Regulatory Impact Analysis
Senior Research Fellow
Mercatus Center at George Mason University
Arlington, Virginia USA
Key Steps in Regulatory Analysis
1. Assess evidence of market failure or other
2. Identify regulatory and non-regulatory
3. Assess benefits of alternatives
4. Assess costs of alternatives
In Plain English …
1. What’s the problem and what caused it?
2. What are the alternative solutions?
3. What will each solution accomplish?
4. What does each solution require us to give
Why Does Analysis of the Problem Matter?
USDA catfish reg. Vs. DOI bird hunting reg.
Why Does Good Benefit Analysis Matter?
FDA proposed animal food rule:
$13-17 million benefits, $87-129 million costs
Apply to pet food only:
$12-15 million benefits, $6-9 million costs
Why Does Good Cost Analysis Matter?
$4.3 billion (2005)
Reduced air travel
Increased waiting time
Increased fatalities due to
substitution from flying to driving
$2.35 billion (2005)
$2.76 billion (2005)
116 individuals (4th
Why Are We Doing This Project?
1) Agency accountability
2) Better analysis likely means better rules
3) Academic research
4) Stakeholder participation
1) Six criteria from E.O. 12866 and Circular A-4
2) Proposed “economically significant” regulations
3) Team of economists
4) Read RIA and entire Federal Register preamble
5) Qualitative evaluation with numerical scores
6) 2008 to present
1. Systemic Problem: How well does the analysis identify
and demonstrate the existence of a market failure or other
systemic problem the regulation is supposed to solve?
2. Alternatives: How well does the analysis identify and
analyze alternative approaches?
3. Benefits (or Other Outcomes): How well does the
analysis identify the benefits or other desired outcomes
and demonstrate that the regulation will achieve them?
Scoring Criteria (cont.)
4. Costs: How well does the analysis assess costs?
5. Use of Analysis: Does the proposed rule or the RIA
present evidence that the agency used the Regulatory
Impact Analysis in any decisions?
6. Cognizance of Net Benefits: Did the agency maximize
net benefits (benefits-costs) or explain why it chose
5 Complete analysis of all or almost all
aspects, with one or more “best
4 Reasonably thorough analysis of
most aspects and/or shows at least
one "best practice"
3 Reasonably thorough analysis of
2 Some relevant discussion with some
documentation of analysis
1 Perfunctory statement with little
explanation or documentation
0 Little or no relevant content
0-5 points each
Total Score: 0-30 points
15.4 points (51%)
Highest Possible Score = 30 points
Best score ever: A
28/30 points (93%)
Average Scores by criterion (2008-2012)
Systemic problem 2.1
Benefits (or other
Use of analysis 2.2
Cognizance of net
* Scores out of 5 possible points
• Little difference in average quality of analysis between
• Lower-quality analysis comes from agencies whose policy
preferences (ideologies) are closer to the administration’s
• “Midnight” regulations and regulations left for the next
administration to finalize have worse analysis
• Agencies are more likely to claim they used an analysis if its
quality is higher
Research findings (cont.)
• Securities and Exchange Commission has worse analysis
than executive branch agencies
• Interim final rules that implement presidential priorities have
worse analysis (early DHS and early ACA)
• Longer OIRA review is associated with higher-quality
• Many proposed regulatory process reforms would likely
generate better analysis
Potential regulatory reforms
• Require Regulatory Impact Analysis by law
• Judicial review
• Quality of analysis
• Was use of analysis explained?
• Require publication of analysis for comment before
proposed regulation is written