Many economists have long advocated the use of cost-benefit analysis and other economic tools to improve regulatory decision-making and cost-effectiveness. Some government agencies have adopted such measures. Have they worked? A new paper co-authored by Robert Hahn, one of the more prominent cost-benefit advocates, suggests the results have been mixed and recommends additional reforms. Here’s the abstract:
In response to the increasing impact of regulation, several governments have introduced economic analysis as a way of trying to improve regulatory policy. This paper provides a comprehensive assessment of government-supported economic analysis of regulation. We find that there is growing interest in the use of economic tools, such as benefit-cost analysis; however, the quality of analysis in the U.S. and European Union frequently fails to meet widely accepted guidelines. Furthermore, the relationship between analysis and policy decisions is tenuous. To address this situation, we recommend pursuing an agenda that allows economics to play a more central role in regulatory decision making. In addition, we suggest that prediction markets could help improve regulatory policy and improve measurement of the impact of regulation.