Regulation protects us, so why count the cost? Because someone pays it

Nobody has ever won an election promising dirtier water. I want to start there, because the first thing every conservative learns, usually the hard way, is that the moment you say the word "regulation" with a frown, a man in a blue suit appears on television and says you want children to drink poison. It is a cheap trick and it works almost every time.

So let me say it plainly before I say anything else. I want clean air. I want clean water. I want the meat in the grocery store to be what the label says and the brakes on the minivan to work. A free market is a wonderful thing, but it is not a magic wand, and it has never claimed to be. The question that matters is not whether we should have rules. The question is whether we should count what the rules cost, in the same ledger where we count what they save. That question is not radical. It has been the stated policy of the United States, under presidents of both parties, since 1981. And it is still the question that gets you called names at dinner parties.

Here is the thesis. A rule is a trade. Somebody gets a benefit, and somebody, somewhere, pays a price. Honest government writes both columns on the same page. The people who resist counting the costs are not protecting clean water. They are protecting their ability to call every rule free.

The best case for regulation, stated fairly

I will make the opposing argument as well as its smartest defenders would, because if I cannot do that I have no business answering it.

Markets do a great job of getting people what they want when buyers and sellers bear the consequences of their choices. But sometimes they do not. A factory that dumps waste into a river does not pay the cost of the fish kill or the downstream town's water treatment; the neighbors do. Economists call that an externality, and the economist Arthur Pigou wrote about it in the 1920s. Other times the buyer simply cannot tell what he is getting. A shopper cannot test a packaged hamburger for contamination, and a parent cannot inspect a crib's construction. When one side knows far more than the other, the market can reward the seller who cuts corners. And history is full of examples: in 1906 Upton Sinclair's novel The Jungle shocked the country with its description of the meatpacking industry, and within months Congress passed the Meat Inspection Act and the Pure Food and Drug Act. In 1969 the Cuyahoga River in Ohio caught fire from the oil and debris on its surface. Nobody wanted that, nobody voted for it, and the market did not fix it. Laws did.

Every word of that is defensible, and a good deal of it is true. The Republican Party in particular has no reason to flinch from this history. Theodore Roosevelt, a Republican, signed the 1906 food laws. The Environmental Protection Agency was created in 1970 under President Nixon, a Republican, and the Clean Air Act of 1970 was signed by him too. Conservatives did not walk in late to the clean air debate. We helped write the first draft.

So I concede the premise. There are real market failures, and government has a role in answering them. Now let me tell you why that concession is where the argument begins, not where it ends.

Answer one: the benefit is real, and so is the bill

The first point is arithmetic. Every rule has a cost, and someone pays it. When a factory installs a scrubber, the cost does not vanish. It lands on some combination of the owners, the workers, who may see smaller raises or fewer hours, and the customers, who pay higher prices. Economists spend careers working out who bears what share, and the answer varies, but the answer is never "nobody."

Here is why that matters. If a rule delivers ten dollars of benefit for one dollar of cost, it is a bargain and you should build it tomorrow. If it delivers one dollar of benefit for ten dollars of cost, it is a bad trade, even if the goal sounds noble. You can only tell the difference by counting. The man who says "you can't put a price on clean water" is correct as a matter of philosophy and useless as a matter of governing, because we do put a price on it every day. We just choose whether to do it with our eyes open.

A hypothetical makes it concrete. Suppose a river needs to be cleaned up to a given standard. Rule A reaches the standard at a cost of $40 million. Rule B reaches the same standard at a cost of $90 million, because it requires a particular technology. The $50 million difference does not disappear. It could have paid for a second river's cleanup, or a hundred more inspectors, or lower rates for the customers who will fund the first project. Choosing Rule B without asking is not caring more about the river. It is caring less about everything else.

Answer two: the same cost hits a small firm much harder

Here is a point that gets lost in the abstract. Many compliance costs are fixed. A rule that requires a new report, a certification, a piece of equipment or a lawyer's review costs about the same whether the company has five employees or five thousand.

Take a hypothetical fixed compliance cost of $30,000. A firm with $3 million in annual revenue spends $30,000 divided by $3,000,000, which is 1 percent of its revenue. A firm with $300 million in annual revenue spends $30,000 divided by $300,000,000, which is 0.01 percent. The small firm bears a cost one hundred times heavier relative to its size. The giant barely notices it, and may even welcome the rule, because it knocks out the rivals who can't absorb the cost.

This is not a conspiracy theory. Economists have long observed that established companies sometimes support regulation because it raises a barrier for newcomers. The Congress of 1980 recognized the problem when it passed the Regulatory Flexibility Act, which requires agencies to look at the effect of rules on small entities. When the shop on the corner shrinks and the national chain grows, "protection" may have protected the wrong party. If you want the practical side, how a small business owner can fight a federal rule before it is final explains how a business owner can get the small-firm effects on the record, and the new employer's checklist for the first year of payroll and taxes shows what that burden looks like to someone hiring a first employee.

Answer three: counting the costs is bipartisan policy, not a corporate plot

Let me give you the history, because it surprises people.

Congress passed the Paperwork Reduction Act in 1980, signed by President Carter, a Democrat. It created the Office of Information and Regulatory Affairs, or OIRA, inside the Office of Management and Budget. The idea was to put a check on the paperwork burden that agencies imposed on the public.

In February 1981, in his first month in office, President Reagan issued Executive Order 12291. It required agencies to prepare a regulatory impact analysis for major rules and, to the extent permitted by law, to adopt a rule only if its potential benefits to society outweighed its potential costs. OIRA was given the job of reviewing the analyses. Reagan's order was controversial at the time; critics charged that it gave the White House too much power over independent agencies and tilted decisions toward industry.

