A court’s ability to be impartial in evaluating a regulatory agency’s economic analysis is a critical factor in determining the importance of the role judicial review in regulatory reform. A new Mercatus Center study, which examines a sample of relevant cases, provides evidence that the judicial system reviews regulatory analysis impartially.
Some of the most controversial aspects of comprehensive regulatory reform are provisions that would allow courts to assess whether a regulatory agency conducted adequate analysis to assess whether the regulation solves a real problem and whether the benefits are commensurate with the costs. Proponents see judicial review as a necessary enforcement mechanism to ensure that regulations are based on fact rather than good intentions. Critics fear that judicial review could result in judges using alleged flaws in agency regulatory analysis as an excuse to strike down regulations they don’t like.
The Mercatus study examined a representative sample of 37 cases in which the agency’s regulatory impact analysis (or other economic analysis) played a major role in a federal appeals court’s decision to uphold or strike down the regulation. The top chart shows that, in 21 of the 37 cases (57 percent), the court upheld the agency’s regulation after examining the agency’s economic analysis. In the remaining 16 cases, appeals courts struck down the regulation either because the agency conducted insufficient analysis or because the findings of the agency’s analysis actually undermined the agency’s case for the proposed regulation. Such decisions are not necessarily anti-regulatory. The bottom chart shows that, in slightly more than half of these cases, courts have implied that flaws in the agency’s analysis led it to under-regulate.
These holdings suggest that the activist judge who strikes down regulations willy-nilly is more of a boogeyman than a real concern in the regulatory reform debate.