Assessing the Quality of Regulatory Impact Analyses

This study provides the most comprehensive evaluation of the quality of recent economic analyses that agencies conduct before finalizing major regulations. We construct a new dataset that includes analyses of forty-eight major health, safety, and environmental regulations from mid-1996 to mid-1999. This dataset provides detailed information on a variety of issues, including an agency's treatment of benefits, costs, net benefits, discounting, and uncertainty. We use this dataset to assess the quality of recent economic analyses and to determine the extent to which they are consistent with President Clinton's Executive Order 12866 and the benefit-cost guidelines issued by the Office of Management and Budget (OMB). We find that economic analyses prepared by regulatory agencies typically do not provide enough information to make decisions that will maximize the efficiency or effectiveness of a rule. Agencies quantified net benefits for only 29 percent of the rules. Agencies failed to discuss alternatives in 27 percent of the rules and quantified costs and benefits of alternatives in only 31 percent of the rules. Our findings strongly suggest that agencies generally failed to comply with the executive order and adhere to the OMB guidelines. We offer specific suggestions for improving the quality of analysis and the transparency of the regulatory process, including writing clear executive summaries, making analyses available on the Internet, providing more careful consideration of alternatives to a regulation, and estimating net benefits of a regulation when data on costs and benefits are provided