September 14, 2020 | By: Brian F. Mannix
The Environmental Protection Agency (EPA) has an important and well-defined mission with broad public support. Too often, however, the Agency has sought to strengthen its position by aligning itself with politically powerful rent-seeking interests. There are numerous examples—most recently, the use of the renewable fuels standards to subsidize ethanol refiners and related agricultural interests. My wish for the Agency on its fiftieth birthday is that it stays focused on its own mission and remembers that old adage: “Dilution is not the solution to pollution.”
November 19, 2019 | By: Brian F. Mannix
Part I of this paper compares and contrasts a simple carbon tax, a rebated carbon tax, and an output-compensated carbon tax, using the electric power industry to illustrate the differences. Part II of the paper explains the mathematical duality between those three price instruments and their corresponding quantity instruments: auctioned cap-and-trade and allocated cap-and-trade, both of which impose a constraint on the quantity of emissions, and emissions-rate-cap-and-trade (also called offset trading), which imposes a constraint on the emission-intensiveness of industrial output. Keeping in mind the properties of compensated demand curves, Part III of the paper argues that the mathematical form of their regulatory constraints can help explain many of the typical differences between economic and social regulation – including the tendency of economic regulatory agencies to be multi-headed “independent” agencies, their inclination to use more adjudication and formal rulemaking than is typical of social regulators, and their troubling susceptibility to agency capture.
September 17, 2019 | By: Susan E. Dudley, Daniel R. Pérez, Brian F. Mannix, & Christopher Carrigan
Policymakers face demands to act today to protect against a wide range of future risks, and to do so without impeding economic growth. Yet traditional analytical tools may not be adequate to frame the relevant uncertainties and tradeoffs. Challenges such as climate change, nuclear war, and widespread natural disasters don't lend themselves to decision rules designed for discrete policy questions and marginal analyses. We refer to such issues as "uncertain futures."
September 12, 2019 | By: Brian F. Mannix & Bridget C.E. Dooling
In this article we focus on the executive’s authority to write a cross-government “rule-on-rules” to govern regulatory analysis, including benefit-cost analysis and the courts’ authority to enforce such a rule.
January 22, 2019 | By: Susan E. Dudley & Brian F. Mannix
Across developed countries, benefit-cost analysis (BCA) is the principal public policy tool for laying out available information in a way that allows policy makers to make balanced, efficient regulatory decisions in the face of limited resources. However, BCA has limitations. This article examines the institutional and technical factors limiting the use of BCA as a tool for improving regulatory policy and offers some recommendations for reducing those barriers.
August 06, 2018 | By: Brian F. Mannix
Benefit-cost analysis (BCA) continues to be the principal tool used by American presidents to guide the discretionary decisions of regulatory agencies under their supervision, and increasingly it is viewed by the courts as an important consideration for agencies to take into account in justifying their regulatory decisions. This paper argues that BCA is properly viewed, not simply as a technocratic planning tool, but as a solution to a principal-agent problem. Specifically, it is intended to test whether an agency can demonstrate that it is acting in the public interest. Viewed in this light, some common analytical practices used by regulatory agencies become questionable. A BCA should not, for example, use an assumption that consumers are irrational to support a claim that coercive regulation is making them better off. Consumer sovereignty is axiomatic in BCA, and an agency that uses BCA to justify its actions must accept individuals’ judgments about their own welfare.
August 2, 2017 | By: S. Dudley, R. Belzer, G. Blomquist, T. Brennan, C. Carrigan, J. Cordes, L. Cox, A. Fraas, J. Graham, G. Gray, J. Hammitt, K. Krutilla, P. Linquiti, R. Lutter, B. Mannix, S. Shapiro, A. Smith, W. .Viscusi & R. Zerbe in the Journal of Benefit-Cost Analysis
Regulatory impact analyses (RIAs) weigh the benefits of regulations against the burdens they impose and are invaluable tools for informing decision makers. We offer 10 tips for nonspecialist policymakers and interested stakeholders who will be reading RIAs as consumers.
May 13, 2015 | By: Brian F. Mannix & Susan E. 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.
January 03, 2013 | By: Brian F. 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.
March 12, 2012 | By: Brian F. 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.
August 3, 2020 | By: Brian F. Mannix
Research professor Mannix's comment focuses on three aspects of the NPRM. Part I responds to EPA’s question about the legal authority for the NPRM, and suggests that the agency examine several broader sources of authority in addition to the CAA. Part II affirms the general principle that EPA should consider – consistent with the agency’s legal jurisdiction – the full range of benefits and costs that flow from its decisions, and it points out some of the “boundary drawing” challenges, including co-benefits, that can distort the results of a BCA. Part III explores a longstanding problem with the way discounting is done in Regulatory Impact Analysis, and proposes a correction. The discounting problem originates in OMB Circular A-4; but, while it is doing housekeeping on its BCA procedures, EPA should take this opportunity to engage with OMB and try to correct it.
