Grading Estimates of the Benefits and Costs of Federal Regulation

48 Pages Posted: 15 Oct 2006 Last revised: 30 Jan 2014

Date Written: September 1, 2006

Abstract

I review two recent estimates of the costs and, in one case, benefits of federal regulation. The first is found in the Office of Management and Budget's 2005 report to Congress on the benefits and costs of federal regulations (OMB 2005b). OMB estimates annual benefits in 2004 to be $70 to $277 billion and costs to be $34 to $39 billion, but these estimates omit a great deal; the cost estimate, in particular, is generally acknowledged to be an underestimate. The other estimate, written by Mark Crain (Crain 2005) and sponsored by the Small Business Administration, uses a different approach and generates an estimate of $1 trillion. Crain also finds that the burden on small firms is much greater than the burden on large firms. In the final section of the paper, I also review a recent comparison, presented in the 2005 report to Congress, of ex ante and ex post estimates of the benefits and costs of individual regulations. I find the Crain report to be deeply problematic and the OMB's ex ante/ex post comparison slightly less so.

Keywords: regulation, benefits, costs, ex ante, ex post, OMB

JEL Classification: K29, Q58, I18

Suggested Citation

Harrington, Winston, Grading Estimates of the Benefits and Costs of Federal Regulation (September 1, 2006). RFF Discussion Paper No. 06-39, Available at SSRN: https://ssrn.com/abstract=937357 or http://dx.doi.org/10.2139/ssrn.937357

Winston Harrington (Contact Author)

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