Professor, Department of Economics
University of California, San Diego
* One signatory was inadvertently left off the original letter but has been added here.
The views expressed in RFF blog posts are those of the authors and should not be attributed to Resources for the Future.
