Cost-Benefit Analysis and Human Dignity
Two recent papers deal with some hard questions in the area of cost-benefit analysis. Here are two recurring problems: (a) deciding which costs and benefits to count and (b) how precisely to count some types of costs and benefits.
For example, can ‘collateral’ effects of government action be excluded from consideration? Is it appropriate to measure dignity, for example when deciding whether to require the construction of buildings that are accessible to persons with disabilities? And, if so, how would one go about measuring it?
See Sunstein, “The Limits of Quantification“:
The problem of nonquantifiability is a recurrent one in both public policy and ordinary life. Much of the time, we cannot quantify the benefits of potential courses of action, or the costs, or both, and we must nonetheless decided whether and how to proceed. Under existing Executive Orders, agencies are generally required to quantify both benefits and costs, and (to the extent permitted by law) to show that the former justify the latter. But agencies are also permitted to consider apparently nonquantifiable factors, such as human dignity and fairness, and also to consider factors that are not quantifiable because of the limits of existing knowledge. When quantification is impossible, agencies should engage in “breakeven analysis,” by which they explore how high the nonquantifiable benefits would have to be in order for the benefits to justify the costs. Breakeven analysis can be used and potentially disciplined in three different ways. (1) Sometimes agencies are able to identity lower or upper bounds, either through point estimates or through an assessment of expected value. (2) Agencies can often make progress by exploring comparison cases in which relevant values have already been assigned (such as for a statistical life). (3) When agencies cannot identify lower or upper bounds, and when helpful comparisons are unavailable, breakeven analysis requires agencies to identify what information is missing and to specify the conditions under which benefits would justify costs (“conditional justification”). In admittedly rare cases, regulators, no less than individuals, might have to “pick” or instead to “opt.”
And Bayefsky, “Dignity as a Value in Agency Cost-Benefit Analysis“:
President Obama’s 2011 Executive Order 13,563 on cost-benefit analysis (CBA) authorizes agencies to consider “human dignity” in identifying the costs and benefits of proposed regulation. The notion of incorporating dignity into CBA, this Note points out, highlights the importance of choosing between different conceptions of CBA: one that aims to derive a monetary figure for dignity, and one that seeks to take dignity into account in unmonetized form. This Note illuminates the stakes of the choice between monetized and unmonetized CBA by drawing attention to various ways in which dignity might be incorporated into CBA.
The Note then argues that CBA can and must include dignity in unmonetized form. In doing so, agencies should embrace “qualitative specificity,” which involves elucidating in qualitative terms the nature and gravity of dignitary considerations in a particular regulatory context. Qualitative specificity, the Note indicates, enables agencies more transparently to assess the positive and negative consequences of government regulation, and it facilitates public participation in the process of defining the nature of dignity in the senses relevant to the effects of government regulation. In response to the critique that qualitative specificity is indeterminate and fails to constrain administrative discretion, the Note contends that qualitative specificity provides only as much determinacy as is actually available; this approach is preferable to monetization that emerges with a determinate number but fails to accommodate the complex and malleable nature of dignity.
As my mini-series on the role of administrative law values in judicial review rumbles on, I thought it timely to link to these papers. The values one finds in judicial-review cases have a Janus-faced quality. Not only do they influence how judges decide administrative-law cases but they may also influence how administrative power is structured and exercised.
The impetus for the growing importance of cost-benefit analysis is provided by good administration. Regulation will be much more effective and efficient if the benefits outweigh the costs. My modest (and I think largely uncontroversial) point is that attention to the value of good administration will not always be sufficient.
In many areas of regulation, consideration of other values will be necessary to round out cost/benefit analysis. In particular, an appreciation of human dignity (a component of many modern conceptions of the rule of law) becomes important. Sunstein and Bayefsky’s contributions suggest that it is possible to harmonize dignity and good administration, though it is not always an easy task.
This content has been updated on July 30, 2014 at 19:38.