Regulation magazine

CAFE and the Tension Between Optimization and Competition in Rulemaking

December 14, 2015

By Brian Mannix
Choosing regulatory options that maximize net benefits is a sound principle, but it needs to be applied with an appropriate measure of humility. Regulators may be tempted to think that they can use benefit-cost analysis to determine what is “best” for the economy, and then simply mandate it. The collateral damage to competition and innovation can easily turn an otherwise well-intentioned rule into an economic disaster. Regulatory specification of a particular technology can be especially damaging when the technology is proprietary, because then the law may simultaneously lock out competitors and lock in customers.

Literature

Regulation, Innovation, & Entrepreneurship: A Review of the Literature

December 08, 2015

By Ana Maria Zárate Moreno
The regulatory environment in which firms interact can hinder or contribute to the creation and early stage growth of new businesses as well as to the innovation process within a market. This document reviews the literature that explores the empirical relationship between regulation and innovation and regulation and entrepreneurship, focusing on the effects of regulatory quality across countries. The thematic analysis conducted in this literature review indicates that institutions matter for economic activities and that regulation, as an important part of the institutional environment, is a central aspect of the ecosystem for innovation and entrepreneurial engagement.

Identifying Regulations Affecting International Trade and Investment: Better Classification Could Improve Regulatory Cooperation

Identifying Regulations Affecting International Trade and Investment: Better Classification Could Improve Regulatory Cooperation

November 10, 2015

By Daniel R. Pérez
Early notice of upcoming regulations that are likely to affect international trade and investment helps U.S. citizens and companies as well as our trading partners. The U.S. has tasked its regulatory agencies with flagging such rules in the semiannual Unified Agenda before they are issued. We compared the number of rules that agencies flagged as likely to have an international impact from 2008 through 2014 with the number of rules we identified, based on our criteria, that were likely to have such an impact. Agencies are currently identifying less than 30% of these rules.

Agency use of retrospective review of regulations

Learning from Experience: Retrospective Review of Regulations in 2014

November 03, 2015

By Sofie E. Miller
Through a series of Executive Orders, President Obama has encouraged federal regulatory agencies to review existing regulations and to “modify, streamline, expand, or repeal them in accordance with what has been learned.” Learning from experience is an important part of a healthy regulatory process, so multiple government guidelines instruct agencies to incorporate retrospective review plans into their proposals during the rulemaking process. Our latest research finds that, despite these guidelines, agencies are not planning prospectively for ex post analysis of their rules.

JPP

Salience, complexity and state resistance to federal mandates

October 28, 2015

By Steven J. Balla & Christopher J. Deering
Although state resistance to federal mandates is a prevalent characteristic of contemporary American federalism, little is known about the factors that separate resisting states from states that do not oppose federal policy. This article examines state resistance through a framework that classifies public policies by salience and complexity and identifies societal interests and government officials who are hypothesised to influence policy making on issues of varying types. These hypotheses are investigated in the context of state resistance to four federal laws – the Patient Protection and Affordable Care Act, No Child Left Behind Act, Help America Vote Act and REAL ID Act. The results of the statistical analysis demonstrate the centrality of the characteristics of citizens, elected officials and specialised interest groups in conditioning state resistance to federal mandates. These results suggest that state resistance can be characterised as a strategic response to federal mandates that varies systematically across types of public policies.

EPA

Regulatory Science and Policy: A Case Study of the National Ambient Air Quality Standards

September 09, 2015

By Susan E. Dudley
Effective environmental policy depends on reliable scientific information and transparent policy choices; it is challenged not only when science is politicized, but also when policy is “scientized.” This paper suggests that current practices scientize policy and threaten not only regulatory outcomes, but the credibility of the scientific process. Using a case study of the procedures by which the Environmental Protection Agency sets National Ambient Air Quality Standards under the Clean Air Act, it illustrates some of the perverse incentives involved in developing regulations, and offers possible mechanisms to improve those incentives and resulting policy.

Graph

Whose Benefits Are They, Anyway? Examining the Benefits of Energy Efficiency Rules 2007 - 2014

September 02, 2015

By Sofie E. Miller
Over the past decade, regulations setting energy efficiency standards have proliferated. These rules account billions of dollars in annual regulatory benefits, but the Department of Energy relies on private benefits and benefits to residents of other countries to justify the standards, contrary to typical benefit-cost analyses. This paper examines the composition of benefits resulting from DOE’s energy efficiency rules 2007 – 2014, and finds that these rules don’t pass a traditional cost-benefit test when relying on traditional analytical assumptions.

