Toward a Political Economy of Cost-Benefit Analysis

40 Pages Posted: 6 Nov 2011 Last revised: 25 Jan 2012

Daniel H. Cole

Indiana University Maurer School of Law; Indiana University School of Public and Environmental Affairs; Indiana University Bloomington - Workshop in Political Theory and Policy Analysis

Date Written: November 16, 2011

Abstract

This is a substantially revised, refocused, and updated version of an earlier draft paper, exploring the significant role Cost-Benefit Analysis (CBA) plays in facilitating or impeding legislative and regulatory policy decisions. The paper centers around three case studies of CBAs EPA prepared for: (1) Clinton Administration changes to Clean Air Act air quality standards for ozone and particulate matter; (2) President Obama's recent decision to suspend EPA's reconsideration of the Bush Administration's air quality standard for ozone; and (3) the George W. Bush Administration's "Clear Skies" legislative initiative. The first two case studies demonstrate, between them, how well-constructed CBAs can facilitate social welfare-enhancing and impede welfare-reducing rules, even in cases where explicit consideration of costs is legally prohibited. The third case study tells a more complex story of how CBAs can be manipulated either to promote welfare-reducing regulations or impede welfare-enhancing regulations. When that happens, however, the virtuous transparency of CBAs renders those efforts liable to discovery and disclosure, as in the case of the Bush Administration's failed "Clear Skies" initiative. The paper concludes with an assessment of implications of the case studies for our understanding of the role of CBA in political (both legislative and regulatory) processes, and with a call for more qualitative and quantitative empirical research on the use and abuse of CBA as a political tool.

Keywords: Social costs, Cost-benefit Analysis, Economic Analysis, Environmental Law, EPA

JEL Classification: C7, D61, D7, H43, K23, K32, K33, Q2

Suggested Citation

Cole, Daniel H., Toward a Political Economy of Cost-Benefit Analysis (November 16, 2011). Indiana Legal Studies Research Paper No. 1954892. Available at SSRN: https://ssrn.com/abstract=1954892 or http://dx.doi.org/10.2139/ssrn.1954892

Daniel H. Cole (Contact Author)

Indiana University Maurer School of Law ( email )

211 S. Indiana Avenue
Bloomington, IN 47405
United States

Indiana University School of Public and Environmental Affairs ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Indiana University Bloomington - Workshop in Political Theory and Policy Analysis ( email )

Indiana University Bloomington
Bloomington, IN
United States
(812) 855-4421 (Phone)

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