Then, in September 1993, President Clinton, a Democrat, replaced it with Executive Order 12866. Clinton's order kept the core idea. Agencies must assess the costs and benefits of significant rules, and should adopt a rule only upon a reasoned determination that its benefits justify its costs. His order refined the framework: it focused review on "significant" actions, defined an "economically significant" rule as one with an annual effect of $100 million or more, and allowed agencies to weigh values that are hard to quantify, such as fairness and distributive effects. Presidents of both parties since have kept that framework in place.

The point is that cost-benefit review is not a Republican device. It is a bipartisan feature of modern government, and the argument is mostly about how rigorous it should be and who gets to do the counting. Which means that when a conservative asks, "What does this rule cost, and what does it buy?" he is quoting the policy of every administration since Reagan, not demanding anything exotic.

The Supreme Court has weighed in, too. In Whitman v. American Trucking Associations (2001), the Court held, in an opinion by Justice Scalia, that the Clean Air Act did not allow the EPA to consider costs when setting national air quality standards. The Court was reading the statute as written, and it shows that where Congress is silent or says otherwise, costs can be excluded by law. In Michigan v. EPA (2015), the Court held that the EPA acted unreasonably when it decided that regulating power plants was "appropriate and necessary" without considering cost. So the Court has said both things: Congress can tell an agency to ignore cost, and when Congress uses a word like "appropriate," the agency must not.

Answer four: who decided? The delegation problem

There is a deeper question hiding under the cost question. Who writes these rules?

Article I, section 1 of the Constitution says: "All legislative Powers herein granted shall be vested in a Congress of the United States." Not in an agency. Yet a great many binding rules are written by agencies under statutes that give them broad authority. The Supreme Court has allowed this so long as Congress supplies an "intelligible principle," a standard from J.W. Hampton, Jr. & Co. v. United States (1928). The Court has struck down delegations only twice, both in 1935: Panama Refining Co. v. Ryan and A.L.A. Schechter Poultry Corp. v. United States. In Gundy v. United States (2019), a plurality upheld a broad delegation, but Justice Gorsuch wrote a forceful dissent arguing that the doctrine had drifted too far from the text.

Why does that matter to your wallet? Because when an unelected agency writes a rule with the force of law, no voter can fire anyone for it. If Congress itself had to vote on the major rules, it would have to count the costs in public, with its name on the roll call. A delegation lets members of Congress take credit for the goal and blame the agency for the bill. That is accountability in reverse.

Answer five: rules accumulate, and almost nobody counts the stock

One more point. We count new rules, at least some of them. We rarely count the pile of old ones. Each rule may seem small and sensible, but they stack, and the stack carries a cost that no single rule shows. Add a regulation, add a form, add a deadline, and you have never asked what the thirty-first requirement does to a business that has already complied with thirty.

That is why conservatives argue for retrospective review: a requirement that agencies look back at old rules, test whether they did what was promised, and drop those that did not. A law that is never revisited is a law nobody checks. The market gets a performance review every day. Government rarely gets one at all.

The other side's best reply to all this

To be fair to the opposition: they say cost-benefit analysis can be gamed. Costs are easier to measure than benefits, because a company can show you its invoice, while the value of a clean lake or a longer life is harder to pin down. Critics argue that this tilts the scale against protection. They have a point. Some benefits are hard to quantify, and honest analysts say so and still include them. Others point out that industry often overstates compliance costs in advance. That is also sometimes true, and the right answer is to check the predictions against what happened, which is exactly what retrospective review does.

What I take from this is that the remedy for bad counting is better counting, with open data and public comment, not no counting. We do not abolish the scale because someone leaned on it.

How to argue the point without sounding like an enemy of clean water

This is the practical part, and it is where most conservatives stumble.

1. Lead with the goal. Open by saying you want the lake clean, the food safe and the workplace safe. Then ask whether the rule in front of you is the best way to get there.
2. Say "yes, and." Yes to the goal, and let's look at whether a cheaper route gets the same result. Rule A versus Rule B is a better frame than rules versus no rules.
3. Ask for the numbers. What does it cost, who pays it, and what do we get? If the answer is "we can't say," that is itself an answer.
4. Separate the kinds of rules. A rule that stops one party from harming another is a different animal from a rule that merely bars a competitor from entering a trade. The first has a strong case. The second is often protectionism in a safety costume, as the license you need to braid hair and the jobs it quietly kills and zoning may be the biggest price control you never got to vote on show.
5. Favor review and sunsets. Ask that rules be revisited, and be ready to say what you would keep.

The deeper philosophical case, about prices as signals and rules as costs, is made in Seven Myths About the Free Market That Deserve Retirement, and the way a government that skips the arithmetic tends to end up in a mess is told in From Diocletian to Nixon, Every Price Control Ends the Same Way.

The bottom line

• A rule is a trade. Someone gets a benefit and someone pays the price, usually through lower wages, higher prices or smaller profits. Count both columns.
• Fixed compliance costs hit small firms hardest. In our hypothetical, a $30,000 cost is 1 percent of a $3 million firm's revenue and 0.01 percent of a $300 million firm's.
• Cost-benefit review is bipartisan policy, from Reagan's Executive Order 12291 to Clinton's Executive Order 12866. Asking for it is not extremism.
• When you argue the point, start with the goal, offer a cheaper route to it, and ask for the numbers. You will win more minds than the man who just says "no."
• When your member of Congress votes on a delegation of power, ask who will be accountable for the cost.