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How Well Does the U.S. Government Do Benefit-Cost Analysis?

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  • Robert W. Hahn
  • Patrick M. Dudley

Abstract

To make prudent recommendations for improving the use of benefit-cost analysis in policy settings, some measures of how well it is actually done are essential. This article develops new insights on the potential usefulness of government benefit-cost analysis by examining how it is actually performed in the United States.We assess the quality of a particularly rich sample of benefit-cost analyses of federal regulations. The data set we use for assessing the quality of regulatory analysis is the largest assembled to date for this purpose. The seventy-four analyses we examine span the Reagan administration, the George H. W. Bush administration, and the Clinton administrations. The article is the first to assess systematically how government benefit-cost analysis has changed over time.There are three key findings. First, a significant percentage of the analyses in all three administrations does not provide some very basic economic information, such as information on net benefits and policy alternatives. For example, over 70 percent of the analyses in the sample failed to provide any quantitative information on net benefits. Second, there is no clear trend in the quality of benefit-cost analysis across administrations. Third, there is a great deal of variation in the quality of individual benefit-cost analyses. Copyright 2007, Oxford University Press.

Suggested Citation

  • Robert W. Hahn & Patrick M. Dudley, 2007. "How Well Does the U.S. Government Do Benefit-Cost Analysis?," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 1(2), pages 192-211, Summer.
    • Handle: RePEc:oup:renvpo:v:1:y:2007:i:2:p:192-211
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    Citations

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    Cited by:

    1. David A. Keiser & Catherine L. Kling & Joseph S. Shapiro, 2019. "The low but uncertain measured benefits of US water quality policy," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 116(12), pages 5262-5269, March.
    2. Vigren, Andreas & Ljungberg, Anders, 2018. "Public Transport Authorities’ use of Cost-Benefit Analysis in practice," Research in Transportation Economics, Elsevier, vol. 69(C), pages 560-567.
    3. Marggraf, Rainer & Masius, Patrick & Rumpf, Christine, 2012. "Zur Integration von Tieren in wohlfahrtsökonomische Analysen," DARE Discussion Papers 1207, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    4. Daniel R. Petrolia & Dennis Guignet & John Whitehead & Cannon Kent & Clay Caulder & Kelvin Amon, 2021. "Nonmarket Valuation in the Environmental Protection Agency's Regulatory Process," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(3), pages 952-969, September.
    5. Michael Makowsky & Richard Wagner, 2009. "From scholarly idea to budgetary institution: the emergence of cost-benefit analysis," Constitutional Political Economy, Springer, vol. 20(1), pages 57-70, March.
    6. McGartland, Al, 2013. "Thirty Years of Economics at the Environmental Protection Agency," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 42(3), pages 1-17, December.
    7. Robert W. Hahn & Paul C. Tetlock, 2008. "Has Economic Analysis Improved Regulatory Decisions?," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 67-84, Winter.
    8. Scott Farrow, 2011. "Incorporating Equity in Regulatory and Benefit‐Cost Analysis Using Risk‐Based Preferences," Risk Analysis, John Wiley & Sons, vol. 31(6), pages 902-907, June.
    9. Neal Hockley, 2014. "Cost–Benefit Analysis: A Decision-Support Tool or a Venue for Contesting Ecosystem Knowledge?," Environment and Planning C, , vol. 32(2), pages 283-300, April.
    10. Caroline Cecot & Robert Hahn & Andrea Renda & Lorna Schrefler, 2008. "An evaluation of the quality of impact assessment in the European Union with lessons for the US and the EU," Regulation & Governance, John Wiley & Sons, vol. 2(4), pages 405-424, December.
    11. Fraas Art & Morgenstern Richard, 2014. "Identifying the analytical implications of alternative regulatory philosophies," Journal of Benefit-Cost Analysis, De Gruyter, vol. 5(1), pages 137-171, January.
    12. Atkinson, Giles & Groom, Ben & Hanley, Nicholas & Mourato, Susana, 2018. "Environmental Valuation and Benefit-Cost Analysis in U.K. Policy," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 9(1), pages 97-119, April.
    13. Zimmermann, Michel & Pye, Steve, 2018. "Inequality in energy and climate policies: Assessing distributional impact consideration in UK policy appraisal," Energy Policy, Elsevier, vol. 123(C), pages 594-601.
    14. Amy Sinden & Douglas A. Kysar & David M. Driesen, 2009. "Cost–benefit analysis: New foundations on shifting sand," Regulation & Governance, John Wiley & Sons, vol. 3(1), pages 48-71, March.
    15. Carl F. Cranor & Adam M. Finkel, 2018. "Toward the usable recognition of individual benefits and costs in regulatory analysis and governance," Regulation & Governance, John Wiley & Sons, vol. 12(1), pages 131-149, March.
    16. Scott Farrow, "undated". "Random Error and Simulation Models With an Unobserved Dependent Variable as applied to the Benefits and Costs of the Clean Air Act," UMBC Economics Department Working Papers 09-103, UMBC Department of Economics, revised 26 Jan 2008.
    17. Scott Farrow, 2008. "Improving the Regulatory Analysis of the Cooling Water Intake Structure Rule: What Does an Economist Want?," UMBC Economics Department Working Papers 09-102, UMBC Department of Economics.
    18. Bruce A. Desmarais & John A. Hird, 2014. "Public policy's bibliography: The use of research in US regulatory impact analyses," Regulation & Governance, John Wiley & Sons, vol. 8(4), pages 497-510, December.
    19. Harrington, Winston & Morgenstern, Richard & Velez-Lopez. Daniel, 2012. "Tools for assessing the costs and benefits of green growth : the U.S. and Mexico," Policy Research Working Paper Series 6242, The World Bank.
    20. Stuart Shapiro & John F. Morrall III, 2012. "The triumph of regulatory politics: Benefit–cost analysis and political salience," Regulation & Governance, John Wiley & Sons, vol. 6(2), pages 189-206, June.
    21. Özlem Turan & Serkan Gurluk, 2024. "The Impacts of Social Discount Rate in Countries Striving for Industrialization," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 5428-5442, June.

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