Modernizing Regulatory Review, a Presidential memorandum published January 20, 2021, serves as a preface to the regulatory policies of the Biden Administration. As such, the memorandum complements three executive orders (E.O 13993: Revocation of Certain Executive Orders Concerning Federal Regulation; E.O. 13990: Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis; and E.O. 13979: Ensuring Democratic Accountability in Agency Rulemaking) that collectively rescind the previous administration’s regulatory policy. The regulatory policy foreshadowed in the memorandum and other documents, however, goes beyond rescinding the Trump administration’s program or restoring previous regulatory regimes.

Modernizing Regulatory Review calls for “improving and modernizing” regulatory review. Regulatory review includes, among other things, the benefit-cost and other analyses that Executive Order 12866 (Regulatory Planning and Review) requires for all significant executive branch regulations; agencies include these analyses in the Regulatory Impact Analyses or Economic Analyses reviewed by the Office of Information and Regulatory Affairs. Regulatory review as now practiced has been in place for 28 years, although there have been occasional hiccups, such as in the last administration when -- most notably -- E.O. 13771 made regulatory costs primary and created new regulatory categories in parallel to existing measures.

The memorandum calls for reform because it finds current regulatory review deeply flawed: “When carried out properly, [regulatory review] can help to advance regulatory policies that improve the lives of the American people.” Regulatory review could of course be done better; benefit-cost analyses do not always follow best practices (Farrow and Viscusi 2011), and the assessment of distributional effects is often spotty.

What is important cannot be measured?
According to a famous expression¹, the most important things cannot be measured. This seemed also to be true for biodiversity in cost-benefit analysis, in particular for the impact on non-economic benefits of biodiversity. However, this is not true anymore, as for over a decade in the Netherlands a methodology known as biodiversity points is being applied for this purpose (see Bos and Ruijs, 2021). Biodiversity points are quite similar to the quality-adjusted life years (QALY) used for cost-effectiveness analysis of health care treatments. Biodiversity points provide a quality-adjusted measure of the changes in the quantity of biodiversity. It is not based on the preferences and information of consumers or citizens, but is based in a standardized way on the expert-opinion of ecologists. The unit of measurement is not dollars or euros but is the number of biodiversity points.

For many cost-benefit analyses (CBA), properly assessing the welfare effects of a policy measure on biodiversity is important. This does not only apply to CBA on conservation or stimulation of biodiversity, but also to CBA on other policy areas such as mobility, agriculture and water safety, as the policy measures in these policy areas often have impacts on biodiversity. For example, a new road connecting two cities through a forest is good for mobility but has also impact on the value of biodiversity. The value of the forest for various economic uses may increase due to the reduction in travel time for visitors but the non-use value, e.g. the existence value and the value for future generations of the forest and the biodiversity of its species, may be affected severely by fragmenting the forest and by increasing traffic, pollution and visitors.

The revelations of the Facebook Files have again focused public attention on the spread of misinformation, hate speech and incitement to violence on Facebook. Youths across the globe use Facebook's Instagram and similar platforms to share violent videos. The question inevitably arises if authorities could use these platforms for violence prevention.

Bystander programs represent an established prevention measure. They motivate people to intervene in violent situations and teach the skills for safe and effective intervention. Studies suggest that bystander programs could reduce violent victimization and perpetration. However, face-to-face programs are cost-intensive and difficult to scale. Online programs face the challenge of reaching enough relevant participants. Social media can help on both counts. They allow reaching large audiences at relatively low cost and precisely addressing individuals at risk, i.e. micro-targeting.

This blog series is a partnership of the Society for Benefit-Cost Analysis On Balance blog and Dr. Zoë Plakias’ Spring 2021 Benefit-Cost Analysis (AEDECON 5330) class at The Ohio State University. Students interviewed experts in benefit-cost analysis to learn about what they do and why they do it. All interviews have been edited for brevity and clarity with the help of Dr. Plakias and are shared with the approval of the interviewer and interviewee.

• Expert: Dr. Charles Griffiths
• Interviewer: Katrina Hadley

Dr. Charles Griffiths is a Senior Economist at the U.S. Environmental Protection Agency. He has also taught courses on benefit-cost analysis at Johns Hopkins University and the University of Maryland and served as a Senior Economist for Environment, Energy and Natural Resources on the Council of Economic Advisers during the George W. Bush administration.

