What's in a Number: Arguing About Cost-Benefit Analysis in Administrative Law

Abstract

Michigan v. EPA and a rash of administrative law decisions from the D.C. Circuit have resuscitated a longstanding debate over the role of costbenefit analysis in a regulatory democracy. The debate in its present form contrasts quantitative (or formal) approaches to qualitative (or informal) ones. However, the distinction between quantitative analysis and qualitative balancing is distracting, and even misleading, because monetization and aggregation, rather than quantification, is at the heart of cost-benefit analysis. This Article elucidates three interpretations of monetization and aggregation, and hence, cost-benefit analysis. Welfarist cost-benefit analysis serves as an indicator of a rule’s impact on overall well-being. Replicative cost-benefit analysis, on the other hand, strives to identify and reproduce the outcomes that would have prevailed under a particular set of arrangements, a frictionless market being the most salient example. Finally, rationalizing cost-benefit analysis seeks to demonstrate that there is a set of numbers, satisfying certain structural and substantive conditions, that makes the rule at issue the best one.

These interpretations of cost-benefit analysis are not necessarily exclusive. But they represent differing approaches for understanding monetization and aggregation. Adopting them as part of the vocabulary for debating cost-benefit analysis facilitates critical examination of the practice and its justifications. While the academic dispute over the normative desirability of a cost-benefit standard remains unsettled, existing doctrine suggests that judges reviewing administrative action for arbitrariness may only impose on agencies cost-benefit analysis that is rationalizing.