Could Legislatures Be Structured to Make Pareto Optimal Policy Decisions?


Ideological adversaries outside government have sometimes reached consensus on controversial issues — negotiating agreements that all parties have described as meeting their needs. These episodes suggest there may be ways to structure legislatures to reach equivalent results.

For instance, under the Negotiated Rulemaking Acts of 1990 and 1996, most federal agencies, when grappling with a divisive issue, can invite all the interest groups involved to jointly write a regulation on that subject. The process begins with the relevant agency asking each interest group to appoint a spokesperson. The representatives then meet, with the understanding that if, over time, they can negotiate a regulation they all support, the agency will likely adopt it. By this process, opposing interest groups have agreed on regulations for issues such as nuclear waste disposal, student loans, food safety, public housing, and fuel economy standards for cars and trucks.

Participants in negotiated rulemakings have consistently evaluated the outcomes as superior to standard procedures in terms of “economic efficiency” and “cost effectiveness” to the public, costs and benefits to their own interest groups, the “quality of the scientific analysis” and “incorporation of appropriate technology.”

This paper therefore presumes that negotiated rule-making is Pareto superior to conventional policymaking procedures.

We analyze negotiated rulemakings and similar episodes to try to discern what factors make Pareto optimal outcomes likely. Based on these findings, this paper suggests a way to structure legislatures to reach comparable outcomes.