FCC to Use More Economics and Data Analytics to Improve Decisions

From outside the Beltway, Washington for years has appeared to be besieged by political intrigue

Senior Fellow and Director, Center for the Economics of the Internet

From outside the Beltway, Washington for years has appeared to be besieged by political intrigue. Important governmental decisions that affect the lives of millions of Americans often have little formal analysis to support a finding that the likely benefits of a new governmental program will outweigh the likely costs. If that sounds like arbitrary decision making, it is.

If a government program does not work well, one might expect it to be improved, or to end. But even a poorly performing program cannot be deemed to have failed if there never were clear objectives or milestones to be met, or if there never were cost guidelines that could not be exceeded. Poor decision-making begets poor decisions. Ask for the documentation necessary to support a government decision, and one will often find blank stares, or worse, countless documents that do not credibly support the government position.   To many Americans, the results are arbitrary at best.

At least at one federal agency, that arbitrariness may end.

Chairman Ajit Pai of the Federal Communications Commission announced today that the FCC is establishing an Office of Economics and Analytics. That office will coordinate economic and statistical analyses on behalf of the FCC, and it will promote best practices in evaluating the costs and benefits of Commission programs. Chairman Pai, from Parsons, Kansas, is bringing some Midwestern common sense to the nation’s capital.

This is not to say that economic analysis alone will guarantee perfect government programs. There are many reasons that will not happen. Of course, not all economists, even one-armed economists, agree on every issue. Even if economists and information analysts were to agree on the likely benefits of a program, the program still must be implemented. All of the planning and analytics in the world cannot ensure successful implementation of a program. Even if perfectly implemented, a government program may still fall short of targets. But it is difficult to imagine that infusing some economic analysis in decision-making processes that today have none will not result in at least some better outcomes.

Better economics may also improve the judicial review of FCC rules as well. Judicial review today is a low bar: did the FCC have statutory authority to promulgate a certain rule? No one asks whether the Commission can document that the expected benefits of the rule will exceed the expected costs because the Commission is not required to make that determination. But if the FCC could demonstrate that a rulemaking process not only complied with statute but also resulted in rules with clearly documented net benefits, judges and the American public would be comforted. It is deeply troubling that a federal agency can lawfully promulgate rules without even the flimsiest of documentation that the rules have any benefits or costs.

The plan for the new office was outlined by Chairman Pai in a speech last spring at the Hudson Institute. Setting up a new governmental office in a matter of months may not seem like a noteworthy accomplishment outside the Beltway, but in Washington, such a timeline is Herculean.

Of course, most news outlets will ignore the story: federal agency takes steps to unleash professionals to improve decisions. Small, almost invisible, steps by honest officials to improve government by relying more on professional analytics provided by honest government employees do not sell news programs. But it is in these invisible steps that government is at its best. Chairman Pai and the entire FCC should be proud. Quietly.