Cost/Benefit Analysis or Rock, Paper, Scissors
By David Henderson
President Reagan began regulatory reform with Executive Order 12291, titled simply “Federal Regulation”; President Clinton watered it down with EO 12866; and President Trump beefed it up with EO 13771 (“Reducing Regulation and Controlling Regulatory Costs”) and EO 13777 (“Enforcing the Regulatory Reform Agenda.”) The executive orders required a cost/benefit analysis to assure that the costs of major regulations would be compared with their benefits. But on his first day in office, President Biden revoked those executive orders with his own memorandum titled “Modernizing Regulatory Review.” If you read the memorandum carefully, you’ll see that the word “modernizing” is inapt. Indeed, the memorandum would more accurately be labeled “Replacing Cost/Benefit Analysis with Rock, Paper, Scissors.”
This is from David R. Henderson, “Open Season For New Regulations,” Defining Ideas, February 4, 2021.
But even if that weren’t a problem, there are two other major problems. First, notice that the OMB is being put in a position not so much to screen regulations as to propose them. Does this mean the agencies will quit proposing regulations and passively await direction from the OMB? No way. Indeed, the memorandum reads as if President Biden is proposing that OMB be a cheerleader for new regulation. He states that he wants OIRA to “play a more proactive role in partnering with agencies to explore, promote, and undertake regulatory initiatives that are likely to yield significant benefits.” Rah, rah, sis boom bah.
The second major problem is one that anyone with much experience dealing with bureaucracy will probably notice: with so many possible criteria, regulators will have running room to implement regulations they like because those regulations pass some criteria even while they fail others. The regulators might, for example, choose a regulation that promotes public health and safety but at the expense of economic growth. Without cost/benefit analysis as a guide, how will they trade off between these two criteria? Any way they like.
Note also the disappointment I express with Cass Sunstein’s take. He should know better.
Read the whole thing.