The Costs of Regulating–and Not Regulating

A few days ago, I wrote about the REINS Act, a Congressional effort to block administrative regulatory activity. A commenter asked for a discussion of what we know about the costs of regulation, so I did a bit of research.

What I discovered reinforced my belief that the answer to most questions is: “it depends,” and/or “it’s more complicated than that.”

It turns out that there is not a lot of research calculating the costs of regulatory activity, and what does exist comes to very inconsistent results. Scholars argue about how such costs should be measured, and how best to conduct accurate analyses.

Despite these uncertainties, it is standard procedure to subject proposed rules to a cost/benefit analysis before they are promulgated. Since those analyses are being conducted prior to the implementation of proposed regulations, they are based upon estimates of both the costs and the benefits, and no matter how good-faith those estimates, they are essentially guesswork.

Anti-regulation politicians who throw around huge numbers that “demonstrate” how burdensome regulations are rarely admit that there is very little agreement on those numbers, nor do they address the benefit side of the equation, so a concrete example, assessing the actual costs of regulations that have been in effect for a long enough period of time to permit more accurate assessment, is instructive.

Vanderbilt University recently studied the compliance costs the university incurred, and came up with a big number. 

So let’s see which of those nasty, costly regulations we could dispense with.

The great majority of the university’s compliance costs were connected to research. There are a number of stringent rules governing academic research: some require respecting the privacy of human subjects, others ensure that volunteers in medical studies have information they need in order to make informed decisions about their participation. Still others ensure that the research will not pose unnecessary risks to individuals or communities.

Which of those “costly” rules should we dispense with?

Universities also bear the costs of obtaining accreditation. Accrediting agencies require lots of information in order to ascertain whether a given institution of higher education is providing…what’s that called?…education. Without accreditation, students would have to make expensive decisions about attendance without knowing whether the “product” had been adequately vetted, and whether a degree from that institution would be valued or discounted by potential employers.  (Actually, I’d favor a far more rigorous examination, since some “accredited” schools hardly seem to merit that credential. But that is a post for another day.)

Universities must also comply with regulations that are generally applicable. They must, for example, abide by rules governing immigration. Would the Congressional critics of regulatory costs prefer that University personnel turn a blind eye to the immigration status of their students? What about Human Resources regulations requiring compliance with civil rights laws?

Whole industries must comply with costly regulations governing food and drugs. Even if we could measure those costs with reasonable accuracy, how should we count the benefits? How do we determine–let alone value– the number of lives saved? How do we calculate, let alone value, reductions in illnesses from impure drugs or spoiled foods?

It seems likely that the REINS Act is aimed at environmental regulations. How do we value the benefits of clean air and water?

None of this is to say that all regulatory activity is wonderful or necessary. The “take away” is that both purported costs and anticipated benefits should be viewed with healthy skepticism, and all regulations should be evaluated individually and on their own merits.

Bottom line: it is perfectly justifiable to argue that the benefits of a specific regulation are not worth the costs involved in complying with that particular regulation. But ideological arguments against an activity called “regulation” are–excuse the expression–bullshit.


  1. It seems that to Republicans it isn’t that they want “low” standards; it’s that they don’t want “any” standards at all. More of the “every man for himself” approach to life that reaped such great human advancements during the Dark Ages.

  2. NEPA is very specific about the way to do cost-benefit analyses, but the companies that do them for infrastructure projects have developed ways to avoid intangible costs, so the final result usually comes out favoring the project. After all the company is being paid by the outfit that wants to do the project.

  3. And as we know, regulations can and do have arbitrary applications, like the one in Indiana that requires that any violation of environmental regulations at Bear Run Coal Mine must be witnessed by a regulator in order to cite the owners for the violation. That would mean that a regulator would have to be on site 24/7.

    It is always more convenient to decry the regulation as unnecessary overreach than to comply even if it means that people die (Upper Big Branch Mine, WV, 2010) or are poisoned (Flint, MI or East Chicago, IN).

    Cancer clusters like the ones in LA can be directly attributed to the chemical pollution of the air, land and water of the area where regulations are routinely ignored or consciously circumvented and have done so for decades. There is no regulatory cost to the polluters only to those who are the beneficiaries of their waste disposal methods unless it is to their PR firms for the constant denial of responsibility and promotion of their benevolent provision of jobs.

    Coal ash, fracking, overuse of fertilizers, pesticides and herbicides that have profound effects on those who are exposed are killing people every day, just very slowly and mostly out of sight. If there were no regulations at all, we would look like Eastern Europe when the wall came down.

    The costs in human suffering and environmental destruction are incalculable. Costs of regulation pale by comparison to the benefits to humankind and the environment in which we live.

