• Video

History of Benefit-Cost Analysis

When and why did administrative agencies start doing cost-benefit analysis? Professor Susan Dudley maps out the history of executive orders that imposed this procedure. President Ronald Reagan formalized the process and every President since has enforced cost-benefit analysis to evaluate regulatory impact. https://youtube.com/watch?v=lWo-_0Zug2M


Every president going back to Ronald Reagan has imposed some procedures where through executive orders requiring agencies, before they issue a regulation, to do analysis and to evaluate alternative ways of approaching the problem that they've identified. So clearly identify the problem, look at alternatives that could do that and then look at the benefits and the costs of each of those alternative approaches and choose the approach that maximizes the net benefits, the difference between the benefits and the costs. So that requirement for regulatory impact, of which benefit-cost analysis is a big component, actually goes back even further than Reagan. President Carter had executive orders requiring agencies to do that and Nixon had some earlier versions of that. But they were the forerunners to this benefit-cost analysis, that now all agencies are supposed to do. What Reagan also did is he established this office of information and regulatory affairs within OMB and he required agencies to do this analysis to develop their regulation and then to send their draft regulation to OIRA - the office of information and regulatory affairs for review before the regulation is published. President Clinton, in 1993, rescinded the Reagan order after several months, but wrote his own that is very similar. It requires the analysis of benefits and costs. It requires OMB review of all significant regulations. And President Clinton's order has been in effect ever since then. Clinton, George W. Bush, Barack Obama, and Donald Trump all are continuing to use that same order and those same procedures it shows that people recognize the executive branch has some responsibility for making sure that those regulations and those regulatory agencies are accountable to the people through at least one elected branch and that's the president.

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