Thursday, March 9, 2017

The Dilemma of Regulation:

Is it Good or Evil?

After I reported on the death of Harold Denton last week, I couldn't shake the feeling that his career and his role in the aftermath of the Three Mile Island (TMI) accident had some larger implications that I should have addressed--namely, the importance of a good regulator.

When I lecture to students on regulation, I always start by saying that, in a perfect world, there would be no need for regulation.  Everyone would be capable and ethical and honest--no one would cut corners to save time or money, no one would cheat anyone else, no one would be careless or irresponsible or would handle equipment they weren't trained to handle.  We wouldn't need stoplights that end up making us stop even when we can see that no traffic is coming the other way.  We wouldn't need to have policemen giving us speeding tickets when, most of the time, you can drive a little over the speed limit perfectly safely.

I also like to give two examples of the value that regulation--and regulators--sometimes have.  In particular, I point out that before the present era of occupational, environmental, and other regulation, the death rate from accidents was astounding by today's standards.  Quoting from David Von Drehle in Time magazine, May 2, 2013, who was talking about what happened after the infamous Triangle Factory fire in New York City in 1911:

A little more than a century ago, in the rapidly developing United States of America, nearly 1,000 workers died on the job every week, on average. Collapsed mines buried them alive. Bursting steam engines scalded them to death. Pots of molten steel poured over their heads. Whirling saw blades worked loose in lumber mills and turned to shrapnel. Railroad engines crashed. Merchant ships and fishing boats sank in trackless seas.

In the years since then, the number of workplace fatalities has been cut by more than 90%, even as the population of the country has more than tripled. The risk of death on the job today is but a tiny fraction — less than 1/30th — what it was on the warm spring day in 1911 when 146 garment workers died in New York's notorious Triangle fire.

The fact is that most regulation today was introduced in an effort to prevent a repetition of disasters that were killing and maiming people in the early days of industrialization.  Even today, as Von Drehle points out, in countries with lower regulatory standards and higher levels of corruption, we still see factories collapsing and killing hundreds of workers.

My other favorite example is the Thalidomide scare of the 1950s.  Thalidomide was legal in Europe while the FDA appeared to dither and delay approval for use in the U.S.  In the meantime, women using the drug in Europe started to give birth to deformed babies.  In the end, it was a single person on the FDA staff who kept asking for more information that saved the American public from the same fate.  Until the risks of Thalidomide were revealed, this woman had been widely criticized for causing regulatory delay.  

Does every regulatory delay save lives?  Of course not.  Is every search for more information merited?  No.  Can regulators make an effort to speed up their reviews?  Certainly.  But it is a difficult challenge to determine how to speed up reviews without risking missing some important potential problem.  It is not a problem that can be solved by imposing an arbitrary restrictions on regulations.

I do not want to be an apologist for regulation.  Regulations do have some inherent shortcomings:  they are sometimes made in reaction to a problem, so they are implemented in a hurry and may not fully consider all possible situations and implications; regulators tend to use some conservatisms to try to counter anything they may not have thought of; they tend not to be updated as fast as new technology develops or as our knowledge evolves, so can be out of date.

Regulations, to serve their purpose, need to be continually reviewed and modified to reflect new technology, new science, new social developments, and new concerns.  Some regulations may even become obsolete and should be eliminated.  But evaluating regulations is complex.  Regulations exist in a complex world--they have costs, but they also have benefits.  Decisions to eliminate or modify existing regulations or to develop new regulations need to be based on objective reviews of the entire picture: the needs, the options, the costs, and the benefits.

There is a lot that can and should be done to improve regulation.  Regulators should seek to find the least burdensome ways of implementing regulations.  The NRC has attempted to encourage this through its Principles of Good Regulation.  The paperwork and reporting requirements of regulations are often considerable and should be streamlined where possible.

All of this, however, should not be done with a view that regulation is evil and the less we have the better.  This should be done with a view toward addressing the kinds of needs that led to the regulations in the first place, whether they were health and safety regulations, economic regulations, or any other kind of regulation.  They should be done with a perspective on what has been good about regulation as well as what has been flawed--of the factory accidents that were prevented because of the lessons learned from the Triangle Factory fire, the medical problems that were prevented because of the kinds of regulators that evaluated Thalidomide and other drugs, and all the other benefits, often unrecognized, of things that didn't go wrong because of regulation.



