Abstract Despite repeated calls for retrospective regulatory review by every President since the 1970s, progress on implementing such reviews has been slow. We argue that part of the explanation for the slow progress to date stems from misalignment between the goals of regulatory review and the institutional framework used for the review. We define three distinct goals of regulatory review – the rule relevance goal, the rule improvement goal, and the regulatory learning goal. We then examine the text of the Presidential Executive Orders and major Congressional legislation addressing retrospective review, and document which goals were targeted and which institutions were used to conduct the reviews. We find that the U.S. federal government has almost always sought review of one rule at a time, conducted by the agency that issued or promulgated the rule and that these reviews tend to focus on rule relevance and costs. This institutional framework for retrospective review – one rule, assessed by the promulgating agency, focused on relevance and cost – is only well-suited to a narrow interpretation of the rule improvement goal. We then review alternative institutional structures that could better meet the rule improvement goal and the broader regulatory learning goal across multiple rules and agencies, and we offer recommendations for developing new guidance and institutions to promote multiagency regulatory learning.
{"title":"Institutional Roles and Goals for Retrospective Regulatory Analysis","authors":"Lori S. Bennear, J. Wiener","doi":"10.1017/bca.2021.10","DOIUrl":"https://doi.org/10.1017/bca.2021.10","url":null,"abstract":"Abstract Despite repeated calls for retrospective regulatory review by every President since the 1970s, progress on implementing such reviews has been slow. We argue that part of the explanation for the slow progress to date stems from misalignment between the goals of regulatory review and the institutional framework used for the review. We define three distinct goals of regulatory review – the rule relevance goal, the rule improvement goal, and the regulatory learning goal. We then examine the text of the Presidential Executive Orders and major Congressional legislation addressing retrospective review, and document which goals were targeted and which institutions were used to conduct the reviews. We find that the U.S. federal government has almost always sought review of one rule at a time, conducted by the agency that issued or promulgated the rule and that these reviews tend to focus on rule relevance and costs. This institutional framework for retrospective review – one rule, assessed by the promulgating agency, focused on relevance and cost – is only well-suited to a narrow interpretation of the rule improvement goal. We then review alternative institutional structures that could better meet the rule improvement goal and the broader regulatory learning goal across multiple rules and agencies, and we offer recommendations for developing new guidance and institutions to promote multiagency regulatory learning.","PeriodicalId":45587,"journal":{"name":"Journal of Benefit-Cost Analysis","volume":"59 1","pages":"466 - 493"},"PeriodicalIF":3.4,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87420146","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Benefit–cost analysis (BCA) is often viewed as measuring the efficiency of a policy independent of the distribution of its consequences. The role of distributional effects on policy choice is disputed; either: (a) the policy that maximizes net benefits should be selected and distributional concerns should be addressed through other measures, such as tax and transfer programs or (b) BCA should be supplemented with distributional analysis and decision-makers should weigh efficiency and distribution in policy choice. The separation of efficiency and distribution is misleading. The measure of efficiency depends on the numéraire chosen for the analysis, whether monetary values or some other good (unless individuals have the same rates of substitution between them). The choice of numéraire is not neutral; it can affect the ranking of policies by calculated net benefits. Alternative evaluation methods, such as BCA using a different numéraire, weighted BCA, or a social welfare function (SWF), may better integrate concerns about distribution and efficiency. The most appropriate numéraire, distributional weights, or SWFs cannot be measured or statistically estimated; it is a normative choice.
