US regulatory agencies frequently use cost-benefit analysis (‘CBA’) in their decision-making,
and several such CBAs have been challenged in court.
In general, scholars such as Cass Sunstein, Jacob Gersen and Adrian Vermeule favour a
deferential standard of judicial review, primarily on the basis that CBA involves technical
questions which agency experts, as opposed to generalist judges, are better qualified to
answer. Since CBA typically involves monetisation of costs and benefits and environmental
benefits are notoriously hard to quantify, at first glance the argument for judicial deference
appears, if anything, to be even stronger in the context of environmental regulation. This
paper takes a contrary view.
Based on a review of US appellate court decisions involving valuation of environmental
benefits, I argue that the difficulties inherent in such valuation are not only technical or
methodological – the kind that experts are arguably better equipped to address. Before
dealing with methodological questions, i.e. how benefits are to be measured, the valuer must
first determine which benefits are relevant – a determination which involves value
judgments, questions of policy and statutory purpose. As an empirical matter, I show that
courts do in fact engage with these questions in the judicial review of CBA. As a normative
matter, based on an evaluation of the case law, regulatory practice and the nature of
questions at issue, I argue that this is how it should be.