February 20, 2020 | By: Brian F. Mannix
This public interest comment begins by making some general observations about the use of Marginal Excess Tax Burden in the context of budgetary, tax, and regulatory policy. It then offers responses to the eight specific questions listed in the OMB notice.
March 07, 2019 | By: Brian F. Mannix
The House Committee on Energy and Commerce, Subcommittee on Energy held a hearing titled, "Wasted Energy: DOE's Inaction on Efficiency Standards and Its Impact on Consumers and the Climate." Research Professor Brian Mannix submitted a written statement on the 40 year history of appliance efficiency standards, and why analysis dating back to the Carter administration is still relevant today.
October 31, 2018 | By: Brian F. Mannix
The proposed “Affordable Clean Energy” (ACE) rule rests on a stronger legal foundation and a sounder economic analysis than the stayed Clean Power Plan (CPP). In particular, the choice of a “best system of emissions reduction” (BSER) based on heat-rate efficiency, a measure of CO2 intensity, is much more consistent with the Clean Air Act than was the CPP’s statewide budget approach, as is the decision to use domestic benefits to justify the rule. The proposed reforms to section 111(d) procedures and to the New Source Review criteria are both important and stand on their own right.
August 20, 2018 | By: Brian F. Mannix
In this comment, Mannix explores the reasons why the Council on Environmental Quality might choose to conduct a rulemaking on the general topic of how it considers benefits and costs, reviews some of the legal considerations that should be brought to bear on that effort, and recommends that the administration consider encouraging this type of activity in other agencies.
August 13, 2018 | By: Brian F. Mannix
This comment begins by exploring the reasons why EPA might choose to conduct a rulemaking on the general topic of how it considers benefits and costs, and then discusses some of the legal considerations that should be brought to bear on the effort.
April 27, 2018 | By: Brian F. Mannix
The EPA has proposed to repeal the greenhouse gas (GHG) emissions guidelines for electric generating units issued on October 23, 2015—better known as the Clean Power Plan (CPP). The Agency has also sought comment separately on what, if anything, ought to replace it. This comment, often drawing on earlier comments, will focus on the Regulatory Impact Analysis (RIA) that supported EPA’s 2015 CPP final rule, and outlines those areas where the agency made major errors in the 2015 RIA, and where it could go further to improve the analysis.
April 09, 2018 | By: Brian F. Mannix, Sofie E. Miller, & Susan E. Dudley
The George Washington University Regulatory Studies Center improves regulatory policy through research, education, and outreach. As part of its mission, the GW Regulatory Studies Center conducts careful and independent analyses to assess rulemaking proposals from the perspective of the public interest. This comment on the Office of Management and Budget’s 2017 Draft Report to Congress offers suggestions for improving the information value of the Report, as well as the evidence on which regulatory policies depend, and does not represent the views of any particular affected party or special interest.
February 27, 2018 | By: Brian F. Mannix
Mannix recommends four features that the agency should incorporate into a possible replacement for the agency’s Clean Power Plan. First, the agency should set standards for CO2 intensity, rather than a mass-based cap on CO2 emissions. Second, the standards should be tiered by technology. Third, the agency should allow trading of CO2 credits, both within and across technology categories. Fourth, the agency should incorporate a safety valve mechanism that keeps the price of CO2 credits commensurate with the domestic social cost of carbon. Such a rule could function as a “last-ton tax,” with many of the economic efficiencies of a carbon tax, but without exceeding the boundaries of EPA’s regulatory authority.
February 13, 2017 | By: Susan E. Dudley, Brian F. Mannix, Sofie E. Miller, & Daniel R. Pérez
In this comment on the Office of Information and Regulatory Affairs’ (OIRA) interim guidance on Executive Order 13771, GW Regulatory Studies Center scholars acknowledge that the Order represents a significant departure from past practice, however, they emphasize that the additional budgeting constraints it imposes need not supplant longstanding requirements to examine regulatory benefits as well as costs and to achieve regulatory objectives as cost-effectively as possible. The comment reinforces OIRA’s draft questions and answers, and offers some suggestions for clarification and improvement.
