The New Challenge to Cost-Benefit Analysis. How Sound Is the Opponents' Empirical Case?

By Carlin, Alan | Regulation, Fall 2005 | Go to article overview

The New Challenge to Cost-Benefit Analysis. How Sound Is the Opponents' Empirical Case?


Carlin, Alan, Regulation


FOR MORE THAN TWO DECADES, BOTH Republican and Democratic presidential administrations have supported the use of cost-benefit analysis (CBA) in the review of federal regulatory decisions. And for three decades, both Republican and Democratic White Houses have supported the use of some sort of cost analysis for such decisions. But that consensus appears to be ending. The growing partisan divide over CBA is beginning to reflect the Red Team-Blue Team battles that have become common in other aspects of government.

The history of bipartisan support for CBA is probably well known to readers of Regulation, but it is largely unknown to most of the rest of the population. Although there has been some debate among economists concerning the strengths and limitations of CBA for analyzing regulatory decisions, that debate has taken place largely in economic journals and gray literature. But few, if any, of the involved scholars have argued that such analyses should not be undertaken.

In the last few years, however, outright opposition has appeared to the use of CBA in reviewing or formulating environmental regulations. This has major potential implications for regulatory decision-making in future administrations, particularly Democratic ones.

Most of the opponents of CBA have been lawyers; those defending CBA have been economists. The debate originally revolved primarily around articles by John Morrall of the Office of Management and Budget and Robert Hahn of the AEI-Brookings Joint Center for Regulatory Affairs. Both scholars attempted to show that the cost-effectiveness of federal regulations varied greatly. CBA opponents have gone beyond disputing Morrall's and Hahn's analyses by making much broader arguments that CBA has inherent problems, that it is being administered with an anti-environmental bias by OMB's Office of Information and Regulatory Affairs, and that it largely helps only the regulated industries by delaying and weakening new regulations.

Most of the opponents' arguments have appeared in various law journal articles, Web sites and Web publications, and books, but not in economic journals. A recent issue of OMB Watch in March 2005 contains a concise summary of the opponents' arguments. The proponents have not been inactive either; Hahn's extensive 2005 monograph In Defense of the Economic Analysis of Regulation summarizes many of their arguments.

CHALLENGING CBA

Recently, CBA critics Frank Ackerman of Tufts University, Lisa Heinzerling of Georgetown University, and Rachel Massey of the Environmental Research Foundation have taken the argument against CBA to a new level. The three carried out their own original empirical study of several environmental decisions from the 1960s and 1970s. They conclude that CBA would have yielded results that history shows would have been undesirable. In effect, instead of attacking the supporters of CBA and their analyses, Ackerman, Heinzerling, and Massey have attempted to make a "positive" empirical case that CBA would have resulted in "adverse" environmental decisions in cases that they believe everyone would agree were "good" environmental decisions.

In July of 2004, the three critics released a paper examining three significant historical environmental decisions to which CBA was or could have been applied. Their paper asks, "If today's methods of cost-benefit analysis had been applied in the past, would it have given its blessing to the early regulations which now look so successful in retrospect?" Ackerman, Heinzerling, and Massey answer that question negatively, claiming:

   We have compiled three case studies in coming to this
   conclusion: the removal of lead from gasoline in the
   1970s and 1980s, the decision not to dam the Grand
   Canyon for hydroelectric power in the 1960s, and strict
   regulation of workplace exposure to vinyl chloride in
   1974. The technique would have gotten the answer
   wrong in all three cases. … 

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

The New Challenge to Cost-Benefit Analysis. How Sound Is the Opponents' Empirical Case?
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.