Small Farms, Big Costs

September 10, 2013

By Sofie E. Miller & Cassidy B. West
The Food and Drug Administration recently extended to November 15 the deadline for public comment on its proposed rule, Standards for the Growing, Harvesting, Packing, and Holding of Produce for Human Consumption. This is the second extension, providing the public an unusually long 304 days to comment on the proposed regulation and offer suggestions for its improvement. It is also a welcome opportunity, as the draft rule does not meet statutory and executive requirements and may needlessly harm consumers as well as small farmers domestically and abroad.

electric car

Questioning NHTSA’s ‘Noisy Electric Cars’ Rule

July 09, 2013

By Sofie E. Miller
Early this year, the National Highway Traffic Safety Administration published a proposed rule that would require hybrid and electric vehicles to make a sound while being operated at speeds slower than 18 miles per hour. Because they use an electric motor, hybrid and electric vehicles generate less noise than conventional vehicles with internal combustion engines (ICEs), and legislators and regulators alike are concerned that pedestrians could be injured by a vehicle that they can’t hear coming. Under the 2010 Pedestrian Safety Enhancement Act, NHTSA must conduct a safety standard rulemaking to establish an “alert sound” for hybrid and electric vehicles. The act requires that the noise made by a hybrid or electric vehicle could allow a pedestrian, especially a sightimpaired pedestrian, to identify the direction of the vehicle. NHTSA is also operating under the National Traffic and Motor Vehicle Safety Act, which requires NHTSA safety standards to “be performance-oriented, practicable, and objective, and meet the need for safety. In addition, in developing and issuing a standard, NHTSA must consider whether the standard is reasonable, practicable, and appropriate for each type of motor vehicle covered by the standard.”

office of management and budget

OMB’s Reported Benefits of Regulation: Too Good to Be True?

July 09, 2013

By Susan E. Dudley
Since 1997, the Office of Management and Budget has reported to Congress each year on the benefits and costs of federal regulation. These reports, which generally conclude that the benefits of regulation are an order of magnitude greater than the costs, are used to refute concerns that regulations may be hindering economic growth and to suggest that smart regulation can provide large net economic gains. For example, the Democratic National Committee’s 2012 platform defended President Obama’s regulatory record against Republican criticism by repeating the president’s claim that regulations issued over his first three years produced “more than 25 times the net benefits of the previous administration’s regulations.” The OMB’s draft 2013 report estimates that regulations issued over the last decade have aggregate benefits of between $193 billion and $800 billion, compared to costs ranging from $57 billion to $84 billion.


EPA’s Retrospective Review of Regulations: Will it Reduce Manufacturing Burdens?

May 17, 2013

By Sofie E. Miller
Through a series of Executive Orders, President Obama has encouraged federal regulatory agencies to review existing regulations “that may be outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned.” This paper examines the initial results of that review to understand whether actions pursued under this initiative are likely to be successful at reducing regulatory burden. Since reports suggest that the manufacturing sector bears greater regulatory burdens than other sectors, and that regulations issued by the Environmental Protection Agency (EPA) impose particularly high costs on this sector, the focus here is on the expected effects on the manufacturing sector of EPA’s identified reforms.

los angeles smog

The EPA’s Implausible Return on its Fine Particulate Standard

April 10, 2013

By Susan E. Dudley
Last January 14th, the Environmental Protection Agency published a final rule in the Federal Register updating the National Ambient Air Quality Standards (NAAQS) for particulate matter. The rule reduces by 20 percent the allowable annual concentrations of fine particles less than 2.5 micrometers in size (PM2.5), from the current 15.0 micrograms per cubic meter (μg/m3) that was affirmed in 2006, to 12.0 μg/m3.

According to the EPA, meeting the standard “will provide health benefits worth an estimated $4 billion to $9.1 billion per year in 2020—a return of $12 to $171 for every dollar invested in pollution reduction.” This is such an impressive return on investment that it raises the question why the EPA chose a standard of 12.0 μg/m3 when, by its logic, a tighter standard would yield even greater returns.


Crony Environmentalism

April 10, 2013

By Sofie E. Miller
The benefits and costs that regulators highlight when announcing a rule can say a lot about a regulation’s composition—and sometimes the benefits (or costs) that are omitted are the most important part of the story. For the Environmental Protection Agency’s new biodiesel standard, the stated costs and benefits don’t even begin to tell the whole story: by the agency’s own estimates, the rule achieves neither economic efficiency nor improved environmental quality, and it leaves the public paying the price. What could have caused regulators to finalize a rule that causes harm to the environment at such a great cost to the public?

high frequency trading

Races, Rushes, and Runs: Taming the Turbulence in Financial Trading

January 03, 2013

By Brian Mannix
Many participants, regulators, and observers of commodity and security markets have a sense that something in recent years has gone awry: that the explosive growth of high-frequency digital trading is somehow excessive, costly, unfair, and/or destabilizing. Several ideas for changing the rules have been discussed. Without a coherent explanation of exactly what is wrong, however, it can be very difficult to develop a promising remedy.