May 12, 2016 | By: Sofie E. Miller, Daniel R. Pérez, Susan E. Dudley & Brian F. Mannix
This public comment suggests several areas of regulatory policy where federal regulations have hindered, rather than helped, competition, and recommends that agencies take this opportunity to reduce these regulatory barriers to competition.
March 07, 2016 | By: Brian F. Mannix
The EPA has presented its Environmental Economics Advisory Committee a series of questions that relate to an analytical procedure for estimating the value of statistical lives saved in the future – possibly the distant future – as a result of regulations imposed today. Intertwined with the detailed analytical questions, however, is a fundamental ethical and methodological question: Is it right to force a relatively poor population to pay an inflated price – higher than they are willing to pay to save their own lives – to save the lives of a richer population, on the theory that rich people’s lives are more valuable?
November 19, 2015 | By: Brian F. Mannix
This Public Interest Comment, filed last year in response to EPA’s proposed Clean Power Plan, addresses the relative merits of a “mass-based” or “rate-based” emissions trading program in state plans required by EPA’s rule. This same question has arisen again in the context of EPA’s development of Federal Implementation Plans (FIPs) that might be imposed on noncomplying states. The comment (which has now been filed in the FIP rulemaking) concludes that a rate-based trading program, similar to the EPA’s successful program for trading lead in gasoline in the 1980s, has compelling advantages over a mass-based program.
October 02, 2015 | By: Brian F. Mannix
Contrary to claims, EPA and NHTSA’s proposed standards to regulate greenhouse gas emissions and fuel efficiency for medium and heavy-duty engines and vehicles is not “a win-win-win.” The agencies’ RIA forecasts large benefits, mostly in the form of private fuel savings but, fails to recognize that competitive markets are far better informed, and far better motivated, to pursue these fuel savings efficiently. The net effect will be higher costs, not savings. Other external benefits might be used to justify the standards, but an honest RIA would acknowledge that these come at a price.
December 02, 2014 | By: Brian F. Mannix
EPA has proposed state-by-state carbon-intensity targets for electricity generation. Several states and other parties have asked EPA to convert these intensity targets into "mass-based" targets – i.e., carbon caps that could be used in cap-and-trade programs. RSC Visiting Scholar Brian Mannix argues that this would be a mistake; emissions trading can work well under an intensity constraint, and would be far more resistant to rent-seeking than would a cap-and-trade program.
February 26, 2014 | By: Susan E. Dudley & Brian Mannix
This comment endorses the administration’s effort to arrive at a uniform SCC, to help ensure internal consistency across a portfolio of policies directed at reducing carbon emissions. However, it raises concerns that the task of estimating the SCC was undertaken with an apparent bias that needs to be corrected before it can be taken as objective.
October 1, 2020 | By: Brian F. Mannix
At 50 years old, the EPA is the focus of some bitter controversies, but the nature of its mission should be something that unites us far more than it divides us. Brian Mannix reflects on the papers from a symposium on the agency held last year at Case Western Reserve University, and suggests some of the ways that strident advocacy in the public arena can distort our thinking about how best to solve problems.
August 6, 2020 | By: Brian F. Mannix
OMB’s guidance on regulatory analysis directs agencies to evaluate regulatory benefits and costs using two standard discount rates, 3 percent and 7 percent, but it gives little insight on how to use them other than to try both. The initial draft of OMB’s first such guidance, published in 1988, did include specific instructions on how to use two rates simultaneously, but those instructions were deleted in the editing process. This Regulatory Insight recreates those original instructions, and explains how they help to resolve many misunderstandings about discounting that have developed since then.
June 22, 2020 | By: Brian F. Mannix
EPA is simultaneously pursuing two related initiatives: a revision of its longstanding Guidelines for Economic Analysis, and an NPRM on the use of such analyses in rulemakings under the Clean Air Act. Meanwhile, CEQ has been making major revisions to its regulations governing NEPA for all federal agencies, but the president just signed an Executive Order telling agencies to try to work around NEPA. What’s going on? Part II of this two part commentary looks at NEPA.
June 17, 2020 | By: Brian F. Mannix
EPA is simultaneously pursuing two related initiatives: a revision of its longstanding Guidelines for Economic Analysis, and an NPRM on the use of such analyses in rulemakings under the Clean Air Act. Meanwhile, CEQ has been making major revisions to its regulations governing NEPA for all federal agencies, but the p resident just signed an Executive Order telling agencies to try to work around NEPA. What’s going on? Part I of this two part commentary looks at EPA.
November 06, 2019 | By: Brian F. Mannix
The proposed Environmental Appeals Board reforms will provide a faster path to a final EPA decision, so that applicants can either live with it or challenge it in court, but in either case they will not be stuck in administrative limbo.