  4. What is the cost of lack of regulation in human lives; has it ever been calculated? We talk of regulation standards and compliance in dollars and cents/sense rather than the ultimate cost to those who pay with their lives or destruction of the environment.

    Love Canal still sits filled with hazardous waste the last I saw anything about that area. We were never told the truth about the Three Mile Island spill hazards to surrounding lands and waterways which includes the home of our beloved Hershey chocolate production. Research Helen Caldicot for specifics regarding that lack of compliance with known prevention measures. Erin Brockevich won her first battle against cancer-ridden areas surround California’s PG&E and continues battling other disregarded research measures and regulations. As does Jan Schlichtmann on the east coast. Karen Silkwood lost her life fighting to save lives where there were no regulations to be followed. There is no protection from plutonium waste or spills and never will be. Kerr-McGee is gone now but so are those who lost their lives working in hazardous areas with primarily paper face masks for protection. The same was true of the Navaho Indians, Kerr-McGee’s basic work-force in the mines to mine uranium; their death rate from lung cancer was a high percentage.

    The amount of research that has been done, resulting in current regulations which are uniformly ignored due to the cost of following them is only counted in dollars and cents with no sense of the cost to humanity or environment.

    My daughter worked in the main Kroger bakery on English Avenue for 24 1/2 years till becoming disabled; their only protection from the flour-laden air were paper face masks. Due to the extreme heat from commercial size ovens, no air conditioning is provided, merely very tall oscillating pedestal fans to move the lung-clogging, sometimes 117 degree heat, air around. Frequent ammonia spills from mechanisms occurred; OSHA requires full evacuation of entire factories when that happens. At the Kroger bakery only the small area around the spill was evacuated because no one was required or allowed to report to OSHA. The research had been done and regulations in place but…the work must go on to increase profits.

    Research and regulations are a system of follow the money; never follow the destruction of the environment or the cost in human lives. This will escalate with the privately owned United States government – now at all three levels, Legislative, Executive and Judicial. Let the Tweets begin!

  5. Consider something I posted to Facebook today:

    It would appear that the dissolution of the union will again become an issue in America.

    When you consider the red and blue states we have two countries held together by a failing marriage.

    Trump’s inaugural speech described the red states. “Falling apart” was the essence of his words. Obsolete. Out of touch. Inward focused rather than worldly. Afraid rather than optimistic.

    The blue states, who have for decades paid all of the bills, it has been revealed, get a disproportionately small say in the federal government. Apparently success gets punished.

    The future of the red states is dimmer than their past as their economies are based on fossil fuel energy which is unaffordable if all costs and consequences are considered. They are kept afloat by federal government subsidies which their President Trump has indicated he supports at the expense of the future.

    Two Americas as different as night and day.

    How can one set of regulations accommodate two different countries?

  6. One aspect of regulation which can’t be cost/benefit analyzed is that it, experience has shown, is necessary to keep capitalism from consuming itself.

    Capitalism abhors competition but competition is what keeps it viable. What balances that tension is regulation.

    One of the realities that makes business experience inapplicable to public service is that most business decisions lend themselves very well to cost/benefit analysis because at the end of the day business is only about make more money regardless of the impact on others.

    Government is so much more nuanced than that.

  7. JoAnn,

    “Research and regulations are a system of follow the money; never follow the destruction of the environment or the cost in human lives. This will escalate with the privately owned United States government – now at all three levels, Legislative, Executive and Judicial. Let the Tweets begin!”

    A tweet on regulation:

    There is no doubt that there are problems with the privately owned United States government. That’s a very serious problem on the surface.

    However, a larger and much more dangerous problem is moving rapidly at the sub-surface level. It’s FASCISM. It’s face is the Tea Party.

    Question: How do you regulate fascism? Historically, democracy has been impotent in that regard.

    Answer: Anti-Fascism. In the past, it has been the only vehicle for imposing “REGULATIONS.”

  8. Many regulations come about after a catastrophe. Since they are reactive, they will be a bit too much, but look at what they are reacting to. In medical research, the first human subjects protections came after World War II, when we learned of Dr. Mengele’s work. More came after we learned of the Tuskeegee Institute studies of syphilis. Even more came after the Jesse Gelsinger case. All were flagrant violations of even the most basic medical ethics.

    When my researchers would complain, I would tell them that as soon as they could assure there would never be another such incident, I would stop making them do all of the terrible, onerous paperwork.

    Most of the regulations consist of filing paperwork. We were able to use computers to reduce duplication and when I retired I was working on other ways to reduce the time spent in compliance activities. Let me just say, it’s not that hard to be a good actor in this highly regulated field. Those who complain are just blowing smoke.

