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7. Reviews of the Economic Analysis/RIA Process

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Regulatory impact assessments (RIAs) trace their ancestry back at least as far as the Nixon administration. Then, EPA and other regulatory agencies were required to prepare Quality of Life reviews for proposed regulations. These reviews were to include consideration of alternatives and estimates of costs. The Ford administration enhanced the review requirement placing some emphasis on inflation and energy effects.

The turning point in the evolution of RIAs came in February, 1981 when President Reagan issued Executive Order 12291 requiring Regulatory Impact Analyses for all major regulations, i.e., those costing more than $100 million or meeting certain other criteria. This order required benefit-cost analysis and made maximization of net benefits the regulatory objective. President Clinton’s later order additionally required consideration of distributional consequences. Although executive orders require the development of benefit-cost analyses, the statutes authorizing regulations may limit or preclude consideration of their findings.

Substantially more than a hundred RIAs have been prepared to date, primarily by the Environmental Protection Agency. It is reasonable to study the quality and effect of those analyses. Several scholars and organizations have done so, as follows:
7.1. Economic Analyses at EPA: Assessing Regulatory Impact edited by Richard Morgenstern (Resources for the Future, formerly Deputy Assistant Administrator at the EPA)
7.2. Regulatory Reform: Assessing the Government's Numbers by Robert Hahn (American Enterprise Institute)
7.3. "The US Regulatory Analysis Framework: A Review" by Ralph Luken (EPA) and Art Fraas (OMB)
7.4. Analysis of the Costs and Benefits of Regulations: A Review of Historical Experience by Michael Rusin, et al., American Petroleum Institute
7.5. Cost-Benefit Analysis Can Be Useful In Assessing Environmental Regulations, Despite Limitations by the General Accounting Office
7.6. EPA's Use of Benefit-Cost Analysis 1981-1986 by the Environmental Protection Agency.
The present document will summarize these reviews and, in its conclusion, attempt to identify their more interesting and more common findings.

There are two distinct but interrelated themes that the reviews consider. The first is the quality of the RIAs. The second is the way regulatory agencies utilize them. The latter is complicated by statutory limitations on the use of benefit-cost analysis. Different reviews concentrate on different themes but this document will deal with both.


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