Uncertain Benefits Estimates for Reductions in Fine Particle Concentrations

August 29, 2012

By Art Fraas & Randall Lutter
The Environmental Protection Agency's (EPA's) estimates of the benefits of improved air quality, especially from reduced mortality associated with reductions in fine particle concentrations, constitute the largest category of benefits from all federal regulation over the last decade. EPA develops such estimates, however, using an approach little changed since a 2002 report by the National Research Council (NRC), which was critical of EPA's methods and recommended a more comprehensive uncertainty analysis incorporating probability distributions for major sources of uncertainty. Consistent with the NRC's 2002 recommendations, we explore alternative assumptions and probability distributions for the major variables used to calculate the value of mortality benefits. For metropolitan Philadelphia, we show that uncertainty in air quality improvements and in baseline mortality have only modest effects on the distribution of estimated benefits. We analyze the effects of alternative assumptions regarding the value of reducing mortality risk, whether the toxicity is above or below the average for fine particles, and whether there is a threshold in the concentration-response relationship, and show these assumptions all have large effects on the distribution of benefits.


Improving Causal Inferences in Risk Analysis

August 24, 2012

By Tony Cox
Recent headlines and scientific articles projecting significant human health benefits from changes in exposures too often depend on unvalidated subjective expert judgments and modeling assumptions, especially about the causal interpretation of statistical associations. Some of these assessments are demonstrably biased toward false positives and inflated effects estimates. More objective, data-driven methods of causal analysis are available to risk analysts. These can help to reduce bias and increase the credibility and realism of health effects risk assessments and causal claims.


Perpetuating Puffery: An Analysis of the Composition of OMB's Reported Benefits of Regulation

August 14, 2012

By Susan E. Dudley
The Office of Management and Budget reports that the benefits of regulations issued over the last decade exceed the costs by an order of magnitude. But how accurate are those estimates? Over 80 percent of total reported regulatory benefits derive from three sources: (1) reductions of fine particles in the air as a direct result of regulation, (2) the co-benefits achieved from ancillary reductions in these particles as an indirect result of regulation, and (3) private savings for which agencies have offered no market failure explanation. This article critically examines the approaches and assumptions behind these estimates, and suggests that the reported benefits should be viewed with some skepticism.


Regulation, Jobs, and Economic Growth: An Empirical Analysis

March 12, 2012

By Tara M. Sinclair & Kathryn Vesey
Claims about government regulation and its detrimental effects on job creation and economic growth are currently receiving substantial attention in the public sphere. Yet, conclusive evidence demonstrating this link between regulatory activity and macroeconomic indicators remains elusive. This paper seeks to empirically examine these linkages, using the on-budget costs of regulation over time as a proxy for federal regulatory activity. This analysis finds that the macroeconomic effects of regulatory agency budgets as a whole as well as of subcategories of regulatory spending are indistinguishable from no effect based on the data and statistical methods available. This finding is generally robust throughout our sensitivity analysis. Sinclair & Vesey explore possible explanations for this finding, as well as why the results differ from other studies on the same subject. This report highlights throughout the numerous challenges associated with both accurately measuring regulatory activity and obtaining valid estimates of its effects on the macroeconomy. It also offers recommendations moving forward on how to keep the public conversation about regulation constructive and evidence-based.

brian mannix

Regulatory Subsidies: A Primer

March 12, 2012

By Brian Mannix
Subsidies are a commonplace feature of government programs, and can be found in regulatory programs as well as in budget expenditures and in the tax code. An accurate accounting of regulatory subsidies, accessible to the general public, could improve government
regulation by helping to ensure that such subsidies are used only when, and to the degree that, they serve a sound public purpose. This is easier said than done, however. This paper explores the concept of a regulatory subsidy and review some examples. A more technical Appendix examines some of the obstacles to creating a clear accounting of regulatory subsidies, and suggest areas where useful studies might be pursued.

washington dc

(Mis)Applications of Behavioral Economics to Regulation: The Importance of Public Choice Architecture

August 01, 2011

By Adam Smith
In this paper, I evaluate the recent promotion of libertarian paternalism as a viable means of coordinating market activities. In doing so, I challenge the notion that “anti-antipaternalism” logically follows from the findings in behavioral economics. For behavioral economic policy to be effective, advocates must show how policy will be rendered effectively through public institutions. I argue that the central dilemma of the field of behavioral law and economics is that it lacks analysis of the public choice architecture within which the improvement of private choice architecture would take place. Without an accompanying theory of the public institutions by which behavioral economic policy will be implemented, the
promotion of these types of policy prescriptions is premature.

washington dc

Public Commenting on Federal Agency Regulations: Research on Current Practices and Recommendations to the Administrative Conference of the United States

March 15, 2011

By Steven Balla
This report, commissioned by the Administrative Conference of the United States (ACUS), investigates agency practices in soliciting, circulating, and responding to public comments during the federal rulemaking process.

washington redskins

Regulators and Redskins

December 17, 2010

By Bentley Coffey, Patrick McLaughlin, & Robert Tollison
We examine the correlation between federal government activity and the performance of the D.C. area's National Football League team, the Washington Redskins. We find a significantly positive, non-spurious, and robust correlation between the Redskins' winning percentage and the amount of federal government bureaucratic activity as measured by the number of pages in the Federal Register. Because the Redskins' performance is prototypically exogenous, we give this surprising result a causal interpretation. Drawing upon public choice theory and behavioral economics, we provide a plausible explanation for the causal mechanism: bureaucrats must make "logrolling" deals in order to expand their regulatory power, and a winning football team acts as a commonly shared source of joyous optimism to lubricate such negotiations. We do not find the same correlation when examining Congressional activity, which we attribute to legislator loyalty to their home state's team(s).