Regulatory policy: what role for retrospective analysis and review?

Given that President Obama’s Executive Orders on regulation have emphasized the importance of retrospective analysis and review of existing federal rules, I survey the state of retrospective analysis and review of federal regulations. I first ask how much is known about the economic merit of past federal regulatory decisions, based on retrospective economic analyses of their effects. I review reports of the Office of Management and Budget and related literature, but unlike those reports I find only five rules, issued by the National Highway Traffic Safety Administration (NHTSA), for which retrospective analyses provide estimates of both costs and reasonably good proxies for benefits (e.g., adverse health effects avoided). Other retrospective studies of federal rules estimate are incomplete, estimating only the compliance costs, or only the benefits, or only costs and measures of effectiveness, like emissions reductions, which do not closely relate to people’s welfare. I also seek to explain differences in the practice of retrospective analysis and review between NHTSA, which appears to have the best record of retrospective analyses among federal agencies, and the Environmental Protection Agency (EPA), an important regulatory agency. I find that NHTSA regularly conducts such analyses and reviews, while EPA rarely does retrospective analysis and presents rulemakings that look like business as usual as being the result of a retrospective review. I analyze the role of data limitations, statutory authority, and institutional incentives in influencing the different behaviors of these two agencies. I conclude that differences in data availability and in particular the lack of relevant control groups, are an important barrier to retrospective analysis at EPA. This data deficiency, combined with important restrictions on EPA’s ability to consider information on net benefits or cost-effectiveness in its rule-making, are together the biggest hindrance to generating better information about the effects of its rules. I conclude with recommendations intended to generate more measurement of the actual effects of regulations.