A popular narrative with respect to the 1984 Chevron decision is that it provided regulatory agencies with the leeway to exploit the ambiguities in their statutes. After Chevron, the courts had to defer to agency judgments in situations in which the authorizing statute is ambiguous, which fostered a wave of greater regulation. The principal task for those advocating protective, yet sensible, regulations was to curb the degree of discretion provided by the Chevron deference ruling. The 2024 Loper Bright decision overturned Chevron and has achieved a curb on regulatory discretion. Presumably, a future with more responsible regulation should be brighter.

Here we take a somewhat different view. The regulatory problems that emerged both before and after the Chevron decision are much more fundamental and can be traced back to the authorizing statutes, not just the behavior of the administrative state. Understanding the current regulatory environment and the challenges posed by both Chevron and Loper Bright requires an understanding of how we got to the current situation and which social institutions could be more engaged in promoting efficient regulations going forward.

Before Chevron / The Nixon administration launched a wave of regulatory initiatives. Chief among them were the establishment of the Environmental Protection Agency (EPA) in 1970, the National Highway Traffic Safety Administration (NHTSA) in 1970, and the Occupational Safety and Health Administration (OSHA) after passage of the Occupational Safety and Health Act of 1970. Congress also established many other agencies, such as the Consumer Product Safety Commission in 1972. The congressional mindset underlying the development of the regulatory statutes was that it was a straightforward and not particularly costly task for agencies to require that the environment be made clean and that jobs be made safe.

The statutes for health, safety, and the environment directed agencies to address those concerns in an uncompromising manner. For example, the Clean Air Act prohibited the EPA from considering costs when setting ambient air quality standards. Legal challenges to OSHA to promote the balancing of benefits and costs in setting regulatory standards succeeded in obtaining a requirement that the risks addressed by OSHA standards had to be significant, but the legal challenges to OSHA’s authority did not succeed in incorporating benefit–cost balancing in agency decisions.

The emerging uncompromising strategy for regulation proved to be much more costly than expected. To rein in the regulatory compliance costs, the Ford administration established the Council on Wage and Price Stability to oversee new regulations and to review the inflation impact statements that agencies were required to provide for so-called major regulations. The Carter administration continued the effort to raise regulatory cost consciousness, and it required that agencies assess benefits and costs and to adopt regulations that were more cost-effective. None of the regulatory policy efforts required benefit–cost balancing. Council on Wage and Price Stability regulatory oversight was limited to public filings on regulatory proposals and lobbying by the White House to try to rein in regulatory excesses.

The environment of pursuing cost-effective policy options included the EPA developing its so-called “bubble policy,” which was finalized during the Reagan administration. Rather than assuming that each emissions point was a stationary source that should be subject to a specified emissions limit, the EPA sought to interpret what was meant by a stationary source more flexibly. By focusing on the total emissions from a plant as if there were an artificial bubble around the plant, it would be possible for firms to select which emissions source could be reduced most cost effectively. Firms could target the pollution reductions that could be achieved at the lowest cost per unit of pollution reduction. Companies would reduce their overall pollution, but in a more cost-effective manner. Economists touted the bubble policy effort as efficiency-enhancing regulatory reform.

Chevron / The Natural Resources Defense Council challenged the bubble policy flexibility, insisting that every pollution source must be treated as a stationary source that is subject to a stringent emissions cap. The Supreme Court ruling on behalf of the EPA in Chevron concluded that the EPA did have the authority to proceed in its interpretation of what constituted a stationary source. More generally, agencies such as the EPA were able to make such regulation implementation decisions when the statutory guidance is ambiguous. Although most of the impetus for challenges to Chevron deference stem from a concern with excessive regulation that resulted from the decision, the policy context in which Chevron emerged involved cost reductions that were efficiency-enhancing. The genesis of the policy was in the spirit of efficient regulatory reform.

End of Chevron / The Loper Bright decision overturned the Chevron doctrine but did not solve the underlying problems caused by the structure of agencies’ legislative mandates. The statutory guidance continues to reflect the same lack of concern with the benefit–cost merits of policies. Beginning with the Reagan administration and continuing to the current time, the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) has taken on responsibility for regulatory oversight. As a consequence of the restructuring, there has also been a bolstering of the requirements that agencies must meet. For major regulations, agencies must also present estimates of the benefits and costs. Agencies also must justify their policies based on a benefit–cost test except when doing so is not consistent with the agency’s legislative mandate. Unfortunately, that exemption continues to be a major roadblock for requiring that agencies such as the EPA and OSHA enact policies that pass a meaningful benefit–cost test.

What Loper Bright could give birth to / The regulatory consequence of the overturning of the Chevron deference principle is prospective rather than retrospective. A desirable feature of the Loper Bright decision is that it overturned Chevron deference for future regulations but did not prompt a reassessment of existing regulations. Revisiting regulations already on the books for up to four decades would create enormous inefficiencies and would not be in the interest of companies that have already invested in compliance costs. It is also infeasible to determine all regulations that emerged because of the Chevron deference principle because not all regulations where agencies exploited Chevron deference led to legal challenges to the regulation.

To be concrete, Rep. Lauren Boebert (R–CO) did not understand the Loper Bright decision or the wisdom of the Court’s exemption for existing regulations. In a House Oversight Committee hearing on July 10, 2024, she insisted that EPA Administrator Michael Regan was required to revisit all regulations that had relied on Chevron deference. The Supreme Court decision actually reached the opposite, more efficiency-enhancing, conclusion, which is that existing regulations should not be subject to a reassessment.

In closing, it is important to emphasize that we are not in the business of predicting what will shake out. but rather what could happen that is a positive regulatory outcome. Less confusion and more logical and robust regulatory outcomes where Congress is running regulatory formation processes would be desirable. Moreover, it is possible that the new set-up where Congress starts the process and fleshes things out could lead to fewer legal disputes and enhanced evidence-based regulatory policy both ex ante and ex post. Is it not enough to have a super mandate that all policies must be permitted to do and base policies on a BCA analysis (even the so-called independent agencies) and let OIRA enforce it? Agencies can be permitted to override specific congressional mandates with cost-effective alternatives, which institutionalize the good part of Chevron but limits it to promoting efficient regulation.

Elevating the role of benefit–cost tests coupled with increasing agency flexibility to pursue more efficient policy options will provide a comprehensive mechanism for curbing perceived regulatory excesses and enhancing the beneficial impacts of regulation. In addition to expanding the role of ex ante evaluations of prospective regulations, there could be enhanced ex post regulatory assessments. Efforts to identify underperforming regulatory policies could be more successful if they focused on contexts where companies have not already incurred the compliance costs or where there are scheduled increases in future compliance costs.

Much has changed in the more than half century since the establishment of the health, safety, and environmental agencies. There continue to be legitimate market failures that warrant regulatory intervention. The initial Chevron decision was notable in that it identified the shortcomings of existing statutory guidance. We have also learned that regulatory policies come at a substantial cost, which sometimes does not receive sufficient consideration in the development of regulatory policies. Agencies require stronger and more specific guidance than they currently receive to ensure that regulatory policies are in society’s best interests. The Loper Bright decision should provide the impetus for rethinking the structure of the administrative state. Rather than treating Loper Bright as the culmination of regulatory reform, our proposal for moving forward is to restructure the statutory guidance provided to regulatory agencies.