{"title":"Accounting for the Distribution of Benefits and Costs in Benefit–Cost Analysis","authors":"J. Hammitt","doi":"10.1017/bca.2020.29","DOIUrl":"https://doi.org/10.1017/bca.2020.29","url":null,"abstract":"Abstract Benefit–cost analysis (BCA) is often viewed as measuring the efficiency of a policy independent of the distribution of its consequences. The role of distributional effects on policy choice is disputed; either: (a) the policy that maximizes net benefits should be selected and distributional concerns should be addressed through other measures, such as tax and transfer programs or (b) BCA should be supplemented with distributional analysis and decision-makers should weigh efficiency and distribution in policy choice. The separation of efficiency and distribution is misleading. The measure of efficiency depends on the numéraire chosen for the analysis, whether monetary values or some other good (unless individuals have the same rates of substitution between them). The choice of numéraire is not neutral; it can affect the ranking of policies by calculated net benefits. Alternative evaluation methods, such as BCA using a different numéraire, weighted BCA, or a social welfare function (SWF), may better integrate concerns about distribution and efficiency. The most appropriate numéraire, distributional weights, or SWFs cannot be measured or statistically estimated; it is a normative choice.","PeriodicalId":45587,"journal":{"name":"Journal of Benefit-Cost Analysis","volume":"19 1","pages":"64 - 84"},"PeriodicalIF":3.4,"publicationDate":"2020-12-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83455833","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract A commonly assumed reason for the delegation of authority from a legislature (politicians) to bureaucracies is that the bureaucrats have an information advantage over the politicians, including knowledge of cost–benefit analysis (CBA). But it is reasonable to assume that the bureaucrats use their information advantage by taking all relevant aspects of policy into account? We model the use of CBA using a delegation model and then test the theoretical predictions with empirical data collected from five Swedish government agencies. The empirical results lend support both for the hypothesis that risk aversion concerning the environmental outcome, the bureaucrats’ environmental attitudes, and the cost of taking CBA information into account have a considerable impact on the probability of using information from a CBA. Hence risk averse and bureaucrats with strong environmental preferences are less likely and bureaucrats with low cost of doing a CBA more likely than other bureaucrats to use CBA information. Finally, a binding governmental budget constraint may positively influence a bureaucrat’s choice of using CBA information. A tentative conclusion is therefore that it may be possible to increase the use of CBA by making the budgetary consequences of policies much clearer and demanding due consideration of costs.
{"title":"The Influence of Individual Characteristics and Institutional Norms on Bureaucrats’ Use of Cost–Benefit Analysis: A Choice Experiment","authors":"J. Hammes, L. Nerhagen, H. C. Fors","doi":"10.1017/bca.2020.23","DOIUrl":"https://doi.org/10.1017/bca.2020.23","url":null,"abstract":"Abstract A commonly assumed reason for the delegation of authority from a legislature (politicians) to bureaucracies is that the bureaucrats have an information advantage over the politicians, including knowledge of cost–benefit analysis (CBA). But it is reasonable to assume that the bureaucrats use their information advantage by taking all relevant aspects of policy into account? We model the use of CBA using a delegation model and then test the theoretical predictions with empirical data collected from five Swedish government agencies. The empirical results lend support both for the hypothesis that risk aversion concerning the environmental outcome, the bureaucrats’ environmental attitudes, and the cost of taking CBA information into account have a considerable impact on the probability of using information from a CBA. Hence risk averse and bureaucrats with strong environmental preferences are less likely and bureaucrats with low cost of doing a CBA more likely than other bureaucrats to use CBA information. Finally, a binding governmental budget constraint may positively influence a bureaucrat’s choice of using CBA information. A tentative conclusion is therefore that it may be possible to increase the use of CBA by making the budgetary consequences of policies much clearer and demanding due consideration of costs.","PeriodicalId":45587,"journal":{"name":"Journal of Benefit-Cost Analysis","volume":"29 1","pages":"258 - 286"},"PeriodicalIF":3.4,"publicationDate":"2020-12-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76765737","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract The value of a statistical life (VSL) establishes the money-risk tradeoff that U.S. government agencies have used for four decades to monetize the mortality reduction benefits of proposed regulations. This article advocates the adoption of the VSL more generally both for policy evaluation purposes and for setting the magnitude of regulatory sanctions involving fatalities. Agencies currently employ the inconsistent practice of using the VSL to set the stringency of regulations, while at the same time, reverting to very low monetary values of sanctions for violations that result in fatalities. Reform of penalty levels to reflect the VSL will require increasing the current statutory limits on regulatory penalties. Revamping the penalty structure also will incentivize private companies to incorporate the VSL in their corporate risk analyses. Government agencies, including those concerned with national defense, similarly could profit from greater expansion of the use of the VSL in policy decisions.
