Benefit-Cost Analysis Should Promote Rational Decisionmaking

If you are reading this essay, you probably do not need to be persuaded of the merits of benefit-cost analysis. But it may nonetheless be useful to remember the extended history of this approach to rational decision-making to better evaluate what may or may not be happening now under the Trump Administration. Use of benefit-cost analysis in rulemaking is often traced back to Presidents Richard Nixon, Gerald Ford, and Jimmy Carter, who each had an embryonic form of centralized review that used economic analysis for evaluating regulatory proposals. The election of President Ronald Reagan, who issued Executive Order 12,291 within a month of his inauguration, brought a dramatic change in the role of benefit-cost analysis in regulatory development. The order not only established systematic centralized review for all regulatory actions by executive branch agencies, but it also specified that draft regulatory actions would not be issued unless their potential benefits to society would…

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