Evaluating Transfer Regulations: Routine Use of Cost-Effectiveness Analysis Could Dramatically Improve Transfer Programs' Effectiveness While Saving Taxpayers' Money

By Posner, Eric A. | Regulation, Winter 2003 | Go to article overview

Evaluating Transfer Regulations: Routine Use of Cost-Effectiveness Analysis Could Dramatically Improve Transfer Programs' Effectiveness While Saving Taxpayers' Money


Posner, Eric A., Regulation


WHEN A FEDERAL REGULATOry agency issues a major regulation, the agency usually must provide a cost-benefit analysis that shows the monetized benefits of the regulation exceed the cost it imposes on industry. There has been much debate about whether this practice has improved the quality of regulations, but few doubt that the quality of agencies' reasoning in formulating regulations has improved, and most commentators believe that cost-benefit analysis is a necessary first step toward improved regulation. Agencies, like businesses, are now expected to provide an accounting that shows their projects have a positive net present value. Although agencies, like businesses, can fudge the numbers a bit, regulatory impact statements provide more usable information about regulations than have statements accompanying regulations in the past, and that is a good thing for those who care about government transparency.

The regulations or proposed regulations that have been subjected to cost-benefit analysis are dominated by three areas: healthy, safety, and the environment. Notable recent examples include the Clinton-era arsenic and ergonomic regulations, which were withdrawn by the Bush administration when the analyses indicated that the regulations would produce a net loss for society. In those and other cases, cost-benefit analysis disciplines agencies by preventing them from justifying regulations based on speculative health or environmental benefits.

Cost-benefit analysis forces agencies to complete several valuable tasks: (1) quantify the effects of the regulation (e.g., the evidence either shows that the regulation will reduce cancer rates by a certain percent, or it does not); (2) monetize those effects (e.g., the monetary value of a life saved or a case of bronchitis avoided is a certain amount of dollars); (3) discount future benefits (e.g., a case of bronchitis avoided today is worth more than a case of bronchitis avoided tomorrow); and (4) aggregate those amounts. Then the benefits can be compared to the cost of the proposed regulation and a decision can be made as to the regulation's net results.

Government agencies have intermittently used cost-benefit analysis from the very beginning, but it was in 1981 that President Ronald Reagan issued an executive order that directed all regulatory agencies to perform cost-benefit analysis of major rules. To the surprise of some people, President Bill Clinton issued an executive order that maintained the substance of the Reagan order, though there is some doubt whether his Office of Management and Budget enforced it as vigorously as Reagan's OMB did. Clinton's order remains in force today, and President Bush's OMB has reinvigorated it.

Both the Reagan and Clinton executive orders direct agencies to use cost-benefit analysis on all major regulations, with some exceptions of no interest here. Yet there is a large category of regulations that have escaped cost-benefit srcutiny: so-called "transfer" regulations that determine how money and other benefits are distributed to statutory beneficiaries. Unlike the regulations that normally are subject to cost-benefit analysis, transfer regulations do not solve market failures. Examples of them include guidelines for natural disaster relief, funds issued to victims of the September 11 attack, and payments from Medicare, Medicaid, and Social Security. Transfer regulations implement school lunch programs, research grants, and farm subsidies.

The regulatory impact statements accompanying transfer regulations rarely include cost-benefit analyses or anything resembling them. Annual OMB reports to Congress on the costs and benefits of federal regulation list the dozens of transfer regulations that are promulgated every year, but the agency excludes them from its evaluation of the costs and benefits of regulation.

Cost-effectiveness Why are transfer regulations overlooked? Certainly not because they are unimportant. …

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

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.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

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

Evaluating Transfer Regulations: Routine Use of Cost-Effectiveness Analysis Could Dramatically Improve Transfer Programs' Effectiveness While Saving Taxpayers' Money
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?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access 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.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.