New Hope for Regulatory Reform

Published October 11, 1994

When Congress repealed the 55-mile-per-hour speed limit law in December 1995, the safety experts at the U.S. Department of Transportation predicted that up to 6,400 more people would die every year. Their logic was impeccable: Accidents occurring at higher speeds are more likely to kill than are accidents occurring at lower speeds.

They were wrong.

The highway fatality figures for 1996, released in July, show virtually no change from the 1995 figures. The number of deaths per 100 million miles traveled remained at 1.7, the lowest it has ever been. Montana, which eliminated its daytime speed restrictions altogether, saw deaths on its highways fall from 215 in 1995 to 200 in 1996.

The failure of the doomsayers’ prediction came as no surprise to John Semmens, an economist who heads the Laissez Faire Institute in Chandler, Arizona. For years, Semmens has confidently predicted lower fatality rates if speed limits were raised or repealed. Increasing highway speed limits will attract traffic from other roads, Semmens reasons. Since fatality rates on those other roads are higher than they are on major highways (thanks to the latter’s wider shoulders, gentler turns, and generally superior engineering), any lives lost due to higher speeds would be more than offset by the number of lives saved by having people drive more often on safer roads.

So Semmens was right. But there is a much bigger lesson to be learned from the highway safety example, and it appears that Congress is finally ready to learn it.

Semmens was right because he recognized that every regulation imposes costs as well as benefits. Those costs may be more difficult to see than the benefits, and therefore easy to overlook, yet they may be greater than the more visible benefits. In the case of highway speed limits, the unseen cost was preventable deaths on less-safe country and city roads. Had our nation’s highway regulators carefully weighed the costs and the benefits, they might have opposed the national 55-mile-an-hour limit years ago, saving thousands of lives.

The Regulatory Improvement Act of 1997, recently introduced in the U.S. Senate, would require all government agencies to apply cost-benefit analysis to any proposed rules estimated to cost more than $100 million. The Act calls for studying alternative ways of accomplishing objectives–including market- and incentive-based approaches and passing no rule at all–that might cost less or produce more benefits. And it requires that the assumptions and sources of estimates be made publicly available.

The Act also wisely calls for scientific assessments of the risk that the rule seeks to address compared to the risk posed by adoption of the rule itself. Such assessments would be reviewed by expert boards that are “broadly representative and balanced” and include members “who are independent of the agency program.”

The cost-benefit analysis and risk assessment would be used to produce a report to Congress that prioritizes health hazards and life-saving interventions. We would finally know, for example, whether we spend too much pursuing tiny hypothetical risks such as “disinfection byproducts” in drinking water or small dust particles in the air, and too little on much larger known risks such as the absence of lights and railings on some stretches of road.

Prioritizing risks is absolutely essential if we are to get the most “bang” for every dollar spent to protect human health and the environment. This is common sense as well as good economics.

The Act is careful not to oversell the possible benefits of either cost-benefit analysis or comparative risk analysis. It does not impose unreasonable demands on the bureaucracy or unrealistic deadlines on the Administration. It recognizes and gives a role to alternative views on difficult-to-describe costs or difficult-to-measure benefits.

The pragmatic language may disappoint some partisans, but it will be reassuring to most Americans. Most importantly, it shows that elected officials are finally moving past rhetoric and getting serious about improving regulation.

The Act would accomplish what many experts in the scientific and economic communities say needs to be done to improve the effectiveness, and reduce the cost, of regulation. It could dramatically improve the efficiency of regulation, benefitting every family and every business in the nation.

If Congress passes The Regulatory Improvement Act of 1997, the nation will finally be on the road to regulatory reform. And as John Semmens would say, the faster the better!

Note: Economist John Semmens is the author (with Dianne Kresich) of “Auto Safety Regulations: Hazardous to Your Health?” and “Deregulation, Privatization, and Air Travel Safety,” Policy Studies released by The Heartland Institute in January 1988 and May 1989, respectively.