[Federal Register Volume 74, Number 233 (Monday, December 7, 2009)]
[Unknown Section]
[Pages 64137-64139]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: X09-31207]
[[Page 64137]]
INTRODUCTION TO THE FALL 2009 REGULATORY PLAN
It is . . . the policy of the United States that . . .
agencies shall prioritize actions based on a full
accounting of both economic and social benefits and
costs and shall drive continuous improvement by
annually evaluating performance, extending or expanding
projects that have net benefits, and reassessing or
discontinuing under-performing projects.
Executive Order 13514 on Environmental,
Energy, and Economic Performance
(Oct. 5, 2009)
Some of the nation's most important policies are
implemented through regulation. In domains as diverse
as energy efficiency, environmental protection, health
care, occupational safety, civil rights,
communications, homeland security, and many more, the
government attempts to protect its citizens through
regulations.
In a memorandum signed on January 30, 2009, President
Obama emphasized that as a result of many years of
experience, ``Far more is now known about regulation -
not only about when it is justified, but also about
what works and what does not.'' He explicitly directed
the Director of the Office of Management and Budget,
Peter Orszag, to evaluate the regulatory review process
and, among other things, to ``clarify the role of the
behavioral sciences in formulating regulatory policy''
and ``identify the best tools for achieving public
goals through the regulatory process.''
Director Orszag has written that behavioral economics
is ``one of the most important intellectual
developments of the past several years. . . . By taking
the insights of psychology and observed human behavior
into account, we now have a fuller picture of how
people actually behave - instead of just reducing them
to the hyper-rational utility-maximizers of Econ 101.''
A behavioral approach to regulation is straightforward.
It draws on evidence of people's actual behavior. It
favors approaches that are clear, simple, and easy to
understand. It attempts to ensure that regulations will
have good consequences.
These goals have many implications for regulatory
policy. In the domain of savings for retirement,
consider these words from the President's Fiscal Year
2010 Budget:
``Research has shown that the key to saving is to make
it automatic and simple. Under this proposal, employees
will be automatically enrolled in workplace pension
plans--and will be allowed to opt out if they choose. .
. . Experts estimate that this program will
dramatically increase the savings participation rate
for low and middle-income workers to around 80
percent.''
In September 2009, the President expanded on this theme
by offering a series of initiatives for increasing
automatic enrollment. He said, ``We know that automatic
enrollment has made a big difference in participation
rates
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by making it simpler for workers to save - and that's
why we're going to expand it to more people.''
In many other domains, it is possible to promote
regulatory goals by selecting the appropriate default
rules. And where it is not possible or best to change
the default, we can have a similar effect merely by
easing and simplifying people's choices. Several of the
rules discussed in this Plan reflect this aspiration.
One such rule, involving hazard communication to
workers and proposed by the Occupational Safety and
Health Administration in 2009, is expected to increase
simplicity, to reduce costs, and at the same time to
save dozens of lives each year.
In the same vein, the Administration is taking a series
of steps toward simplifying the Free Application for
Federal Student Aid (FAFSA), reducing the number of
questions and allowing electronic retrieval of
information. Use of a simpler and shorter form is
accompanied by measures designed to permit online users
to transfer data previously supplied electronically on
their tax forms directly onto their FAFSA application.
To achieve regulatory goals, it is important to
understand that people are often affected by the
behavior of their peers: If people learn that they are
using more energy than similarly situated others, their
energy use declines - saving money while also reducing
pollution. In the domain of seatbelt usage, real change
occurred as regulation worked hand-in-hand with
emerging social norms. The Administration is well aware
that if safety is to increase significantly on the
highways, it must be in part because of social norms
that discourage distracted driving (and other risky
behavior). In October 2009, the President issued an
Executive Order banning texting while driving by
Federal employees; the Department of Transportation is
embarking on a range of initiatives to reduce
distracted driving.
Scientific integrity is critically important, in the
sense that regulators cannot decide how to proceed
without having a sense of what is known and what
remains uncertain. Of course some risks are large and
others are small. Some regulations are burdensome and
some are not. Some regulations have unintended bad
consequences; others have unintended good consequences.
In his January 30, 2009, memorandum, President Obama
pointed to the importance of ``a dispassionate and
analytical `second opinion' on agency actions.'' He
also asked the Director of OMB to address the role of
three factors that are not always fully included in
cost-benefit analysis: the interests of future
generations; distributional considerations; and
fairness. If regulation is to be data-driven and
evidence-based, it must include, rather than neglect,
the concerns of future generations.
Many of the regulations in this Plan reflect these
concerns. In particular, environmental regulations,
designed to combat the risks associated with climate
change, are attentive to the interests of future
generations and those who are least well-off. The
Administration has recently developed interim figures
for the social cost of carbon-figures that have been
used for several different regulations in this Plan,
involving energy efficiency in vending machines and
greenhouse gas emissions from motor vehicles. The
figures are based in part on a recognition of the well-
established view that a high discount rate for long-
term damage could lead to action that might harm future
generations.
In addition, President Obama has placed a great deal of
emphasis on open government. In his first weeks in
office, he quoted the words of Supreme
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Court Justice Louis Brandeis: ``Sunlight is said to be
the best of disinfectants.'' President Obama explained
that ``accountability is in the interest of the
Government and the citizenry alike.'' He emphasized
that ``[k]nowledge is widely dispersed in society, and
public officials benefit from having access to that
dispersed knowledge.'' President Obama has stressed
that transparency can ensure that data is available to
all - and with available data, we can greatly improve
our practices.
The Environmental Protection Agency has built on these
ideas with its Greenhouse Gas Reporting rule, requiring
disclosure by the most significant emitters. The data
will allow businesses to track their own emissions and
compare them to similar facilities; it will also
provide assistance in identifying cost-effective ways
to reduce emissions in the future.
All this is merely a start. For example, the Executive
Order on environmental, economic, and energy
performance will attempt to track progress in meeting
crucial goals - including greenhouse gas emissions
reductions - and disclose both costs and benefits to
the public.
Regulatory decisions often require complex tradeoffs,
especially in the current economic environment. We are
committed to ensuring that those tradeoffs reflect the
best available information, respect scientific
integrity, and benefit from public participation - and
are rooted in a clear and transparent understanding of
the human consequences.
Cass R. Sunstein
Administrator
Office of Information and Regulatory Affairs