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  2. The challenge is when regulation comes about due to political pressure to address the "panic of the day". It has been said that a good crisis is a terrible thing to waste - and often the problem is that regulators believe that they are smarter than the rest of us and that only they can save us from their imagined catastrophe of the moment. My favorite current example is the switch to diesel fuel in most all of Europe to address anthropogenic CO2 emissions. Yes, diesel fuel reduced CO2 emissions, it also generated lots of other greenhouse gases and great quantities of particulate matter (soot) with significant detrimental health and environmental effects. Fear of GMO's is another. And don't get me started on OSHA's demand for split toilet seats. The most emotionally laden is DDT - its elimination many years ago saved lots of wildlife and also led to lots of malaria deaths. Finding the right balance is the challenge, the only solution which seems to work is to throw the bastards out every few years and let a new bunch of different bastards in, this way the ship of state keeps lurching from side to side, but, thus far, has yet to hit the rocks.

  3. "But it is a difficult challenge to determine how to speed up reviews without risking missing some important potential problem. It is not a problem that can be solved by imposing an arbitrary restrictions on regulations."

    But aren't almost all regulations arbitrary themselves?

    Unless it is completely obvious that something is either so dangerous as to be always prohibited or so inherently safe that no regulations are necessary, setting a rule is a judgment call. That is, some arbitrary decision must be made, and that decision could have some very valid arguments against it that should not be dismissed lightly.

    The main conundrum with regulation is how far do you go? As a neighbor of mine used to say, "You can make a circle only so round." At some point you have to stop trying and say that it's good enough, and short of a commandment from God, where you stop is a human decision that is, by its very nature, arbitrary. How can any restrictions imposed on this process be any more arbitrary?

    Since this is a blog about power generation, let me put it this way. The safest option for generating electricity -- to protect both the workers and the public -- is not to produce any electricity at all. Anything else involves risk, some options more than others. Where you draw the line on what risk is acceptable and what is not is completely arbitrary, and the costs that result from complying with the rules that are established as a result are also completely arbitrary. Sadly, it appears that, in recent years, some regulators seem to prefer the "no electricity" option as the ultimate goal for regulation, and while this is unachievable, they are working to get as close to that as possible (while still favoring some politically popular options, of course).

    So what is wrong with concluding that this is unacceptable and imposting restrictions to prevent this type of abuse of regulation? I'm curious to hear arguments that such restrictions are any more arbitrary than the regulations themselves.

    1. I would distinguish between a “judgment” and an “arbitrary” decision. Arbitrary is things like “no new regulation.” Judgment is things like cost-benefit-based decision-making. Judgment isn’t perfect, but on balance, regulation has done far more good than harm. Ask anyone in Europe whose mother took Thalidomide whether they are happy there was no regulation restricting it in Europe.

  4. How is it that under the Atomic Energy Commission's regulation we were able to build about 90 safe nuclear power plants? When the NRC was created orders for nuclear power plants were canceled en masse. I am unable to find a single nuclear power plant that was built from conception to completion under the NRC. Why were we able to build 90 nuclear power plants in 15 years under the AEC and virtually none under the NRC in 40 years? Allow me to answer this question.

    During the 60's and early 70's coal was one of the most powerful lobbying groups in Washington. Coal had already lost market share as residences switched from coal to gas heating and railroads switched from coal to diesel locomotives. During this period the only significant organization opposed to nuclear was the coal industry. Even the Sierra Club was not opposed to nuclear. Could it be that that the NRC was created to “maximize safety”, a euphemistic way of saying “regulate it to death”? The climate was right because out of the anti-nuclear bomb and environmental movements came the anti-nuclear power plant movement. The anti-nuke movement became the unwitting propaganda arm of the save coal movement. Nuclear was killed through over regulation and nonsensical anti-nuke propaganda. Coal was saved.