The Psychology of Accountability and Political Review of Agency Rules

Seidenfeld, Mark, Duke Law Journal

INTRODUCTION

Over the past three decades, mechanisms for reviewing agency rulemaking have multiplied. The traditional mechanism of oversight by congressional committees (1) has been supplemented by, inter alia, rigorous judicial review of agency reasons for adopting rules, (2) a mandate that the agency perform cost-benefit analyses of major rules--analyses which are in turn scrutinized by the Office of Management and Budget (3)--and most recently fast-track review by Congress. (4) This plethora of oversight mechanisms naturally raises several related questions: Are all of these avenues for reviewing agency rulemaking necessary? What benefits accrue from these various review mechanisms? What mix of review mechanisms is likely to encourage agencies to adopt rules that best serve the underlying purposes of the statutes that the agencies are authorized to administer?

In a companion article to this Essay, (5) I use psychologists' understanding of accountability to analyze judicial review's potential to improve the quality of agency staff decisionmaking in formulating rules. That article concludes that the hard look version of judicial review, (6) currently applied by the courts, encourages agencies to take greater care when formulating rules, which in turn decreases the likelihood that the rulemaking process will reflect psychological decisionmaking biases. (7) Judicial review, however, also has some undesirable consequences: it imposes significant burdens on agency information gathering and analysis, (8) which increases the time and cost of rulemaking, and can even dissuade agencies from using informal rulemaking when adopting policies that significantly affect the public. (9) Hence, the conclusion that judicial review of agency rules encourages careful decisionmaking does not justify judicial review if one can derive the same benefit--decreasing psychological decisionmaking biases--from other forms of oversight that do not have the same degree of undesirable consequences. In other words, to know whether hard look review is worthwhile, one must analyze the likely impact of alternative oversight mechanisms to determine whether they provide similar benefits with fewer unintended consequences. In addition, if one concludes that alternative mechanisms cannot substitute for judicial review, then one must face the question of whether use of such alternatives is justified. By illuminating the impact of oversight mechanisms other than judicial review, the literature on the psychology of accountability can help one discern whether such mechanisms provide independent benefits that warrant maintaining political review, and what form such review should take.

In this Essay, I use the psychology literature on accountability to evaluate the likely impact of the various forms of political review on the quality of agency decisionmaking. I begin by briefly reviewing the basic findings of psychological research regarding the impact of accountability on decisionmaking. I then apply those findings to the three mechanisms of political review mentioned above--OMB scrutiny of cost-benefit analyses that accompany rules, congressional committee oversight of rulemaking, and congressional fast-track review. Finally, I discuss the implications of those findings, addressing in particular the contention of some scholars that judicial review is unnecessary in light of political review, and opining on the desirability of each mechanism for political review. I conclude that, unlike judicial review, none of the mechanisms for political oversight that I analyze promises to improve the quality of agency staff formulation of most rules. These mechanisms, nonetheless, encourage agencies to develop rules that accord with the preferences of influential political actors, such as the president, congressional leaders, and chairs of committees responsible for oversight of agency programs. Whether one views such encouragement as a justification for political review depends, in large measure, on the theoretical model of the administrative state to which one subscribes.

I. THE PSYCHOLOGY OF ACCOUNTABILITY (10)

Psychologists have recognized that individuals do not make decisions by choosing the optimal outcome from available alternatives. (11) Instead, decisionmakers conserve cognitive resources by using decisionmaking shortcuts. Without such shortcuts, the burden of collecting and analyzing information would be so great that individuals might be unable to make any complex decisions at all. Individuals thus learn to use decisionmaking devices that usually lead to acceptable results without demanding that the person collect an undue amount of information or engage in paralyzing analysis of every possible alternative in light of the available information. (12) Individuals use shortcuts that are unique to them, decisionmaking rules that reflect their training and experiences; (13) they also use shortcuts that they share with most other individuals, decisionmaking heuristics that tend to lead all decisionmakers to acceptable outcomes in most situations. (14)

