Benefit-Cost Analyses and the Regulatory Budget

From: Notice & Comment | A Blog from the Yale Journal on Regulation and the ABA Section of Administrative Law & Regulatory Practice

by Jim Tozzi

Arguments are frequently made to the effect that if the benefits of a regulation exceed its costs, the regulation should promulgated. Here is a succinct statement as to why the aforementioned statement is flawed.

In a like manner with the advent of a regulatory budget, whose control mechanism is anchored in Theory of Optimal Delegation, benefit-cost analysis — while remaining as an important component of centralized regulatory review — will no longer play as dominant of a role as it has it has enjoyed in the past. This slightly diminished emphasis on benefit-cost analysis arises because the criterion for a rule having positive net benefits will be a necessary but not sufficient condition for inclusion in a Federal Regulatory Budget. Furthermore, the presence of a new macro control system opens the door for the use of different social welfare functions in the conduct of benefit-cost analyses.

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