On Balance: Taking Benefit-Cost Analysis on the Road

One of the reasons I look forward each year to the annual conference of the Society for Benefit Cost Analysis is connecting with fellow economists who have chosen careers in my specialty, which has evolved to be regulatory policy and analysis. I enjoy sharing and hearing everyone’s war stories and appreciate the advice I receive from those who have “been there, done that” and hope that I add value when I offer the same to new economists working to influence the policy process.


In April, I had the opportunity to engage with other regulatory economists in a very different setting, when I represented the Department of Transportation (DOT) as part of a U.S. delegation to Bogota, Colombia. The purpose of the trip was to inform Colombia’s efforts to implement good regulatory practices by sharing U.S. regulatory experience. In preparing for the trip, I learned that the adoption of good regulatory practices is part of the accession requirements of the Organization of Economic Cooperation and Development (OECD), which Colombia is seeking to join. Also, Colombia recently implemented a mandatory requirement to conduct Regulatory Impact Analysis (RIA) for new regulations and its regulatory agencies are in the early phases of complying with that requirement.

Aside from DOT, other U.S. representatives included regulatory experts from the Department of Agriculture, Department of Commerce, Environmental Protection Agency, the Office of Information and Regulatory Affairs at the Office of Management and Budget (OMB), and the Small Business Administration. The U.S. team conducted a three-day workshop that covered the U.S. regulatory process, its foundations in economic principles, and how we conduct RIAs. Over 160 individuals from Colombian government agencies, industry and consumer groups, and academia attended.

The workshop covered the many facets of the U.S. regulatory process. We set the stage for a detailed discussion of the practice of RIA by describing our institutional framework for regulation and its key pillars, including information quality, public engagement, and transparency. We discussed the roles of Executive Orders and OMB oversight, and how laws like the Administrative Procedure Act have shaped our processes. We then turned to a more technical discussion regarding the economic underpinnings of RIA, covering BCA and distributional analyses, such as the analysis required under the Regulatory Flexibility Act and environmental justice. We reinforced RIA concepts by walking participants through a real-life RIA, EPA’s Formaldehyde in Wood rule, which was finalized in 2016.The audience asked questions about some of the challenges inherent to conducting RIAs, such as remaining objective in a policy environment that might favor a specific result, conducting RIAs under extreme lack of data, and how allowing for and responding to public input and assuring information quality can add months and sometimes years to a rulemaking. The time aspect was one of the issues most commonly raised, specifically how to best balance the time needed to properly conduct RIAs against the extremely tight deadlines that leadership tends to impose. Of course, we could not offer a one-size-fits-all answer to many of these questions as they come with the territory and are part of what keeps the job of a regulatory economist dynamic and interesting. These are stimulating challenges and one reason I encourage new economists to consider a career in policy analysis. Describing the intricacies of a system that has evolved over many decades renewed my appreciation of the rich U.S. history of applying RIA. My belief that our system contributes to better regulatory outcomes was strengthened as we shared supporting examples with our hosts. One colleague described how an affected party previously unknown to his agency offered crucial input during the public comment period at the proposed rule stage that significantly improved the final rule. I found myself speaking fondly of the Paperwork Reduction Act as I recalled the first survey I conducted as a federal employee, and how OMB review indeed improved the survey instrument significantly. We presented an example where the Regulatory Flexibility Analysis served as an impetus to ask Congress to make changes to a law in order to reduce negative economic impacts on small businesses without compromising safety goals. While the U.S. system may seem extremely complex to analysts in a country in the beginning stages of setting up a regulatory structure, a key message we tried to communicate is that the positive outcomes that result from our processes make it well worth the effort. The opportunity to use economics to influence policy positively is the most rewarding aspect of a career as a regulatory economist. I returned to my office in Washington, D.C. fully energized by the experience. I felt a tremendous sense of accomplishment, a feeling I am sure the rest of the U.S. team shared. We conducted a high-quality, informative workshop and fulfilled our mission of offering guidance to Colombian officials as they further develop their regulatory processes. I am grateful that my career offers the privilege of collaborating with talented and committed professionals. Perhaps more importantly, I am reminded that those of us who work in the field of regulatory economics share much more in common than the frustrations that come along with the challenging parts of our jobs. Our collective success stories are what truly makes our careers worthwhile and taking time to appreciate these important contributions is something we do far too infrequently.

This article presents the author’s personal reflections and observations, and the U.S. Department of Transportation has neither approved nor disapproved its content. Any views or opinions expressed are the author’s and should not be considered to represent the official position of the Department of Transportation.

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