Costs Without Benefit Serve Nobody’s Interests

In an October 16, 2011 New York Times op ed1 , Commissioner Robert Adler suggested that “many” of those who urge the Consumer Product Safety Commission (“CPSC”) and other agencies to conduct cost-benefit analysis “have no interest whatsoever in making regulation more focused and rational” and really want “to stop government from regulating, period.” Commissioner Adler further contends that safety regulators “rarely impose new costs” by regulating but merely reallocate the costs of injuries. While Commissioner Adler may be correct in his assessment of the motives of some Commission critics, that argument, as well as his commentary on injury costs, appear to be deployed to conceal, rather than reveal critical truths. In crafting the Consumer Product Safety Improvement Act of 2008 (“CPSIA”), Congress imposed burdens on industry that could not withstand cost benefit analysis. The Commission has usually declined to discipline their decision-making in implementing that law with such analytical tools

2. The result is that the CPSC imposes greater costs on the marketplace than will be offset by expected benefits. Because such regulatory costs are not offset by comparable reduction of risk, they are in fact “new costs” and are ultimately passed along to consumers in the form of higher prices, loss of products, or other negative market effects.

In the CPSIA, Congress bypassed the CPSC’s normal rulemaking processes by imposing statutory bans and standards on small quantities of lead and phthalates in children’s products and requiring the adoption of various voluntary standards. Atop those costs, Congress added a layer of labeling, certification, testing, and other requirements.

The CPSC has struggled with implementing the CPSIA in a rational fashion both because of potential legal challenges should it not follow the legislative mandates3, but also because of apparently inescapable partisan politics. Faced with statutory requirements that its own scientists have suggested may have little impact on risk in many products, the CPSC has chosen to avoid considering whether many of its actions really benefit the public in a way that offsets, or even bears a reasonable relationship to, the costs. Nor has CPSC weighed the costs of certification, testing and labeling schemes against the likely benefits in life savings and injury reduction. To say that Congress does not require cost benefit analysis for many of these provisions does not mean that ignoring such analysis results in good public policy decisions. Commissioner Adler’s concession that Judge Calabresi might not endorse every Commission regulation on cost-benefit grounds, begs the point that the CPSC has assiduously avoided even trying.

In sum, Commissioner Adler makes arguments that largely avoid confronting the substance of the criticism CPSC has received. Good safety regulation protects the public from risk in a manner that is not completely disproportionate to that risk. Regulatory processes that ignore the relationship of costs to benefits risk imposing new, unjustifiable costs on the public. In encouraging the CPSC to use cost-benefit analysis “many” people are not seeking to discourage any regulation, but rather to encourage good, some might say, rational regulation.

1 Safety Regulators Don’t Add Costs. They Decide Who Pays Them. www.nytimes.com/2011/10/17/opinion/safety-regulators-dont-add-costs-they-decide-who-pays-them.html?_r=1

2 Commissioner Adler’s statement that CPSC does cost-benefit analysis is accurate but selective. CPSC’s practice in implementing the CPSIA has been to avoid such analysis on the grounds that the statutory language does not require it and such analysis would be time consuming and expensive. However, some question whether the real reason to avoid such analysis is because the results would reveal the regulatory initiatives cannot be justified.

3 An attempt to apply the phthalate requirement prospectively was challenged effectively in federal court. National Resources Defense Council, Inc. v. U.S. Consumer Product Safety Commission, 597 F. Supp. 2d 370 (S.D.N.Y. 2009)