Daniel Farber on CPRBlog {Bio}
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Econ101, Ideological Blinders, and the New Head of CBO

There are troubling indications that Keith Hall lets ideology blind him to basic economics.

Last week, in a post about the employment effect of regulations, I mentioned briefly that the new Director of the Congressional Budget Office, Keith Hall, had endorsed some questionable views on the subject.  A reader pointed me toward an additional writing that has done a lot to escalate my concerns.  There are disturbing signs about both Hall’s ideological bias and even his grasp of basic economics.

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Accounting for Job Loss -- The consequences of doing so may not be what you'd expect

The Republicans’ choice for head of the CBO, Keith Hall, spent some time at a libertarian think tank reportedly funded by the Koch brothers, where he wrote about the effect of regulation on employment. Hall argued that regulations cause unemployment (include indirect effects because of price changes), and that the costs of unemployment should be included in regulatory cost-benefit analysis.

In principle, it seems right to include the special harms associated with job loss in cost-benefit analysis (not just for regulations but everything else too).  There’s all kinds of evidence that being fired or laid off is very damaging to people, and that’s a genuine cost — assuming that we can reliably quantify the effect.  As Hall has said:

“The immediate impact of job loss includes lost wages, job search costs, and retraining costs. Further, research shows that even after reemployment it can take as long as 20 years for workers to catch up on lost earnings, largely due to skill mismatches between the jobs lost and the new jobs created in the economy. These losses occur at different lengths of job tenure, in all major industries, and with workers of any age.”

As I said, this seems right in principle. But there are some important caveats.

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Killer Coal

Black lung has been the underlying or contributing cause of death for more than 75,000 coal miners since 1968, according to NIOSH, the federal agency responsible for conducting research on work-related diseases and injuries. Since 1970, the Department of Labor has paid over $44 billion in benefits to miners totally disabled by respiratory diseases (or their survivors). The annual death rate from mining accidents is 20-25 per 100,000, about six times the average industry. If you do the math, that means comes out to about six deaths per thousand workers over the course of a thirty-year career as a miner. This is actually an underestimate because the government figures include office workers employed in the industry.

Miners aren’t the only victims. There’s also air pollution. Even with the pollution controls in place in developed countries, coal remains deadly. According to a 2011 report of the American lung association, particulate pollution from coal-fired power plants causes about thirteen thousand deaths per year. Indeed, according to the report: “Coal-fired power plants that sell electricity to the grid produce more hazardous air pollution in the U.S. than any other industrial pollution sources.”

Of course, things would be much worse if it weren’t for EPA. Just look at China, which has done very little to control pollution from power plants. According to a recent study:

Air pollution causes people in northern China to live an average of 5.5 years shorter than their southern counterparts. . . .

High levels of air pollution in northern China – much of it caused by an over-reliance on burning coal for heat – will cause 500 million people to lose an aggregate 2.5 billion years from their lives, the authors predict in the study, published in the journal the Proceedings of the National Academy of Sciences.

To put it in as few words as possible: coal kills.

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The Death of Deference?

Yesterday, the Supreme Court granted cert. in several cases to hear the following question:

“Whether the Environmental Protection Agency unreasonably refused to consider costs in determining whether it is appropriate to regulate hazardous air pollutants emitted by electric utilities.”

The fundamental issue is whether it was unreasonable for EPA to interpret section 112 to preclude consideration of cost at this particular stage of the regulatory process — not only different from what the Court thinks is the best interpretation, but a position that no reasonable person could take.  The Supreme Court and lower courts have rarely found agency interpretations unreasonable in cases where the statute was ambiguous.  This is called the Chevron Step 2 analysis, while deciding whether the statute is ambiguous is called Chevron Step 1.  The rationales for the Chevron doctrine are that Congress meant agencies to work out statutory ambiguities and that it is better for politically accountable members of the executive branch to do that, as opposed to federal judges with lifetime appointments.


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Lessons From an Epidemic

Ebola’s natural reservoirs are animals, if only because human hosts die to too quickly. Outbreaks tend to occur in locations where changes in landscapes have brought animals and humans into closer contact.  Thus, there is considerable speculation about whether ecological factors might be related to the current outbreak. (See here).  At this point, at least, we don’t really know.  Still, it’s clear that outbreaks of diseases like ebola strengthen the case for forest conservation.  Which is also, obviously good for the environment.  But that’s not what I want to focus on here.

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A Blow to Public Interest Litigation

A Texas judge's award of attorney fees is a threat to all public interest groups, liberal or conservative.

A couple of weeks ago, a federal district judge in Texas awarded over $6 million in attorneys’ fees against the Sierra Club.  Sierra Club had survived motions to dismiss and for summary judgment, only to lose at trial. The court awarded fees on the ground that the suit was frivolous. The combination of rulings — denying summary judgment but then calling a lawsuit frivolous  — is virtually unheard of, at least in the absence of perjury by a witness or document tampering.  It’s hard to account for this peculiar ruling unless the judge was just cranky due to the summer heat in Waco.

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FDA Discretion and Animal Antibiotics

FDA has stalled for 30 years in regulating antibiotics in animal feed. A court says that's O.K.

The FDA seems to be convinced that current use of antibiotics in animal feed is a threat to human health. But the Second Circuit ruled recently in NRDC v. FDA that EPA has no duty to consider banning their use.  That may seem ridiculous, but actually it’s a very close case legally.  The court’s discussion of Massachusetts v. EPA as an administrative law precedent should be especially interesting to environmental lawyers.

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Today's Supreme Court Ruling: Three Key Questions

Direct implications are limited, but we'll be reading the tea leaves for future implications.

Scholars, lawyers, and judges will be spending a lot of time dissecting today’s ruling.   Overall, it’s a bit like yesterday’s World Cup game — EPA didn’t win outright but it didn’t lose either.

Here are three key questions with some initial thoughts:

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Does OIRA Live Up to Its Own Standards?

OIRA should conduct a cost-benefit analysis of its own activities and explore alternatives to its current oversight methods.

A White House office called OIRA polices regulations by other agencies in the executive branch.  OIRA basically performs the role of a traditional regulator – it issues regulations that bind other agencies, and agencies need OIRA approval before they can issue their own regulations.  Essentially, then OIRA regulates agencies like EPA the same way that those agencies regulate industry.  Issuing regulatory mandates and permits is a very traditional form of regulation, often called command and control.

There are a number of well-known criticisms of command-and-control regulation for being “one size fits all,” too rigid, unable to take advantage of information held by the regulated entities, and economically inefficient.  One might predict that OIRA’s own regulations would suffer from similar flaws.  To the extent that OIRA is trying to overcome these problems in other agencies, it might do well to reexamine its own activities applying the same standards.

OIRA pushes agencies toward greater consideration of the costs of their mandates and toward consideration of alternatives to command and control.  But maybe OIRA should turn some of its scrutiny inward to see how well it lives up to its own goals in its activities.

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The Legal Basis for the 111(d) Rules

Megan Herzog has done a great job of explaining the background of the rules and summarizing the proposal in her blog posts.  I just wanted to add a quick note about how EPA has structured its rules in light of possible legal challenges.  The fundamental issue facing EPA is how to define the “best system” for reducing carbon emissions.  Is it limited to technological upgrades at individual emitters?  Or can it be broader, and if so, how broad?  Industry is sure to argue that EPA can only set standards for individual plants that emit carbon, nothing more.

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