{"title":"Extending the Domain of the Value of a Statistical Life","authors":"W. Viscusi","doi":"10.1017/bca.2020.19","DOIUrl":"https://doi.org/10.1017/bca.2020.19","url":null,"abstract":"Abstract The value of a statistical life (VSL) establishes the money-risk tradeoff that U.S. government agencies have used for four decades to monetize the mortality reduction benefits of proposed regulations. This article advocates the adoption of the VSL more generally both for policy evaluation purposes and for setting the magnitude of regulatory sanctions involving fatalities. Agencies currently employ the inconsistent practice of using the VSL to set the stringency of regulations, while at the same time, reverting to very low monetary values of sanctions for violations that result in fatalities. Reform of penalty levels to reflect the VSL will require increasing the current statutory limits on regulatory penalties. Revamping the penalty structure also will incentivize private companies to incorporate the VSL in their corporate risk analyses. Government agencies, including those concerned with national defense, similarly could profit from greater expansion of the use of the VSL in policy decisions.","PeriodicalId":45587,"journal":{"name":"Journal of Benefit-Cost Analysis","volume":"60 1","pages":"1 - 23"},"PeriodicalIF":3.4,"publicationDate":"2020-12-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83739209","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Research and development (R&D) planners in homeland security agencies would like to be able to prioritize investments in projects based on costs versus future safety and security benefits. While costs are often readily available, estimates of safety and security benefits are fraught with uncertainty. To address these challenges, a benefit–cost model of technological change is adapted to the homeland security context. Data are sparse; therefore, estimation is facilitated by developing a familiar linear welfare model using derivatives of cost and risk reduction functions to estimate areas of costs and benefits. The theoretical model is applied to two homeland security projects involving airport patrols and the assignment of U.S. federal air marshals to international flights. Retrospective data are available for most periods. Welfare-based rates of return are reported for the two cases, each of which is estimated to return large present value net benefits. Extensive sensitivity and Monte Carlo simulation explores uncertainties. Two important findings are that (i) given the rationality assumption, relative increases in security levels can be valued, even if the absolute level of security is not known; and (ii) large uncertainties about risk reduction exist but can be bounded by parametric sensitivity and uncertainty analysis.
{"title":"Retrospective Benefit–Cost Analysis of Security-Enhancing and Cost-Saving Technologies","authors":"S. Farrow, D. von Winterfeldt","doi":"10.1017/bca.2020.24","DOIUrl":"https://doi.org/10.1017/bca.2020.24","url":null,"abstract":"Abstract Research and development (R&D) planners in homeland security agencies would like to be able to prioritize investments in projects based on costs versus future safety and security benefits. While costs are often readily available, estimates of safety and security benefits are fraught with uncertainty. To address these challenges, a benefit–cost model of technological change is adapted to the homeland security context. Data are sparse; therefore, estimation is facilitated by developing a familiar linear welfare model using derivatives of cost and risk reduction functions to estimate areas of costs and benefits. The theoretical model is applied to two homeland security projects involving airport patrols and the assignment of U.S. federal air marshals to international flights. Retrospective data are available for most periods. Welfare-based rates of return are reported for the two cases, each of which is estimated to return large present value net benefits. Extensive sensitivity and Monte Carlo simulation explores uncertainties. Two important findings are that (i) given the rationality assumption, relative increases in security levels can be valued, even if the absolute level of security is not known; and (ii) large uncertainties about risk reduction exist but can be bounded by parametric sensitivity and uncertainty analysis.","PeriodicalId":45587,"journal":{"name":"Journal of Benefit-Cost Analysis","volume":"32 1","pages":"479 - 500"},"PeriodicalIF":3.4,"publicationDate":"2020-12-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82855398","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Nepal has suffered from the worst electricity shortages in South Asia. This study is an attempt to measure the willingness to pay for an improved service using a model of revealed preference. Respondents are asked about the actions they are taking to reduce the impact on their household or business of scheduled and unscheduled outages and more stable voltage. We estimate the averting expenditures that were being incurred to compensate for the lack of reliability of the electricity service. The estimated cost of the averting actions as a percentage of the electricity bills is 53 % for households, 47 % for small businesses, 46 % for medium businesses, and 35 % for large businesses. Based on the estimations, we find that in 2017 the annual benefit from improving the reliability of the electricity service would be approximately US$ 188 million with a present value over 20 years of US$ 1.6 billion.
