Abstract
In the light of economic theories, this chapter investigates a series of distinct and sometimes competing rationales or purposes for Impact Assessment of legislation or regulation (IA). They include the mainstream economic rationale, i.e. improving the quality of legislation, as well as a number of purposes which link in with fundamental legal principles, such as accountability, transparency and democracy (representative, participative or counter majoritarian). They are complemented with more complex rationales based on specific strands of economic theory, including remedying information deficiencies and committing players in the legislative game. The picture would not be complete without the less rosy rationales, namely deregulation and legislative entrepreneurship. Most of these rationales—except for the last ones, which do fit part of the practice unfortunately—are compatible with each other, providing strong explanations for one or the other feature of IA. In the end, it seems more appropriate to picture IA as a multi-purpose instrument, following a number of strong and mutually reinforcing rationales. Through this fundamental inquiry, the chapter also highlights a number of open issues, including if and how IA constrains the decision maker, whether IA is available as evidence in subsequent judicial proceedings and how the expert, technocratic and political rationalities behind IA relate to each other.
Pierre Larouche is Professor of Competition Law, Tilburg Law School, Tilburg University and a founding director of the Tilburg Law and Economics Center (TILEC).
A version of this chapter was published as “Ex Ante Evaluation of Legislation Torn among its Rationales”, in Jonathan Verschuuren, ed., The Impact of Legislation—A Critical Analysis of Ex Ante Evaluation (Leiden/Boston: Martinus Nijhoff 2009) 39–62.
The author wishes to thank Jacques Pelkmans in particular, as well as Filomena Chirico, Anne Meuwese and the participants in the working group on ex ante evaluation of legislation at Tilburg University for their help and their useful comments. The responsibility for the content remains the author’s alone.
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- 1.
Namely quality improvement, see infra, Sect. 11.2.2.
- 2.
See her recent work: Meuwese 2008. This chapter builds on the work of Meuwese (which was of invaluable help) and seeks, with the help of economic analysis, to broaden the range of rationales beyond what Meuwese took into account on the basis of law, political science and public administration.
- 3.
European Commission, Impact Assessment Guidelines, SEC (2009) 92 (15 January 2009) at 21 et seq.
- 4.
Ibid., 6.
- 5.
Meuwese 2008, 44–53. The two rationales set out in the main text correspond to the “highlighting trade-offs” and “structuring the discourse” models set out by Meuwese.
- 6.
Especially if they are deemed to be a mere “aid to political decision-making, not a substitute for it”: Impact Assessment Guidelines, supra note 3 at 4. On that account, the decision maker forms its own opinion and the IA does not necessarily reflect what went on in the mind of the decision maker. As discussed infra, notes 17–20 and the accompanying text, that quote might however give too little significance to IAs.
- 7.
Case C-310/04, Spain v. Commission, 7 September 2006, ECJ, [2006] ECR I-7285, paras. 95 ff. This case is discussed in Meuwese 2008, 172–175.
- 8.
Regulation 864/2004 of 29 April 2004 amending Regulation 1782/2003 establishing common rules for direct support schemes under the CAP [2004] OJ L 161/48.
- 9.
Supra note 7, para 103. As the Advocate General points out in her Opinion in this case, the Community institutions were not obliged to carry out an IA: Opinion of 16 March 2006, para. 82.
- 10.
For instance, one of the leading independent studies on IAs in Europe, Renda 2006, does not discuss at much length the reason why IA has been introduced in Europe, other than to mention briefly that it was meant to improve the quality of EU legislation (43–44), as if it was obvious. Indeed his whole book relies on the assumption that IAs are there to improve legislative quality. See also Pelkmans et al 2000, 461.
- 11.
Renda, ibid., 22, when drawing lessons from the US experience.
- 12.
See for instance Baumol 1952. See infra notes 21–22 and accompanying text for a discussion of how these expectations should be defined.
- 13.
See for instance the fundamental contribution of Stigler 1971, 3.
- 14.
If intervention has already taken place and further intervention is contemplated, then the baseline scenario would be “staying with the current level of intervention”, although “no intervention whatsoever” could also be envisaged: see Impact Assessment Guidelines, supra note 3, 29.
- 15.
Meuwese 2008, 45–47.
- 16.
Which Meuwese also identified as a key problem in the discussion of IAs, ibid., 8–9.
- 17.
Infra, Sect. 11.2.3.
- 18.
Properly discounted and in the light of the significance of potential consequences.
- 19.
Impact Assessment Guidelines, supra note 3, 4.
- 20.
