Monday, January 31, 2011

Ignoring Costs and Benefits

"Even when agencies find that the cost of a given regulation does exceed the benefit, political considerations often keep the rules on the books. In 2007, Congress passed a law, named in honor of a 2-year-old child crushed as his father backed down the driveway, that effectively required the installation of rear-view video cameras in cars. The National Highway Traffic Safety Administration, charged with writing the new rules, found that the technology would save lives but — assuming a human life was worth about $6.1 million, a figure used by the agency for its calculations — that the cost would exceed the benefits by more than $1 billion. Nonetheless, the agency proposed the requirement, noting that it was responding to the will of Congress and that 'there is a special solicitude for protection of children.' Under the rule, automakers will be required to start installing cameras by 2014." [NYT]

"Long ago, cost-benefit analysis was a rallying cry for conservatives. It was brought to government by none other than Ronald Reagan, in Executive Order 12291 of 1981...Outraged liberals charged that cost-benefit analysis was a pretext to stifle regulation, and that it was arbitrary because of the difficulty of attaching dollar values to lives, environmental goods, and other regulatory benefits. Conservatives replied that cost-benefit analysis blocks bad regulations: Why would one support a regulation that produces higher costs than benefits?...The debate continued in this vein for decades, but over time, positions shifted. Some liberals came to see cost-benefit analysis as a good-government tool that promotes transparency and accountability, while some conservatives began to wonder whether it confers legitimacy on the New Deal state...[A]cademic research has shown that many of the cost-benefit analyses issued under all administrations were shoddy; in fact, there is little evidence that the introduction of cost-benefit analysis has improved the quality of regulations. The reason is that courts do not usually force agencies to comply with cost-benefit analyses, so unless the president steps in, the agency can do what it wants." [Eric Posner, TNR]

(Nod to Kevin Lewis)

If the NY Times and the New Republic both think Pres. Obama's signature reform program is balloon's probably balloon juice!

1 comment:

Gerardo said...

This is a bit misleading. There is a big difference between an agency doing something because Congress mandates it (video cameras) and doing it because it (thinks it) falls under its mission.

Though, I agree with the point that BCA isn't about maximizing net benefits, it's (tends to be) more about getting the agency to reveal who it thinks is bearing the costs and who is getting the benefits. I think that's called the "agency" problem, in fact. In fact, I think I read a Eric Posner article about that.