From: The Regulatory Review
Regulatory benefit-cost analysis should account for people’s welfare, not just empirical data.
***
In more recent years, there is another area where theory has taken a backseat to empirical measurement: namely, the theory behind benefit-cost analysis (BCA). BCA intends to predict how regulations and other public policies impact society for better or worse. Conspicuously missing from BCA, however, is the necessary theory connecting whatever BCA is measuring to the well-being of actual people.
***
BCA has been a fundamental part of the regulatory process in the U.S. federal government since the early 1980s. Executive Order 12,866, which governs the U.S. regulatory analysis and review process has just enjoyed its 25th anniversary. The government’s benefit-cost watchdog, the Office of Information and Regulatory Affairs, has existed for nearly 40 years.