US and EU flags

The Role of Transparency in Regulatory Governance: Comparing US and EU Regulatory Systems

August 11, 2015

By Susan E. Dudley & Kai Wegrich
This review of regulatory procedures in the EU and US suggests that each values good regulatory practices, such as transparency, public consultation, and regulatory impact analysis, but emphasizes them to different degrees at different stages in the regulatory process. Particularly for regulations that address human health risks, both jurisdictions should be more transparent regarding the uncertainties surrounding estimates of regulatory outcomes and the effect of key assumptions on those estimates. A transparent process for evaluating regulatory effects ex post could also improve regulatory analysis and outcomes.

Pages in the federal register graph

Can Fiscal Budget Concepts Improve Regulation?

July 16, 2015

By Susan E. Dudley
Despite efforts to ensure that new regulations provide net benefits to citizens, the accumulation of regulations threatens economic growth and well-being. As a result, the U.S. legislature is exploring the possibility that applying fiscal budgeting concepts to regulation could bring more accountability and transparency to the regulatory process. This paper examines the advantages and challenges of applying regulatory budgeting practices, and draws some preliminary conclusions based on successful experiences in other countries.

Congress 1941

Improving Regulatory Accountability: Lessons from the Past and Prospects for the Future (as published)

July 15, 2015

By Susan E. Dudley
This Article examines efforts by the three branches of federal government to oversee regulatory policy and procedures. It begins with a review of efforts over the last century to establish appropriate checks and balances on regulations issued by the executive branch and then evaluates current regulatory reforms that would hold the executive branch, the legislative branch, and the judicial branch more accountable for regulations and their outcomes.

Pie chart: ANPRMs by type of rulemaking

Notice & Comment: How Agencies Use Advance Notices of Proposed Rulemaking

June 23, 2015

By Sofie E. Miller & Saayee Arumugam
Agencies already use ANPRMs to gather public input, and have for many years. However, our analysis sought to answer these questions: How frequently do agencies use ANPRMs? Which agencies use ANPRMs most frequently? Do agencies use ANPRMs to solicit public input on minor regulatory issues, or for bigger policy questions? This analysis provides answers to each of these questions for use by policymakers, agencies, and the public alike as we contemplate practical solutions for improving the regulatory process.

Cover of Policy Perspectives magazine

One Discount Rate Fits All? The Regressive Effects of DOE's Energy Efficiency Rule

May 20, 2015

By Sofie E. Miller
This paper examines the Department of Energy's (DOE) reliance on low discount rates to estimate the benefits of its energy efficiency standards and uses existing literature on implicit consumer discount rates to calculate a range of benefits for DOE’s furnace fan rule. While DOE calculates large net benefits from its energy efficiency rule, using discount rates that better represent average consumer time preferences shows that this standard results in net costs. Furthermore, given the variation in consumer discount rates by income, this standard is effectively a transfer payment from low- and median-income households to high-income households.

JPAM journal cover

Point/Counterpoint: Valuing Internalities in Regulatory Impact Analysis

May 13, 2015

By Brian Mannix & Susan Dudley
In this Point/Counterpoint article series with Cass Sunstein & Hunt Allcott, Mannix & Dudley argue that allowing regulators to control consumers 'for their own good' – based on some deficiency in the consumers themselves rather than any failure in the marketplace – is to abandon any serious attempt to keep regulatory policy grounded in any objective notion of the public good.

Crystalline 200

Will the Occupational Safety and Health Administration's Proposed Standards for Occupational Exposure to Respirable Crystalline Silica Reduce Workplace Risk?

March 26, 2015

By Susan E. Dudley & Andrew P. Morriss
This article finds that OSHA's proposed rule would contribute little in the way of new information, particularly since it is largely based on information that is at least a decade old—a significant deficiency, given the rapidly changing conditions observed over the last 45 years. The article concludes with recommendations for alternative approaches that would be more likely to generate information needed to improve worker health outcomes.

Side by side

The CPSC's Off-Road Adventure

March 23, 2015

By Joseph Cordes and Blake Taylor
This article raises issues with the Consumer Product Safety Commission's proposal to regulate recreational off-highway vehicles, commonly referred to as side by sides. CPSC issues rules to mitigate "unreasonable risks." In order to deem a risk as either reasonable or unreasonable, it is necessary to have information on the risk rate. The CPSC, however, proposed this rule without reliable information on the rates of injury and death associated with use of side by sides. Additionally, it is possible that the proposal rule, if enacted, would have a negative impact on consumer surplus if the safety standards make the products undesirable. Such a loss, however, is absent in the Commission's assessment of expected benefits and costs.