July 1, 2019

The Mighty Waves of Regulatory Reform: Regulatory Budgets and the Future of Cost-Benefit Analysis

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In the past 70 or 80 years, there have been what might be called three “waves” of reforms to the process of creating and managing US federal regulations. The first wave began in 1946 with the passage of the federal Administrative Procedure Act, after which states went on to pass and formalize their own administrative procedures. The second wave began decades later in the mid-1970s, ushering in the era of cost-benefit analysis (CBA) reforms for regulations. This article focuses on the third wave of regulatory reforms that appears to be sweeping the nation currently and includes a prediction as to what the next wave might look like, which turns out to be a return to some unsettled issues from the past. The current wave consists of efforts to manage regulatory output under budget or inventory systems for regulations. States like Virginia and Idaho appear to be making the most significant headway as part of the current wave, although the federal government is engaged in a similar effort. The article next focuses on the future of regulatory reform, predicting that economists will revisit the theoretical foundations of CBA, the analytical tool used to evaluate regulations and their effects. Although academia will need to play a constructive role in this process, the states and federal independent agencies could also play a role by experimenting with regulatory institutions and, indeed, experimenting with different methods and modes of analysis.

A version of this article is forthcoming in the Winter 2019 issue of the Business, Entrepreneurship & Tax Law Review.