Transparency in Agency Cost-Benefit Analysis

Abstract

Cost-benefit analysis (“CBA”) is widely used in agency decisionmaking, summarizing the impacts of an agency’s chosen policy. As agency rulemakings have increased in quantity and importance, there has been renewed interest in improving transparency in decisionmaking, especially with respect to the models and data that underlie CBA. Recent proposals have been highly controversial. At least some of the controversy can be attributed to limited information about the usefulness of this type of transparency.

This Article contributes to this debate by evaluating the current level of transparency in CBA and proposing incremental improvements. First, it suggests a new framework for thinking about transparency in CBA that includes two key dimensions: process transparency and policy transparency. A CBA that scores well on these two dimensions would allow interested parties to scrutinize agency action and hold decisionmakers more accountable. Second, it objectively evaluates the process transparency and policy transparency of a comprehensive set of CBAs for significant rules issued between October 2015 and September 2018. It uses a scorecard methodology, which scores whether a particular CBA met a number of different criteria related to transparency.

The Article finds that many agency CBAs lack basic process transparency, meaning that their creation and role in the decisionmaking process is not clear. In addition, most CBAs continue to lack transparency about policy impacts, often failing to quantify and monetize costs and benefits. Among CBAs that do monetize at least some costs and benefits, most do not make their data, models, and underlying sources readily available online. In light of the results, the Article provides low-cost recommendations for improving transparency in CBA that could do more good than harm. In particular, while models used in the CBA and their inputs should be adequately described and made publicly available, it is premature to require that all underlying data from studies used in the CBA be made available. In line with this incremental approach to improving CBA transparency, we argue that the move toward adopting an “open policy framework” in government policy analysis should consider both the costs and the benefits carefully.

Keywords: policy analysis, Executive Order 13,563, Regulations.gov, cost-benefit analysis, CBA, agency decisionmaking, agency decision making, rulemaking, rule making, agency rulemaking, agency rule making, Affordable Clean Energy, Environmental Protection Agency, EPA, agency transparency

JEL Classification: K23