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The Challenges of Improving the Economic Analysis of Pending Regulations: The Experience of OMB Circular A-4

Author

Listed:
  • Art Fraas
  • Randall Lutter

    (Visiting Scholars, Resources for the Future, Washington, DC 20036)

Abstract

Federal regulatory policy and the evaluation of regulations using benefit-cost analysis continue to be quite contentious. Advocates for more regulation claim that benefit-cost analysis loses information and impedes our understanding of the real beneficial consequences of regulatory action. Against this backdrop, economists and advocates of economic analysis have sought to improve the quality and technical content of benefit-cost analysis. This article examines key changes made by the 2003 guidelines in Circular A-4 for regulatory analysis issued by the U.S. Office of Management and Budget in an effort to strengthen such analysis. We discuss the motivation and basis for these changes—the treatment of discount rates and uncertainty and the cost-effectiveness analysis for rules affecting health and safety—and evaluate the U.S. Environmental Protection Agency's response to the A-4 changes in its analysis of environmental rules.

Suggested Citation

  • Art Fraas & Randall Lutter, 2011. "The Challenges of Improving the Economic Analysis of Pending Regulations: The Experience of OMB Circular A-4," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 71-85, October.
    • Handle: RePEc:anr:reseco:v:3:y:2011:p:71-85
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-resource-083110-120042
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    Citations

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    Cited by:

    1. Steven J. Davis, 2015. "Regulatory Complexity and Policy Uncertainty: Headwinds of Our Own Making," Economics Working Papers 15118, Hoover Institution, Stanford University.
    2. Fraas Art & Morgenstern Richard, 2014. "Identifying the analytical implications of alternative regulatory philosophies," Journal of Benefit-Cost Analysis, De Gruyter, vol. 5(1), pages 137-171, January.
    3. Daniel R. Petrolia & Dennis Guignet & John Whitehead & Cannon Kent & Clay Caulder & Kelvin Amon, 2021. "Nonmarket Valuation in the Environmental Protection Agency's Regulatory Process," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(3), pages 952-969, September.
    4. Patrick A. McLaughlin & Casey B. Mulligan, 2020. "Three Myths about Federal Regulation," NBER Working Papers 27233, National Bureau of Economic Research, Inc.
    5. Jerry Ellig & Patrick A. McLaughlin & John F. Morrall III, 2013. "Continuity, change, and priorities: The quality and use of regulatory analysis across US administrations," Regulation & Governance, John Wiley & Sons, vol. 7(2), pages 153-173, June.

    More about this item

    Keywords

    benefit-cost analysis; cost-effectiveness analysis; discount rates; environmental rules; uncertainty analysis;
    All these keywords.

    JEL classification:

    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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