by Stuart Shapiro and Laura Stanley. Original source: Mercatus Center, George Mason University
Since the early 1980s, federal regulatory agencies have produced regulatory impact analyses (RIAs) for major regulations that include an estimate of the expected benefits and costs of the regulation. While observers have both praised and criticized benefit-cost analysis (BCA) since it first became part of the regulatory process, very few have examined the question of what determines the effectiveness of the economists producing the analysis. When do decision makers listen to the economists, and when are the economists ignored?
Supporters of benefit-cost analysis call for reforms that include focusing on more uniform analysis and better compliance with Office of Management and Budget guidance, while opponents largely want the enterprise abandoned. Benefit-cost analysis is not going away—it has now been endorsed by five presidents, both Democrats and Republicans. But merely insisting on better analysis is unlikely to lead to improvement. BCA operates in a political and bureaucratic framework, and any reforms have to acknowledge and work within this framework.
This essay looks at one aspect of the bureaucratic environment in which economists conduct benefit-cost analysis. We examine the autonomy of agency economists from the programs promulgating the regulations to be analyzed. We find some evidence that economists located in the program office responsible for drafting the regulation have less influence on regulatory decision-making.