Judicial Review and Cost-Benefit Analysis: Part II

by James Goodwin

May 04, 2009

Last week I discussed how the institution of judicial review has been used to amplify the deregulatory nature of cost-benefit analysis.  This week, I'll talk about some possible remedies.

An unusual synergy exists between the institutions of cost-benefit analysis and judicial review.  Under most circumstances, the institution of judicial review is arguably neutral with regard to regulatory issues.  When judicial review is applied to a case involving a regulation that has been weakened by cost-benefit analysis, however, the once neutral institution is transformed into one that that can have no other impact than to aid and abet the deregulatory agenda of cost-benefit analysis.  This is because when an agency is forced by cost-benefit analysis to promulgate a rule that is too weak to be supported by the underlying statute, any public interest groups concerned with public health, safety, and the environment is left with a difficult decision to make.  If they challenge the rule in court and win, theirs will be a Pyrrhic victory, because everything would return to the pre-regulatory status quo where no protections are in place, while the agency returns to promulgating a new rule.  If, however, they decide not to challenge the rule, then they will at least have some protections in place that are, for all intents and purposes, better than nothing.  In other words, the successful use of cost-benefit analysis to water-down health, safety, and environmental regulations places public interest organizations in a damned-if-you-do, damned-if-you-don’t situation when it comes to judicial review.

In their recent book, Retaking Rationality, Richard Revesz and Michael Livermore look at this as a “judicial remedies” problem—that is, they see the problem as one in which courts deciding these cases don’t have any good options for giving effect to their decisions when they find in favor of a party challenging a weakened regulation.  To deal with the problem of judicial review in this context, Revesz and Livermore propose that federal courts reviewing regulations employ a new remedy called “remand without vacatur.”  They write:  “In these cases, the court finds for the [pro-regulatory] plaintiff, but allows the [illegally lenient] agency regulation to stand, pending reconsideration of the rule by the agency.  Thus, the plaintiff has the advantage of the weak (but still better than nothing) regulation in place while the agency considers whether to propose a stricter rule or find additional justification for the weak rule.”

It is noteworthy that Revesz and Livermore do not use the problem of judicial review and cost-benefit analysis as providing further ammunition for the argument to jettison cost-benefit analysis.  Instead, they attempt to address this problem by seeking ways to reshape other institutions—in this case, judicial review—so as to minimize the worst aspects of cost-benefit analysis.  They adopt this approach because they are starting from the assumption that cost-benefit analysis is here to stay, so pro-regulatory interest groups better learn how to deal with it.  This line of argument is one that is gaining currency among proponents of stronger regulations, and it is a development that CPR will continue to monitor.

To be sure, the solution that Revesz and Livermore propose for eliminating the deregulatory synergy that exists between judicial review and cost-benefit analysis is far from ideal.  It seems that the far better solution would be to stop using rigid cost-benefit analysis once and for all.  After all, it makes more sense to eliminate one failed institution than to rearrange the entire regulatory world to accommodate that institution’s failings.  But just as regulations promulgated according to cost-benefit analysis are better than nothing, perhaps we will have to accept Revesz’s and Livermore’s solution of remand without vacatur as a solution that is better than nothing as well.

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Also from James Goodwin

James Goodwin, J.D., M.P.P., is a Senior Policy Analyst with the Center for Progressive Reform. He joined CPR in May of 2008.

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