There’s only a little bit of unfairness in the title I’ve given this post, the suggestion that OMB Watch President and CEO Katherine McFate opposes regulation that has benefits. But she does lament the requirement that the benefits of regulation be shown, which is a sibling of not prioritizing benefits at all.
In a post entitled: “Cost‐Benefit Analysis: The Stunning Triumph of a Flawed Tool,” she writes: “It is simply not appropriate to apply cost‐benefit analysis to many aspects of policymaking, and the results from such analyses should not be the final determinant of the value of many proposed standards or safeguards.”
It’s not a new argument. And I disagree with it. All aspects of policymaking should be subjected to cost‐benefit analysis. All policies should provide us more in benefits than they burden us with costs. Just think how much we’d save on military adventurism…
Here’s the heart of McFate’s complaint:
Many regulatory experts and members of the public interest community believe cost‐benefit analysis exaggerates the costs of new rules and underestimates their social benefits. Cost‐benefit analyses are heavily dependent on the assumptions built into the quantitative models used and the data on which the models are applied. The data is provided by regulated businesses. If these businesses are resisting the need to change their production processes or business practices to comply with a new standards or regulation, they will tend to overestimate the compliance costs of the rule.
Nothing here undercuts cost‐benefit analysis per se. McFate’s complaint is that “the other side” is skewing cost‐benefit analysis in its favor.
McFate is right that the benefits of safety and health are harder to quantify than the cost of regulations to deliver them. And she’s right that business ingenuity goes into cutting compliance costs after rules have issued, making initial cost‐estimates seem high. But those are reasons for groups like OMB Watch to get better at cost‐benefit analysis, not reasons to quit the game.
The federal government has hoovered up control over huge swaths of Americans’ economic and social lives, subjecting manifold organs of society to central control contrary to my preference. If the government’s decisionmaking is not to be guided by cost‐benefit analysis, then what? McFate doesn’t say. But she does say:
Americans have a right to safe drinking water, clean air, safe workplaces, safe food, safe drugs, and safe toys. They expect their government to ensure these basic protections. End of story. The value of maintaining and improving the health and safety of the American people? Priceless.
In this romantic, choking swirl of positive rights, we pick up McFate’s view: the United States government should spend any amount of society’s resources on her goals, nevermind whether it makes society better off as a whole. I’ll take cost‐benefit analysis.
OMB Watch should focus on making cost‐benefit analysis better, rather than giving up on regulation with demonstrable benefits.