Rules and Economic Appraisals

Is there a case for using assessments of costs and benefits to appraise not the drafting of a rule but the broad justification for introducing a rule? Is there, moreover, a governmental role for such assessments in spite of arguments for satisfying values other than efficiency?

This chapter considers developments in the cost-benefit and compliance-cost testing of rules in the USA and in Britain. It reviews the theoretical and practical issues raised and assesses the possible contribution of economic appraisals to questions of rule choice.

1. The Appraisal Strategy Developed

Experience in the United States of America

In the United States there was, by 1980, a broad current of dissatisfaction with the nature and practice of regulatory rulemaking.1 Numerous critics had argued that regulators were operating beyond the constraints of political control and were irrationally imposing burdens on industry. It was argued that companies were carrying a dead weight of regulation on their backs and that there was a need for reform in the shape of 'regulatory relief'2 or else a change from rule-oriented or 'command and control' outlooks to those allowing greater managerial freedom within broad governmentally specified goals.3 The criticisms and prescriptions were diverse. As McGarity put it:

By the beginning of the 1980s the regulatory reform movement had achieved a high profile, but it did not carry a unifying theme. To

See T. O. McGarity, Reinventing Rationality: The Role of Regulatory Analysis in the Federal Bureaucracy ( 1991).
G. Eads and M. Fix, "Regulatory Policy", in J. Palmer and I. Jawhill (eds.), The Reagan Experiment ( 1982).
On 'less restrictive' alternatives to 'classical' regulation see S. Breyer Regulation and Its Reform ( 1982) and A I. Ogus, Regulation: Legal Form and Economic Theory ( 1994), ch. 11.


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