This document discusses the challenges faced by economists and policymakers at the US Food and Drug Administration's Center for Food Safety and Applied Nutrition. It outlines the hurdles in estimating costs and benefits for proposed regulations due to data constraints, legal limitations, and uncertainty. It also reviews the requirements for regulatory analysis including assessing baseline practices, quantifying regulatory impacts, and valuing public health outcomes. Economists aim to thoroughly analyze problems and inform decision making, but developing efficient food safety policies is complicated by the many variables involved.

1. Hurdles and Hoops:
Policy and Economics in a Regulatory Agency
Brad Brown, PhD
Lead Economist
and
David Zorn, PhD
Director of Social Sciences
Center for Food Safety and Applied Nutrition
US Food and Drug Administration
Economics of Improved Safety Practices
September 27, 2010

2. Crash Course: Proposed Rule Clearance
Process

3. Crash Course: Final Rule Clearance
Process

4. Requirements for Regulatory Analysis
 Executive Order 12866
 OMB Circular A-4 (guidance for EO 12866)
 Paperwork Reduction Act
 Regulatory Flexibility Act as amended by the
Small Business Regulatory Enforcement and
Fairness Act
 Unfunded Mandates Reform Act

5. Intro: Challenges in Doing Economics
and Making Policy
 Change: It is a big deal
 Emerging issues
 Inherently complicated
 Data constraints
 Legal constraints
 Reservations about CB analysis

6. Change: It Is a Big Deal
 Produce: What we do now
 No routine on-farm inspection
 No specific requirements
 Food cannot be adulterated
 Good Agricultural Practices (GAPs) guidance
 Farms are not registered
 Outbreak investigations typically only performed
on interstate commerce

7. Food is Complicated
 Ubiquitous exposure
 Sheer number of producers
 Multitude of highly varied products
 Even within “fresh produce”, commodity attributes vary widely
 Emerging risks
 Interregional and international – trade effects
 Small vs. big business
 Concentrated production  Number of facilities vs. volume of
production
 Consumer choice
 Rationality?

8. Data: Estimating Costs
 Estimating costs is the “easy” part
 The marginal costs of capital and labor usually available through
standard sources and estimation methods are not controversial.
 Estimating baseline practices is the most difficult step
 Also perhaps the most important
 Necessary information often proprietary
 No single source
 Informal or formal surveys can be unreliable
 An accurate, precise estimate is often impossible to produce
 It is easy to overlook important details
 How do you clean a layer house in the middle of winter in North
Dakota?

9. Data: Estimating Benefits
 Estimating the baseline burden of illness is not the hard part…
 Surveillance methods have come a long way, but…
 Attribution and the extent of under reporting is still difficult to estimate
accurately and precisely
 Science necessary to quantify marginal benefits of regulation is
often very uncertain
 Emerging issues will have very little developed scientific study
 Lab results do no necessarily translate to the field
 Complimentary effects are extremely difficult to disaggregate, even
with rigorous study.
 No consensus on the “correct” valuation metric for illness and
mortality
 Absolutely necessary to compare alternative policies
 Cost of illness
 Willingness to pay
 Quality adjusted life years

10. Legal Constraints on Regulatory Options
 First Amendment
 Legal limitations and precedent: Bioterrorism
regulations
 Language in congressional bills
 Unclear what the impact of yet to be ratified bills
will be

11. Economics? Who Invited You?
Cost Effectiveness of Safety, Toxin Control, and Other Regulations
Source: Hahn and Tetlock (2007), who updated from Morral (2003)

12. What is Wrong With This Picture?
 It is an implied measurement of the
unobservable:
 Efficiency of regulation
 Across time
 Across regulations
 For a true measure of the benefit of economic
analyses, we need to observe what happens
during the rulemaking process
 Example –The Egg Rule

13. What Makes a Good Analysis
 Public health problem defined
 baseline impact of hazard
 baseline practices that potentially contribute to or mitigate the
problem
 Why regulation is the best way to address the problem
 Regulatory options for addressing the problem
 Taking into account other regulations
 Specific changes in behavior of all affected
 Costs of changes in behavior
 Effectiveness of changes in behavior
 Value of the reduction in the public health problem
 Quantified estimates where possible
 Variability and uncertainty in estimates

14. Take Away Points
 Developing sound, efficient, science based
policy is no easy task
 Economists are trained to analyze a prblem
from every angle.
 Seek out and synthesize relevant data to inform
decision making
 Ask difficult questions
 Point out constraints in the optimization problem
 “What do we get for that?”

15. Contact Information
Brad Brown
Bradley.Brown@fda.hhs.gov
301-436-1551
David Zorn
David.Zorn@fda.hhs.gov
301-436-1825

16. Questions?