That problem is further compounded at the EU level, where a number of institutions hold a real power to influence the outcome of legislative procedures (and to a lesser extent, regulatory procedures as well). Contrary to most Member States, where government proposals escape relatively unscathed from the legislative procedure (as long as the government holds a stable majority in Parliament), in the EU Commission proposals can be modified significantly by the Council and the EP (at least when the co-decision procedure is applicable). The IA is carried out by the Commission ahead of its proposal, but the other institutions have been under pressure to carry out their own IAs when they introduce modifications to the Commission proposals which go beyond what was investigated in the original IA. See Meuwese 2008, 99 et seq. for a study of the practice of the EP and Council.
- 21.
On the balance between the polity and the economy in economic regulation, see Larouche 2003.
- 22.
And thus of the well-known causes of market failure, including market power, information asymmetries, externalities or public goods.
- 23.
If the IA bears on an issue where the public authorities have not intervened before, the baseline scenario is “no intervention”. If the IA takes place as part of a legislative or regulatory review, presumably two scenarios should be investigated in any event, namely “no change in current legislation or regulation” (the actual baseline in a review context) and “removal of legislation or regulation”.
- 24.
In line with the general obligation incumbent on public authorities to provide reasons for their action: see for instance Article 296 TFEU.
- 25.
And indeed Meuwese 2008, 49 dismisses it as “too simplistic a goal for the impact assessment procedure”.
- 26.
For an overview of principal/agent theory, see Sappington 1991, 45–66.
- 27.
The Council and EP seem to use IAs against the Commission for that purpose: see Meuwese 2008, 116–118, 121–125 (EP) and 136–139, 142–143 (Council).
- 28.
See also Meuwese, ibid., 51–52.
- 29.
As opposed to less open methods of exerting influence, such as lobbying.
- 30.
Infra, Sect. 11.4.2.
- 31.
This brings us back to the all-important link between the IA and the decision maker. If the IA is to add a representative or counter-majoritarian element to legislative procedures, the decision maker should somehow be bound or at least constrained by the result of the IA. Yet this would potentially clash with the representative democratic model underlying lawmaking. In her work, Meuwese discusses in great depth the constitutional implications of IAs, finding that the status of the IA is currently in a state of flux at the EU level (Meuwese 2008, especially the conclusions at 265–270, 272–274, 280–281). The main representative institutions (Council, EP) seek to give some value to the IA, but they are careful to preserve their decision-making prerogatives. The Commission papers over the clash in its Guidelines, by stating that the decision maker has the final say; as was seen above, this statement is open to discussion.
- 32.
Infra, Sect. 11.3.
- 33.
The seminal work on cognitive biases remains Kahneman et al. 1982.
- 34.
Tversky and Kahneman, in the introductory chapter to their work, ibid., 4–5, describe this bias by reference to an experiment where subjects are asked to assess the probability that someone is a lawyer or engineer by reference to a description of the person. The subjects were also told of the distribution of lawyers and engineers in the sample (the base rate). In contradiction with rational statistical analysis, the subjects in the experiments returned the same assessments irrespective of the base rate.
- 35.
It is also possible that the IA is conducted in a purely linear fashion, in which case it is of doubtful usefulness: see the discussion of legislative entrepreneurship, infra, Sect. 11.4.2.
- 36.
The “regulatory space” paradigm set out by Hancher and Moran 1989 is based on the same idea.
- 37.
I.e. the individuals and firms which are concerned by the decision to be taken (the “civil society” in governance literature).
- 38.
See the historical reviews made by Renda 2006, 8–25 (US), 26–42 (UK) and 43–56 (EU).
- 39.
European Commission, Better Regulation for Growth and Jobs in the European Union COM (2005) 97 final (16 March 2005).
- 40.
European Commission, Implementing the Community Lisbon programme: A strategy for the simplification of the regulatory environment COM (2005) 535 final (25 October 2005).
- 41.
European Commission, Action Programme for Reducing Administrative Burdens in the European Union COM (2007) 23 final (24 January 2007).
- 42.
European Commission, Measuring administrative costs and reducing administrative burdens in the European Union COM (2006) 691 final (14 November 2006).
- 43.
See the latest report: European Commission, Second strategic review of Better Regulation in the European Union COM (2008) 32 final (30 January 2008).
- 44.
In political debates, it still sells to paint the EU as a regulatory Leviathan, as the Irish referendum on the Treaty of Lisbon showed.
- 45.
Whether the number of initiatives is actually reduced depends also on exogenous factors, i.e. whether socioeconomic circumstances have evolved so as that legislative or regulatory intervention would be needed.
- 46.
Renda 2006, 22–23.
- 47.
I.e., the entrepreneur is ahead of the rest in seeing the need for legislative or regulatory intervention.
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Larouche, P. (2013). Impact Assessment: Theory. In: Larouche, P., Cserne, P. (eds) National Legal Systems and Globalization. T.M.C. Asser Press, The Hague, The Netherlands. https://doi.org/10.1007/978-90-6704-885-9_11
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