Policy Watch: Government Analysis of the Benefits and Costs of Regulation

Recently, Congress has shown a greater interest in assessing the economic impact of regulation. This interest was driven in part by estimates that federal regulation costs several hundred billion dollars annually. In 1996, Congress required the director of the Office of Management and Budget to provide estimates of the total annual benefits and costs of individual regulations. This essay reviews the increasing use of economic analysis in regulatory decisionmaking, critically assesses the first 0MB report, and considers how the use of economic analysis can help inform regulatory decisionmaking. It argues that policymakers need to address a growing body of evidence that casts doubt on the effectiveness and efficiency of much regulation.