  9. Peggy,

    “Many regulations come about after a catastrophe.”

    Unfortunately, that’s the only way in most cases. It looks like, we are all about to learn that very hard lesson. Human beings, for the most part, do not take pre-emptive action. History validates this point.

  10. Pete:

    The train has left the station. The great experiment to make America “Great Again” has begun.

    Think of it this way. If the Repubs — not just Trumpkin/Pencekin, because in many respects they are only riding the Congressional and Statehouses Tea Party wave — can bring all the Blue states down to the levels of Red states such as Kansas, Indiana, etc., then they will have succeeded in bringing the Country back together again. No more disparity in opportunity or economic outcomes for the masses. While they, the Kochs, and the Wall Streeters all get richer.

    Actually, calling it an “experiment” is incorrect. Kansas, in particular, but also Indiana, Arizona and other “Red” states have all already swallowed their Laffler curve cut taxes for the wealthy, trickle down economics and Koch Brothers anti-regulation nostrums. The results of those experiments are in and have been for some time. Total, abject failure.

    Kansas Gov. Sam Brownback’s and the Repub cabal’s response to the failure of these fantasies in Kansas? It’s simple; they haven’t cut taxes or regulations enough yet.

    We’re all in for one interesting ride. And by all means, build those tunnels. That’s the ticket to making America “Great Again.” Tunnels and more tunnels!

  11. It is helpful to remember that every regulation exists because knowledgeable people thought it was a good idea. I doubt there are people coming up, with regulations in a vacuum just so they have something to do.

  12. If industry was able to take responsibility for protecting workers, neighbors and customers regulations wouldn’t be necessary. There are too many examples that industry cannot and has not considered the risks associated w their operations and taken steps to eliminate or mitigate those risks. The SOP is to do nothing and wait to get cited. Then negotiate an unreasonably flexible compliance timeline and try to push final compliance as far back as possible. IDEM is often willing to allow this.

  13. Walter; in this old woman’s opinion, the only research that needs to be done at this time is to learn who is NOT following regulations which have been in effect for years. Why write new regulations for those who refuse to abide by those already in place. That makes me wonder if the Republicans will come up with another Amendment to prevent Citizens United from being repealed as has been done with voting and civil rights Amendments…just a thought

  14. As a Boomer I grew up in South Chicago area and worked in a steel mill. The mills needed water, and they also needed a place to dispose of waste water. Our water ways provided for both. I remember watching the waste water being emptied into a river. All those toxic chemicals are still there some where in the sediment even though the mills have been closed.
    American business had it’s way with the environment from the beginning of the Industrial Revolution until around the 1970’s. We are still cleaning the mess up.

    After World War 2 the suburbs went on a building explosion, with few regulations. Homes were built in flood plains with the predictable results.

    The Republicans a long time ago came up with the words “onerous regulations”. Onerous regulations are never defined or listed. The words onerous regulations are applied to what ever the anti-regulation types want: Schools, factory farms, mining, fracking, etc. The other night I caught a brief segment on FOX. The Foxies were all in a lather about how much regulation costs business. Various numbers were thrown about. Naturally, none of the Foxies were required to prove their numbers.

    I think we can be rather certain the 1% do not want their homes and get away locations next to factory farms, fracking or mountain top mining.

  15. Except that ideology doesn’t apply when it’s YOUR backyard – the instant there’s lead in the water in Georgetown, Scarsdale, Grosse Pointe, Oak Park, or Palo Alto you will see wealthy Republicans suddenly shocked, shocked that anyone could get away with such a thing.

    With weakened environmental regulations, NIMBYism will become even more important. But with gerrymandering, even large-scale organizing may have no effect at the state level.

  16. The bottom line is that the wealthy, like Trump, aren’t going to get sucked into a machine in a factory that lacks safety guards or breathe toxic fumes or coal dust, their children aren’t going to suffer the effects of lead poisoning from peeling paint or poisoning from tainted well water, they’re not going to get cheated by a slum landlord or used car salesman, and aren’t going to get radiation sickness from living in a contaminated area. These things happen to other, less valuable people, but, most importantly, they don’t care. They care only about those responsible for failing to avoid causing the vulnerable to suffer from preventable injuries and illness, and the onerous regulations geared to stop these things from happening. Oh, and after people get injured, they don’t want to cover the cost of their health care, either. Give ’em vouchers. That’s good enough. Whatever health care you can get with vouchers, that’s what you have coming.

  17. My aunt was a pro-business Republican who could argue persuasively against government regulations and their costs in profits and jobs. She was also a health nut. When she was diagnosed with pancreatic cancer, she learned that the type of acrylic nails which made her hands more beautiful were carcinogenic. She wanted to know why the government wasn’t controlling for that.

