Life is risky business. Such is the inherent nature of our existence, and understanding this reality is crucial, especially when setting the foundation for regulatory decisions that impact millions of lives. One significant tool in this realm, which unfortunately has been sidelined in recent discussions, is comparative risk assessment. Traditional cost-benefit analyses, while powerful, only provide a part of the picture. In our evolving world of challenges, with increasingly complex decisions to make, comparative risk assessment is no longer an option; it's a necessity.
The Biden Administration recently proposed revisions to the Office of Management and Budget's Circular A-4, and, unfortunately, overlooked the pivotal role of comparative risk assessment. This oversight may result in decisions that seem justified on the surface but lack the depth of understanding provided by evaluating risks comparatively.
Circular A-4 provides guidance to federal agencies on the development of regulatory analysis as required under Section 6(a)(3)(c) of Executive Order 12866. Essentially, it serves as a guideline for how agencies should assess the soundness of regulations, and traditionally has focused on performing cost-benefit analyses for regulations, ensuring that the potential benefits of a regulation justify its costs. Circular A-4 is supposed to standardize regulatory assessment methods to ensure that agencies employ the best available techniques to quantify and monetize anticipated benefits and costs; improve transparency by setting clear standards and ensuring metrics are replicable for those outside the agency; and help federal agencies make better, informed regulatory decisions that maximize net benefits to society.
In essence, Circular A-4 is a tool to help ensure that regulations are based on sound analysis and that the regulatory choices are made after careful consideration of the potential impacts.
In comments to the OMB regarding their proposed revisions to Circular A-4, many organizations criticized OMB’s use of flawed metrics and biased analytical tools in attempting to change the way agencies assess costs and benefits—essentially abandoning any pretense of objectively assessing costs in favor of new and expansive ways of predicting benefits. But even if the Biden Administration were to maintain rigorous cost-benefit analyses, they would only tell part of the story.
At their core, cost-benefit analyses answer a very straightforward question: does a regulatory proposal make either economic or fiscal sense? What they don’t tell you is whether or not they make sense in the context of how the harm the proposal is trying to mitigate or ameliorate compares to other risks that might be more important or harmful.
Wilson and Crouch, in their profound book "Risk Benefit Analysis," highlighted the omnipresence of risk in our lives. They brought forth the idea that even actions and functions deemed "safe" are teetering on the edge of some uncertain outcome. Yet, most of us embrace these actions, consciously or unconsciously, weighing their perceived benefits against inherent risks. This balancing act is the essence of comparative risk assessment.
Take, for instance, the startling statistic from the CDC in 2022: approximately 30,500 deaths in American homes were a result of unanticipated events. These are places most Americans regard as their sanctuaries. The mere act of stepping into the shower carries with it the risk of a tragic accident. But do we shun showers? No. We weigh the pleasure and necessity of a bath against the minuscule risk, and more often than not, choose to embrace the former. This process, perhaps subconscious, is a testament to our inbuilt capacity for comparative risk assessment.
However, when it comes to public decision-making, this intuitive process needs to be more structured, detailed, and integrated into regulatory frameworks. Ignoring it can lead to regulations that appear “safe” but may result in unforeseen consequences.
The term “safe” has been so frequently used that its real meaning often gets blurred. Absolute safety is a myth, a utopia we cannot reach. The Environmental Protection Agency, for example, labels a risk as "de minimus" if it's less than "one-in-a-million." But even this is a comparative measure, derived from the relative assessment of risks.
It is high time that regulatory decisions incorporate the invaluable insights of comparative risk assessment. By doing so, we can make more informed, holistic choices. The Biden Administration's recent proposals missed this opportunity. But it's never too late. In the intricate dance of benefits and risks that life presents, having a holistic understanding can lead to better, safer, and more informed decisions. Let's not ignore the comparative dimension any longer. After all, life is, and will always be, a risky business.
Andrew Langer is Director of the CPAC Foundation Center for Regulatory Freedom. Dr. Arthur Langer, PhD, is Professor Emeritus of the Graduate School of the City University of New York, Dr. Langer and Mr. Langer are father and son.
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