Psychologists also have recognized that personal decision rules and the use of generally applicable heuristics can lead to biases in decisionmaking. (15) Individuals apply decision rules outside of appropriate contexts, and they use heuristics in ways that lead to demonstrably inferior choices. (16) Such biases include the propensity of individuals to overly attribute their knowledge--"beliefs, opinions, suppositions, attitudes and related states of mind"--to others. (17) In addition, decisionmakers, especially experts like those who draft agency rules, tend to be overconfident about predictions they make based on available evidence. (18) Decisionmakers also often make technical errors, such as ignoring base rates when making predictions based on statistical evidence, (19) or considering sunk costs when evaluating investment decisions. (20) Although experts are less apt to make such errors, on occasion they do make them. (21) In evaluating the probability that an event will occur, individuals may rely inappropriately on the "availability heuristic"--the ease with which they can recall similar events. (22) Decisionmakers also may be influenced by irrelevant information, (23) tend to confirm initial hypotheses in the face of contradictory evidence, (24) and irrationally avoid choices that represent extremes when a decision involves a trade-off between two incommensurable values. (25) All of these biases can reduce the quality of decisionmaking by agency staff responsible for formulating rules.

When decisionmakers are held accountable for their choices, their propensity to fall prey to psychological biases changes. Accountability is a broad notion that describes any situation in which a decisionmaker believes that he must justify his decision to others and that failure to provide a satisfactory justification will cause the decisionmaker to suffer negative consequences. (26) Those consequences need not be material. Disdainful looks and feelings of disappointment in one's own performance may suffice to elicit responses mediated by accountability. (27)

Within the broad ambit of accountability falls a multitude of means by which an organization, such as an agency, or, more generally, the administrative state, oversees decisionmakers. Depending on the precise means used, accountability might induce a decisionmaker to take greater care and avoid many of the biases identified above; (28) it might cause the decisionmaker to become defensive about his initially preferred outcome and therefore to expend resources finding information and performing analyses to bolster that outcome, even when subsequent information suggests that the individual should choose an alternative. (29) Or, it might influence the decisionmaker to shade his choice toward an outcome that he believes is preferred by the audience to which he is accountable. (30) In assessing which of these responses is likely, one must look at: (1) whether the decisionmaker is aware that he will be held accountable when he makes his decision, (2) whether he perceives the audience to which he is accountable as legitimate, (3) whether the audience demands a justification of the outcome of the decision rather than the processes by which the decisionmaker reached that outcome, and (4) whether he knows the outcome preferences of his audience, or even the identity of the audience well enough to surmise what its outcome preferences might be. (31)

If an individual commits to a course of action before he is aware that he will have to explain that action, the individual is apt to expend great effort to justify any decision already made. (32) Individuals experience cognitive dissonance if they perceive their behavior as inconsistent with values that they hold. (33) A value that is shared by most professionals is the desire to perform their jobs well. Agency staff members, who are generally professionals, assigned a task of making recommendations or preparing analyses based on externally specified factors--factors that might be stated in a statute or regulation, or dictated by their superiors--thus would suffer dissonance if they could not persuasively explain their recommendations and analyses based on these factors. The potential for such dissonance could induce agency staff members to become defensive and bolster decisions made before they were aware that they would be accountable for those decisions, even if subsequent evidence indicated that those decisions were suboptimal.

An individual accountable to an audience that he does not consider legitimate often will not take the same care in making a decision as one who is accountable to a legitimate audience. (34) Decisionmakers consider an audience illegitimate when the audience has no reason to review the decision, or when the decisionmaker perceives that review is intended to modify his beliefs. (35) When the audience has no reason to be concerned with the decision, such as when the decisionmaker is asked to report to strangers with neither responsibility for the matter nor personal interests in the decision, the decisionmaker simply may not work hard to make a good decision. (36) When the decisionmaker perceives that the audience is trying to alter his beliefs, he is apt to defend decisions that depend on those beliefs more vigorously than if there were no review. (37) As can occur when the decisionmaker becomes aware of review after committing to a decision, this perception can lead to a counterproductive bolstering of initial commitments.

Accountability tends to enhance the quality of decisionmaking only if the decisionmaker is not aware of the preferences of the audience to whom he must report. When individuals are accountable to an audience whose preferences are known, these individuals do not engage in more complex thought about their decision tasks. Instead they alter the outcome of their decisions to come closer to an outcome that would satisfy their audience. (38) In some situations, decisionmakers modify their choices in a manner that is obviously inefficient to avoid an outcome that they might find unpleasant to explain to their audience. (39) Individuals who are accountable to an audience with unknown views are significantly more self-critical while making their decisions. (40) They are more open to qualifying decisions about which they are uncertain. (41) Even when a decisionmaker does not know his audience's preferences, if he knows its identity then he may attempt to surmise what that audience would prefer, and will modify his chosen outcome toward his best guess of what the audience desires. (42) One can avoid the propensity of decisionmakers to choose outcomes that they think will please their audience by shielding the identity of the audience from the decisionmaker.

