Compensating Regulatory Losers

Every change in government regulation creates benefits and burdens that fall unequally on the population. This unequal distribution raises the question of whether fairness requires compensating those who bear regulatory costs—what is known as the “compensation problem.” The extensive body of scholarship addressing the compensation problem tends to focus only on the burdens of regulatory compliance and ignores the burdens of injuries left unaddressed by regulation. The effect of this differential treatment is to treat past regulatory windfalls as permanent entitlements and to omit from the analysis equally deserving regulatory losers who have suffered the consequences of unregulated harms. This paper reframes the compensation problem to expand the mix of regulatory consequences that factor into the analysis of whether regulatory losers deserve compensation. This reframing has important implications for the compensation problem. First, when government regulation does not fully stop a harm, the unabated harms deserve at least as much weight in the fairness inquiry as regulatory burdens do. Second, under the traditional fairness standards of distributive justice and corrective justice, compensation is rarely required and, when it is justified, should focus on systematically disadvantaged populations. Finally, when policy makers assist regulatory losers for political reasons, as they often do, fairness dictates that they also assist populations that suffer from a lack of regulatory protection.