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How Well Does the U.S. Government Do Benefit-Cost Analysis?

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  • Robert W. Hahn
  • Patrick M. Dudley

Abstract

To make prudent recommendations for improving the use of benefit-cost analysis in policy settings, some measures of how well it is actually done are essential. This article develops new insights on the potential usefulness of government benefit-cost analysis by examining how it is actually performed in the United States.We assess the quality of a particularly rich sample of benefit-cost analyses of federal regulations. The data set we use for assessing the quality of regulatory analysis is the largest assembled to date for this purpose. The seventy-four analyses we examine span the Reagan administration, the George H. W. Bush administration, and the Clinton administrations. The article is the first to assess systematically how government benefit-cost analysis has changed over time.There are three key findings. First, a significant percentage of the analyses in all three administrations does not provide some very basic economic information, such as information on net benefits and policy alternatives. For example, over 70 percent of the analyses in the sample failed to provide any quantitative information on net benefits. Second, there is no clear trend in the quality of benefit-cost analysis across administrations. Third, there is a great deal of variation in the quality of individual benefit-cost analyses. Copyright 2007, Oxford University Press.

Suggested Citation

  • Robert W. Hahn & Patrick M. Dudley, 2007. "How Well Does the U.S. Government Do Benefit-Cost Analysis?," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 1(2), pages 192-211, Summer.
  • Handle: RePEc:oup:renvpo:v:1:y:2007:i:2:p:192-211
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    File URL: http://hdl.handle.net/10.1093/reep/rem012
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    Cited by:

    1. Scott Farrow, "undated". "Random Error and Simulation Models With an Unobserved Dependent Variable as applied to the Benefits and Costs of the Clean Air Act," UMBC Economics Department Working Papers 09-103, UMBC Department of Economics, revised 26 Jan 2008.
    2. Michael Makowsky & Richard Wagner, 2009. "From scholarly idea to budgetary institution: the emergence of cost-benefit analysis," Constitutional Political Economy, Springer, vol. 20(1), pages 57-70, March.
    3. Scott Farrow, 2008. "Improving the Regulatory Analysis of the Cooling Water Intake Structure Rule: What Does an Economist Want?," UMBC Economics Department Working Papers 09-102, UMBC Department of Economics.
    4. Harrington, Winston & Morgenstern, Richard & Velez-Lopez. Daniel, 2012. "Tools for assessing the costs and benefits of green growth : the U.S. and Mexico," Policy Research Working Paper Series 6242, The World Bank.
    5. Robert W. Hahn & Paul C. Tetlock, 2008. "Has Economic Analysis Improved Regulatory Decisions?," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 67-84, Winter.
    6. Scott Farrow, 2009. "Incorporating Equity in Regulatory and Benefit-Cost Analysis Using Risk Based Preferences," UMBC Economics Department Working Papers 09-117, UMBC Department of Economics.
    7. Fraas Art & Morgenstern Richard, 2014. "Identifying the analytical implications of alternative regulatory philosophies," Journal of Benefit-Cost Analysis, De Gruyter, vol. 5(1), pages 1-35, January.

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