Is Cost/Benefit Analysis Appropriate for Regulatory Decisions in Life & Death Matters?

I decided to find out if anyone agrees with my opinion that cost/benefit analysis is inappropriate for rulemaking related to traffic safety matters of life and death.

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Here is what I am finding:

  1. Cost-Benefit Analysis: An Inadequate Basis for Health, Safety, and Environmental Regulatory Decisionmaking* Michael S Baram ** “INTRODUCTION The use of cost-benefit analysis in agency decisionmaking has been hailed as the cure for numerous dissatisfactions with governmental regulation. Using this form of economic analysis arguably promotes rational decisionmaking and prevents health, safety, and environmental regulations from having inflationary and other adverse economic impacts. Closer analysis, however, reveals that the cost-benefit approach to regulatory decisionmaking suffers from major methodological limitations and institutional abuses. In practice, regulatory uses of cost-benefit analysis stifle and obstruct the achievement of legislated health, safety, and environmental goals.  The Article concludes that if the health, safety, and environmental regulators continue to use cost-benefit analysis, procedural reforms are needed to promote greater accountability and public participation in the decisionmaking process. Further, to the extent that economic factors are permissible considerations under enabling statutes, agencies should conduct cost-effectiveness analysis, which aids in determining the least costly means to designated goals, rather than cost-benefit analysis, which improperly determines regulatory ends as well as means.” Cost-Benefit Analysis: An Inadequate Basis for Health, Safety, and Environmental Regulatory Decisionmaking*
  2. “Since 1981, the Office of Information and Regulatory Affairs (OIRA) in the White House has reviewed significant proposed and final regulations for conformity with cost-benefit tests.3 Under a series of executive orders, OIRA has performed this role through Republican and Democratic presidencies.4 These policy reviews are controversial: Some claim that OIRA promotes the use of sound social-scientific reasoning; others see it as a front for business interests and a triumph of cold and heartless economic reasoning.” Putting Cost-Benefit Analysis in Its Place: Rethinking Regulatory Review p. 2 by Susan Rose-Ackerman
  3. President Barak Obama has continued the practice of regulatory review under the executive order originally issued by President Bill Clinton and kept in place by President George W. Bush. However, in January 2009, the Administration expressed an interest in revising the executive order. OIRA opened a comment period and received a broad response from the policy community.6 So far, nothing has happened. The comments seem to have fallen into a black hole. OIRA has not attempted a full-blown reconsideration of the executive order. It has concentrated instead on increasing the transparency of government, and especially, on the ease of access to regulatory information and data sets. Otherwise, it is “business as usual”—with the staff reviewing proposed and final rules with only an occasional flare-up over controversial issues, such as whether or not to designate coal ash as a hazardous waste.7 The failure to rethink the executive order is unfortunate—especially given the global trend to institutionalize something called impact assessment (IA).” Putting Cost-Benefit Analysis in Its Place: Rethinking Regulatory Review p. 3
  4. With no change in the executive order, CBA will continue to be enshrined as the ideal standard for regulation in the United States. Even if the actual cost-benefit studies performed by U.S. government agencies are highly variable in quality and often lack key components, the technique remains a benchmark for analysis.10 I seek to challenge the hegemony of CBA on two grounds. First, cost-benefit analysis should be used to evaluate only a limited class of regulatory policies, and even then it should be supplemented with value choices not dictated by welfare economics. Second, CBA presents an impoverished normative framework for policy choices that do not fall into this first category.”  Putting Cost-Benefit Analysis in Its Place: Rethinking Regulatory Review p.4
  5. “Here, the main problems are measurement difficulties that are sometimes so fundamental that better analysis or consultation with experts cannot solve them. I am thinking mainly of debates over the proper discount rate for future benefits and costs; efforts to incorporate attitudes toward risk; and the vexing problems of measuring the value of human life, of aesthetic and cultural benefits, and of harm to the natural world. Disputes over these issues turn on deep philosophical questions—for example, valuing future generations versus” Putting Cost-Benefit Analysis in Its Place: Rethinking Regulatory Review p. 5
  6. “These issues do not have “right” answers within economics. They should not be obscured by efforts to put them under the rubric of a CBA. Politically responsible officials in the agencies and the White House should resolve them in a transparent way. ” Putting Cost-Benefit Analysis in Its Place: Rethinking Regulatory Review p. 6
  7. ” There is no need to resolve difficult conceptual and philosophical issues if the preferred outcome does not depend on the choice of a discount rate or the value given to human life. ” Putting Cost-Benefit Analysis in Its Place: Rethinking Regulatory Review p. 6
  8. “I review the limitations of CBA as a policy criterion and use my critique as a ground for proposing a revised executive order to the Obama Administration. The new executive order should continue to require both up-front consultation on the regulatory agenda and ongoing review of major regulations above some minimum level of importance. As Revesz and Livermore recommend, OIRA could play a larger role in overall agenda setting and policy coordination across agencies.13 Such review serves the interest of any president seeking to influence the overall regulatory environment. Hence, both consultation and review should be mandatory for core executive agencies, but, under my proposed framework, the executive order would only require agencies to carry out formal CBAs for a subset of regulations.” Putting Cost-Benefit Analysis in Its Place: Rethinking Regulatory Review p. 7
  9. “To avoid conflicts with the political pressures facing the President, an advisory body independent of the White House should provide expert analytic advice to agency policy analysts and to OIRA. In this, I build on Stephen Breyer, who urges the creation of a separate expert agency with the mission of rationalizing regulatory policy across programs that regulate risk.14 Bruce Ackerman also recommends the creation of an integrity branch, concerned with transparency and limiting corruption, and a regulatory branch insulated from day-to-day political influences but required to justify its actions publicly.15 Either OIRA, or this new advisory body, should create a library of innovative tools for achieving regulatory goals that go beyond the much criticized command-and-control model. Agency policymakers could access this library as they look for innovative ways to achieve goals, as could those contemplating amendments to existing laws” Putting Cost-Benefit Analysis in Its Place: Rethinking Regulatory Review p. 7-8

Do it, President Obama, for We the People of this United States of America! #VisionZero

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