{"title":"Averting Expenditures and Willingness to Pay for Electricity Supply Reliability","authors":"Naghmeh Niroomand, G. Jenkins","doi":"10.1017/bca.2020.25","DOIUrl":"https://doi.org/10.1017/bca.2020.25","url":null,"abstract":"Abstract Nepal has suffered from the worst electricity shortages in South Asia. This study is an attempt to measure the willingness to pay for an improved service using a model of revealed preference. Respondents are asked about the actions they are taking to reduce the impact on their household or business of scheduled and unscheduled outages and more stable voltage. We estimate the averting expenditures that were being incurred to compensate for the lack of reliability of the electricity service. The estimated cost of the averting actions as a percentage of the electricity bills is 53 % for households, 47 % for small businesses, 46 % for medium businesses, and 35 % for large businesses. Based on the estimations, we find that in 2017 the annual benefit from improving the reliability of the electricity service would be approximately US$ 188 million with a present value over 20 years of US$ 1.6 billion.","PeriodicalId":45587,"journal":{"name":"Journal of Benefit-Cost Analysis","volume":"58 1","pages":"501 - 523"},"PeriodicalIF":3.4,"publicationDate":"2020-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89354126","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-10-11DOI: 10.4324/9780138761790-21
Bernardo J. Aguilar, Thomas J. Semanchin
{"title":"The Implications of Ecological Economic Theories of Value to Cost-Benefit Analysis: Importance of Alternative Valuation for Developing Nations with Special Emphasis on Central America","authors":"Bernardo J. Aguilar, Thomas J. Semanchin","doi":"10.4324/9780138761790-21","DOIUrl":"https://doi.org/10.4324/9780138761790-21","url":null,"abstract":"","PeriodicalId":45587,"journal":{"name":"Journal of Benefit-Cost Analysis","volume":"38 1","pages":""},"PeriodicalIF":3.4,"publicationDate":"2020-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75695449","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Some issues in the application of benefit–cost analysis (BCA) remain contentious. Although a strong conceptual case can be made for taking account of the marginal excess tax burden (METB) in conducting BCAs, it is usually excluded. Although a strong conceptual case can be made that BCA should not include distributional values, some analysts continue to advocate doing so. We discuss the cases for inclusion of the METB and the exclusion of distributional weights from what we refer to as “core” BCA, which we argue should be preserved as a protocol for assessing allocative efficiency. These issues are topical because a recent article in this journal recommends ignoring the METB on the grounds that desirable distributional effects offset its cost. We challenge the logic of this article and explain why it may encourage inefficient policies.
{"title":"Efficiency without Apology: Consideration of the Marginal Excess Tax Burden and Distributional Impacts in Benefit–Cost Analysis","authors":"A. Boardman, D. Greenberg, A. Vining, D. Weimer","doi":"10.1017/bca.2020.18","DOIUrl":"https://doi.org/10.1017/bca.2020.18","url":null,"abstract":"Abstract Some issues in the application of benefit–cost analysis (BCA) remain contentious. Although a strong conceptual case can be made for taking account of the marginal excess tax burden (METB) in conducting BCAs, it is usually excluded. Although a strong conceptual case can be made that BCA should not include distributional values, some analysts continue to advocate doing so. We discuss the cases for inclusion of the METB and the exclusion of distributional weights from what we refer to as “core” BCA, which we argue should be preserved as a protocol for assessing allocative efficiency. These issues are topical because a recent article in this journal recommends ignoring the METB on the grounds that desirable distributional effects offset its cost. We challenge the logic of this article and explain why it may encourage inefficient policies.","PeriodicalId":45587,"journal":{"name":"Journal of Benefit-Cost Analysis","volume":"35 1","pages":"457 - 478"},"PeriodicalIF":3.4,"publicationDate":"2020-09-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88209302","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-08-19DOI: 10.4324/9781351029780-17
E. Mishan, E. Quah
{"title":"Adverse spillovers","authors":"E. Mishan, E. Quah","doi":"10.4324/9781351029780-17","DOIUrl":"https://doi.org/10.4324/9781351029780-17","url":null,"abstract":"","PeriodicalId":45587,"journal":{"name":"Journal of Benefit-Cost Analysis","volume":"74 1","pages":""},"PeriodicalIF":3.4,"publicationDate":"2020-08-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79488656","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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