If Cost-Benefit Analysis is Good, Is More Cost-Benefit Analysis Always Better?

Of course, not everyone agrees that CBA is good in the first place.  It remains anathema to many environmentalists.  My own view is that it can be a useful tool so long as its limitations are clearly understood.

But just because something is good doesn’t mean that more is better.  My grandmother’s view was that if a recipe called for two eggs and one tablespoon of butter, four eggs and two tablespoons would produce an even tastier result — a theory that did not always prove valid.  Sometimes, you really just need two eggs!

The same is true of cost-benefit analysis.  There are a number of proposals in Congress to expand cost-benefit analysis to cover many additional regulations.  A very thoughtful analysis from the Congressional Research Service points out that these proposals may not themselves pass a cost-benefit analysis:

 Although there is no “typical” cost-benefit analysis (just as there is no “typical” rule),the cost of conducting many individual regulatory analyses has been in the hundreds of thousandsof dollars.  If more agencies are required to prepare more detailed analyses for more rules, it isunclear how the agencies will be able to do so without more resources. As noted earlier in this report, if agencies are required to prepare cost-benefit analyses for rules that are not expected to be controversial and are unlikely to be improved as a result of the analysis, that type of requirement itself may not pass a cost-benefit test.

 

 

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Reader Comments

2 Replies to “If Cost-Benefit Analysis is Good, Is More Cost-Benefit Analysis Always Better?”

  1. In my experience, CBAs are almost always secondary to the politics of a particular rule or regulation. What is fine with one rule will be “too expensive” if the politics of the moment happen to dictate it. The real issue is the quality of the CBA (was the work done without too much undue manipulation) and whether we can objectively qualify if a particular cost-benefit trade-off is justifiable. I don’t know why this would considered “anathema” by anybody since environmentalists are no more immune to the challenges of real world implementation than anyone else. Would you rather push through the policy which relies on $60 billion dollars to reduce X amount of tons that does not identify a reliable funding source or a feasible, cost-effective BAT or BACT to achieve the goals or do you reduce .2X amount of tons for $1billion dollars where you have already identified cost-effective BAT/BACT and a feasible funding pathway? Ignoring these kinds of considerations are just plain hubris and will eventually catch up with you, no matter how strong your initial position is.

  2. In my experience, CBAs are almost always secondary to the politics of a particular rule or regulation. What is fine with one rule will be “too expensive” if the politics of the moment happen to dictate it. The real issue is the quality of the CBA (was the work done without too much undue manipulation) and whether we can objectively qualify if a particular cost-benefit trade-off is justifiable. I don’t know why this would considered “anathema” by anybody since environmentalists are no more immune to the challenges of real world implementation than anyone else. Would you rather push through the policy which relies on $60 billion dollars to reduce X amount of tons that does not identify a reliable funding source or a feasible, cost-effective BAT or BACT to achieve the goals or do you reduce .2X amount of tons for $1billion dollars where you have already identified cost-effective BAT/BACT and a feasible funding pathway? Ignoring these kinds of considerations are just plain hubris and will eventually catch up with you, no matter how strong your initial position is.

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Dan Farber

Dan Farber has written and taught on environmental and constitutional law as well as about contracts, jurisprudence and legislation. Currently at Berkeley Law, he has al…

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