  18. The scuttling and trashing has begun. See Affordable Health Care Act, LGBT, climate change, home mortgage rates–severely altered or at risk for trashing. Wasting no time at all, the tweeter is now King of the World with a stroke of the pen and a hand on “Two” Corinthians. OMG! Long slide downhill. We knew all along, didn’t we?

  19. dumbass dubya’s administration had their own cost/benefit analysis for regs. If it cut into profits, that reg was gone. They had zero tolerance for people getting sick from food borne bacteria. Profit was the only game in dubya’s town. That and tort reform, malpractice insurance reform, getting rid of pain and suffering awards, etc.

  20. Sorry I’m late but I have been on a two mile-plus jaunt with the women’s march carrying a sign which read: D.T. My wife and my mother were not pigs!!! There were about 2,000 mostly women who marched in our parade here in Naples, Florida, followed by a big rally at Cambier Park downtown. I had over 100 people who wanted to take a picture of my sign. I told them that if Trump wanted to see a pig he should get a mirror.

    Back to business – I was surprised upon reading the responses to Sheila’s blog today that no one mentioned Bush’s Great Recession, which was largely brought about by Republican laissez faire regulation of the sale and other disposition of credit derivatives around the globe, the casino action crapshoots which undergirded the sale and other disposition of mortgages securitized and packaged up for such purpose. The mortgages were graded AAA by Moodys and others who were paid by the banks to grade such junk securities for sale to such as teacher and firemen pension funds. When the inevitable crash happened, Bush’s Treasury Secretary quickly ponied up 800 billion dollars in bailouts, you may recall. No one went to jail, of course. Chump change fines, as usual, were the order of the day. Car companies were rescued but millions were chased out of their homes via mortgage foreclosures; trillions of dollars in home equity disappeared; small banks were swallowed by big ones etc. etc. etc.

    This happened because of underregulation of banking activities (which have been greatly expanded with the repeal of Glass-Steagall) and which brought about Dodd-Frank, intended to correct the abuses that gave us Bush’s Great Recession and huge losses to our economy which can never be recovered. How comforting it is to know that the Republicans are now and have since 2010 systematically picking Dodd-Frank apart so that you and I can again underwrite the big banks’ crapshoots. Trump, of course, will agree. Maybe the thus unencumbered big banks can make some money available to Trump’s son-in-law for a Trump Resort and Golf Course on Russia’s Black Sea playbround.

    I hold a degree in economics but I don’t need a panel of economists to write up a report of cost-benefit analyses to know that the failure of regulation in the Bush-Cheney era in this instance almost brought us an international depression, and I am surprised again that it was not mentioned by my fellow contributors while I was in absentia today traversing the hot streets of Florida. It is in my opinion the best example of what Shelia was trying to elicit from her followers, and I will leave the lack of regulation and worship of market solutions which brought us the Great Depression for another day.

  21. I worked in the airport industry for over 25 years and it is one of the most regulated industries known today. The airport is a micro city that includes almost all of the functions of a city. Each of these functions carries with it the requisite regulations. Each is necessary for the airport to carry out its purpose. It has to comply with a myriad of environmental laws, safety and security regulations and volumes that are related to aviation alone. The cost of this often runs in the hundreds of thousands yet each has to be complied with. The benefit attendant to these costs are human life so unless we are willing to place an exact value on a human a true cost benefit analysis is meaningless. Therefore, regulations cannot be judged on dollar value alone. The calculus must be based on a deeper value of decency. Unfortunately decency is a currency that is in short supply in our current crop of fools. And Shelia, you are excused for using the bullshit term, much stronger language is needed here and in the future.

  22. Thanks, Sheila, for bringing up the topic os regulation. For years I have been saying that deregulation of what started the economy to slide for the middle class and the poor.

    Much research into the history of regulation here in the 20th century needs to be done.

  23. I am very late in the comments section, but I wanted to add this for historical significance.

    From the 1950s, Reserve Mining Company was extracting iron ore in northern Minnesota and dumping the tailings (waste) into Lake Superior. By the 1960s, the fish in that end of Lake Superior were dying off. Local fishermen with the aid of some sports fishermen tried to get the state of Michigan to sue. Reserve Mining told the state of Minnesota that it would spend no money to defend itself and if the state didn’t defend it, it would close the mine. Michigan backed down.

    After the EPA was created in 1970, the Justice Department, at the behest of the EPA, filed suit. It was discovered that asbestos-like fibers were present in the tailings. The court ordered the plant shut down in 1974 (trial began in 1972), but the Appeals Court allowed them to keep dumping until they could find an alternative, which they did in 1980.

    This is why I will always love the EPA.

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