March 20, 2018

Five Steps to Improve Decision-Making at Independent Regulatory Agencies

Jerry Ellig

Senior Research Fellow

Not all regulatory agencies are designed in the same way. Many independent regulatory agencies lack some of the basic decision-making processes that executive branch agencies (like the Environmental Protection Agency) use.

Why it matters: Like any important decision, implementing regulations involves a number of trade-offs, and the right institutional safeguards can ensure regulators are focused on solving real problems at reasonable costs.

How regulators can do a better job

  • Avoid “ready-fire-aim” rulemaking, in which decisions are made first, and then economists are expected to produce a benefit-cost analysis that supports those decisions. 
  • Ensure the independence of economists (and other analysts) and give them incentives to conduct objective analysis. For example, have economists work in a separate office or bureau, and make sure they are not supervised by the policy staff who write the regulations that the economists will evaluate. 
  • Establish agency-wide standards for regulatory impact analysis that outline the topics that the analysis must cover and establish expectations for quality. 
  • Explain how the economic analysis affected decisions about the regulation. 
  • Invite the Office of Information and Regulatory Affairs to review the regulations and the accompanying analysis, just as it does for executive branch regulations. 

Read more: Why and How Independent Agencies Should Conduct Regulatory Impact Analysis