Finally, the impact of accountability also depends on whether the audience evaluates the outcome of the decision rather than the process by which the individual reached it. (43) Outcome-based review hinges on whether the audience agrees with the decision, independent of the reasons for it. Process-based review focuses on the search for information, processing of information, and reasoning that led to the decision, and does not depend on whether the audience agrees with the outcome. When review is process based, decisionmakers tend to use proper decision strategies and evaluate available alternatives more critically than when they are subject to no review. (44) In contrast, when review is outcome based, decisionmakers tend to engage in greater post hoc justification and therefore to increase their commitment to prior courses of action. (45) Outcome-based review also encourages individuals to decrease the effort that they devote to making decisions. (46)

In reality, pure process- and outcome-based review may be unattainable archetypes. (47) A decision that is persuasively reasoned would be likely to convince at least some reviewers that the outcome chosen is best. But the flip side of this is also probable; an audience that agrees with an outcome is more likely to approve of the process used to reach an outcome with which it agrees than one with which it disagrees. Although psychologists try to keep process and outcome accountability entirely distinct, the literature implicitly recognizes that in the real world the two archetypes interact. That is why, even if review is process based, a decisionmaker who knows his audience's preferences will shade the outcome toward those preferences. (48)

II. OMB REVIEW OF AGENCY RULEMAKING

In addition to the Administrative Procedure Act's simple requirement of notice and comment, when an agency promulgates a rule, various statutes and executive orders require it to prepare numerous analyses, many of which the agency must submit to the Office of Management and Budget (OMB) for review. (49) Of all the required analyses that OMB oversees, the mandate that an agency prepare a cost-benefit analysis for any rule that is a significant regulatory action has had the greatest effect on rulemaking. (50) OMB review plays an especially influential role with respect to cost-benefit analyses because, when OMB finds the agency analysis wanting, that office can prevent the agency from proceeding with the rulemaking unless the agency obtains permission to proceed from the president. (51) In this Part, I focus exclusively on OMB review of cost-benefit analyses of rules with significant economic impact.

Before an agency publishes a proposed rule that will have a significant regulatory impact, and again before it adopts the rule in its final version, the agency must prepare a cost-benefit analysis and provide this analysis to the Office of Information and Regulatory Affairs (OIRA), within OMB. (52) The analysis is reviewed by an OIRA desk officer, who usually is learned in economic analysis, but who generally has little knowledge about the problem that necessitated the rule or of the regulatory environment within which the agency works. (53) Moreover, although desk officers are political appointees under the direct control of the White House, they are sufficiently low level that one cannot guarantee that a particular desk officer shares the views of the president with respect to the particular rule he is reviewing. (54) What OIRA desk officers share, however, is a focus on the costs of regulation, which makes it likely that they will object to a rule if there is uncertainty about whether the regulatory benefits are sufficient to justify the costs of the rule. (55) If a desk officer takes issue with the analysis provided by the agency, then he can stymie regulation unless the agency is willing to escalate the disagreement to the level where it will be addressed by the Administrator of OIRA and the agency head. (56) Pragmatically speaking, a desk officer has considerable ability to make agency staff think hard about issues on which the two disagree.

A. Perceived Legitimacy of OMB Review

The impact of OMB review on agency staff depends first on whether agency staff consider such review legitimate. When President Reagan first imposed the substantive cost-benefit requirement on agency rules, many questioned its legitimacy. (57) Even though the mandate applied only to the extent consistent with law, there is a question whether that mandate nonetheless altered the factors that Congress, by statute, prescribed for agency rules, and therefore whether the president exceeded his authority in issuing it. (58) The furor over the imposition of a cost-benefit standard seems to have died down since President Clinton issued his cost-benefit executive order. The relaxation of the concern about the standard may reflect the fact that Clinton's standard is fuzzier, in that it does not require that all costs and benefits be reduced to dollar values. (59) More likely, however, the decrease in concern stems from perceptions about the president's reasons for promulgating the standard. Clinton maintained an image as a proponent of more efficient but …

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Publication information: Article title: The Psychology of Accountability and Political Review of Agency Rules. Contributors: Seidenfeld, Mark - Author. Journal title: Duke Law Journal. Volume: 51. Issue: 3 Publication date: December 2001. Page number: 1059+. © 2009 Duke University, School of Law. COPYRIGHT 2001 Gale Group.

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