July 31, 2019 | By: Brian F. Mannix
The Environmental Protection Agency (EPA) recently issued three final regulatory actions governing greenhouse gas emissions from electric power plants. These rules will face new legal challenges based on both the economic analysis and the statutory authority for EPA’s actions. Mannix briefly reviews some of the major issues likely to be in contention.
December 12, 2018 | By: Brian F. Mannix
In reaching its unanimous decision last month that the Fish and Wildlife Service had overreached in designating “critical habitat” for the endangered Dusky Gopher Frog, the Supreme Court dodged an important question that Justice Alito had posed during oral argument: Who should pay for the preservation of this public good?
June 07, 2017 | By: Brian F. Mannix
At their onset, and sometimes well beyond that, radical technological breakthroughs can present difficult public policy dilemmas. Emerging technologies are, by definition, full of surprises: there are developments that we cannot fully anticipate, and may include some bad outcomes as well as good ones. In this commentary, Mannix weighs in on the challenges of regulating in a technologically innovative society and provides helpful insight as to how agencies can regulate effectively without impeding innovation.
April 04, 2017 | By: Brian F. Mannix
President Trump’s Executive Order 13771, "Reducing Regulation and Controlling Regulatory Costs," has caused some confusion among the analysts, inside and outside federal agencies, who forecast the economic effects of regulations. Which effects should count as costs and which as benefits? It sounds like it should be an easy question, but it is not. In this Regulatory Insight, Brian Mannix examines some of the obstacles.
June 22, 2016 | By: Brian F. Mannix
After a lengthy and rancorous public comment period, the SEC on Friday did the right thing in approving the application of IEX to become a full-fledged stock exchange. The use of brief delays, such as IEX’s deterministic delay, promises to improve the economic efficiency of financial trading. The Commission also did the right thing in committing to study developments over the next two years. While the internal logic of the IEX exchange is straightforward, the interactions among 13 stock exchanges, each with a different microstructure and timing, will inevitably be complex. The SEC will need to bring additional expertise to bear on the problem of market microstructure.
March 14, 2016 | By: Brian F. Mannix
The EPA has asked its Environmental Economics Advisory Committee for advice on how the Agency should adjust the value of statistical lives (VSL) in the future. Incomes are expected to grow, and people with higher incomes tend to place a higher value on measures to reduce their own mortality risks. Does this mean that a benefit-cost analysis should place greater weight on lives saved in the future than it does on those saved today? In comments filed with the Committee and summarized here, Mannix argues that this is more than just a question of analytical technique.
February 10, 2016 | By: Brian F. Mannix
Albert Einstein’s theory of special relativity offers important insights for understanding the physical constraints that shape the microstructure of today’s financial markets. We need to be wary of applying overly simplistic models of how an ideal market should operate, when market data and orders are traveling at speeds approaching the speed of light. Economic concepts like the Efficient Markets Hypothesis – in an efficient market prices will “instantaneously” incorporate all available information – must be tempered by an understanding of the nature of space and time.
January 06, 2016 | By: Brian F. Mannix
Executive Order 12866 requires benefit-cost analyses for all regulations; in many cases these economic analyses rely upon risk assessment for critical inputs. Usually this is not a problem; in principle, risk assessment and benefit-cost analysis are perfectly compatible. But benefit-cost analysis and chemical risk assessment have not had a happy history together. The problem can be traced to some specific practices that historically have characterized chemical risk assessments, and that are widely accepted within that community.
October 08, 2015 | By: Brian F. 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.
June 17, 2015 | By: Brian F. Mannix
The spirited Point-Counterpoint debate between Cass Sunstein & Hunt Allcott and Mannix & Dudley argued the question of using “internalities” (aka “private benefits”) to justify government regulation of energy efficiency in appliances. In this commentary, Mannix argues that the model espoused by Sunstein and Allcott only works because it assumes there are no rational consumers, giving the government a monopoly on rationality.
August 26, 2014 | By: Brian F. Mannix
An interesting new paper from the Mercatus Center, “The Legacy of the Council on Wage and Price Stability”, takes an instructive look back at the origins of centralized review of federal regulations. While the President has always had the authority to supervise executive branch regulatory actions, there were few formal procedures, and no dedicated professional staff within the Executive Office of the President, until the creation of the Council on Wage and Price Stability (CWPS) in 1974.
April 14, 2014 | By: Brian F. Mannix
In this commentary, Mannix concludes that randomizing buffers, and other technical improvements that mitigate high-frequency trading, will emerge and compete successfully such that regulation is unnecessary.