Breaking Bad? The Uneasy Case for Regulatory Breakeven Analysis

20 Pages Posted: 30 Apr 2014  

Daniel A. Farber

University of California, Berkeley - School of Law

Date Written: April 28, 2014

Abstract

Assessing regulatory benefits is crucial to cost-benefit analysis. And yet, quantification can be problematic, either because of the nature of the benefit themselves or because of uncertainty about achieving them. In such situations, Cass Sunstein calls for the use of a breakeven analysis based on a judgment about whether regulatory benefits are at least as high as costs.

Even assuming that cost-benefit analysis is the best way of making decisions when benefits can be readily quantified, breakeven analysis may or may not be the right approach when quantification is difficult. Instead, depending on the causes of the difficulty, we might want either to revert to more qualitative methods of decision-making or to move beyond breakeven analysis into more rigorous methodologies. Thus, the case for breakeven analysis remains unproven.

Keywords: cost-benefit analysis, unquantifiable benefits, ambiguity, uncertainty

JEL Classification: H43, I18, K23, K32, Q25

Suggested Citation

Farber, Daniel A., Breaking Bad? The Uneasy Case for Regulatory Breakeven Analysis (April 28, 2014). Available at SSRN: https://ssrn.com/abstract=2430263 or http://dx.doi.org/10.2139/ssrn.2430263

Daniel A. Farber (Contact Author)

University of California, Berkeley - School of Law ( email )

Boalt Hall
Room 894
Berkeley, CA 94720-7200
United States
510-642-0340 (Phone)
510-642-3728 (Fax)

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