Quantifying Regulatory Benefits
61 Pages Posted: 19 Apr 2014 Last revised: 26 Jun 2014
Date Written: June 24, 2014
In Nonquantifiable, the 2013 Jorde Lecture at the University of California at Berkeley, Professor Cass Sunstein makes a persuasive argument that administrative agencies should engage in breakeven analysis when they are not able to quantify or monetize some or all of the benefits of a particular regulation. This technique adds useful structure to regulatory decisions that otherwise would appear to be manipulable and arbitrary.
This Comment argues that breakeven analysis is a second-best technique. The most that it can aspire to do is to create upper and lower bounds that provide useful guidance for the evaluation of a benefit. If the range is relatively constrained, breakeven analysis conveys a great deal of useful information. But if the range is large, breakeven analysis might not help much. In some cases, such a range cannot be constructed at all. In others, because of the presence of multiple benefits that have not been quantified, it is not necessarily possible to tease out useful information.
The first-best approach is to actually quantify the benefit. Over the last few decades, a great deal of progress has been made done on this front, and there are important types of benefits that are poised for progress. The categories of quantified and unquantified benefits are therefore not immutable. Instead, they are highly permeable. But the shift from the unquantified to quantified status is not a random one. Instead, it is highly dependent on the government’s role as a funder of private research and as a direct participant in the quantification process. Efforts to bring greater attention to breakeven analysis are salutary, but they must be balanced against the possible adverse impact such efforts might have on the resources and attention the government devotes to quantification.
Keywords: Law and Economics, Regulated Industries and Administrative Law, Environmental, Health, and Safety Law, Agricultural and Natural Resource Economics, General, Government Policy
JEL Classification: K00, K23, K32, Q00, Q30, Q38
Suggested Citation: Suggested Citation