The views expressed in this interview are those of the interviewee and do not represent the position of the U.S. Environmental Protection Agency (EPA).

Monetizing the impact of regulation in order to weigh its benefits against its costs is comme il faut in the US, see, e.g., a recent blog post by Dan Ackland in On Balance. In Sweden, this is not the case. Three laws govern the requirements for background analyses ahead of regulation in Sweden: National Budget Law, Authority Regulation, and Ordnance on impact assessment in regulation. These stipulate that consideration must be taken of costs to the state budget, and to firms, but not to individual citizens or the society as a whole. As a consequence, if a benefit-cost analysis (BCA) is conducted ahead of environmental, energy, and climate policymaking (a big if), it is often of a very poor quality (Swedish Environmental Protection Agency, 2020; Hammes, Nerhagen, & Fors, 2021).

Since the 1970s, Swedish politicians and government agencies love to view the country as a forerunner in environmental policy. Politicians regularly set goals, such as reducing the greenhouse gas emissions from transport by 70 percent by 2030 compared to 2010 levels, meeting water-quality requirements even in waters that naturally don’t meet them, and being carbon neutral by 2045 that are very expensive to reach. At the same time, strong industrial interests influence policies, e.g., a vehicle industry that at times wields an undue influence over policy proposals (SOU 2016:33; Hammes, 2014). This has, among other things, led to a car fleet with the highest CO2 emissions in Europe, when domestic industry has been accommodated in the definition of an “environmentally friendly car”. Policy is made by consensus, and the politicians’ self-image is one of being able to weigh different interests against one other in the process – a process, that nevertheless does not contain a formal BCA.

Benefit-cost analysis, as usually practiced, sums the monetary values of effects on individuals. It can be justified by the potential compensation test: if the total monetary gain to the “winners” (those who gain from a policy) exceeds the total monetary loss to the “losers” (those who are harmed), the “winners” could (in principle) pay compensation to the “losers” so that everyone would judge herself better off with the combined policy and compensation than without. The idea is that by summing the net benefits across individuals, BCA measures “efficiency” or the size of the social pie, and that questions about distribution can be evaluated separately. Logically, policies that expand the social pie permit everyone to have a bigger slice; a smaller pie guarantees that at least some people get a smaller slice. 

The separation of efficiency and distribution is illusory: the size of the social pie can depend on the “numéraire” or measuring rod. Ideally, one might wish to measure each person’s slice by how much it contributes to her wellbeing. But without an objective method for comparing increments to wellbeing between people, one must choose a standard for comparison; the numéraire provides that standard.

Over the course of the past few years, there has been greater attention and scrutiny as to the high cost of America’s “Endless Wars” and over the past few months, alarms have sounded at the estimated price tag of $2.313 trillion in treasure and approximate 243,000 in direct lives lost from the War in Afghanistan (2021, Brown University, Watson Institute Costs of War Project) as well as calls for resignations at the collapse of Kabul. Similarly, the question of what were the benefits, if any at all, and the associated and more philosophical question of “Was it Worth it?” are even more difficult to explain and justify. The answer to these questions will be for each individual and generation to ponder, but it is expected that government leaders and policymakers should fully consider and take into account the benefits and costs prior to the declaration of war – not years and certainly not decades after the fact.

SBCA blogs from June 8 and February 25 this year already suggests ideas for revisions to the 2003 OMB Circular A-4 following President Biden’s January 20, 2021 memo on “Modernizing Regulatory Review”. This blog considers and suggests how to revise Circular A-4 specific to foreign policy decisions and the issue of “standing” in Benefit-Cost Analysis (BCA) by 1) addressing impacts on how Americans residing abroad, varying from a few million to several million (Department of State and GAO, 2015) as a demographic not to be ignored, but also 2) examining the BCA impacts to include global impacts and not only to extend to impacts on the global networks and transboundary linkages that affect U.S. residents. The former, in my view, was an obvious, critical population brought to light in the chaotic airlifts of American citizens as well as allies in Afghanistan and the pressures placed on the Department of State Bureaus of Consular Affairs (CA) and Population, Refugees and Migration (PRM), in particular. The proposed revisions would have implications from public policy and foreign policy perspectives in specific ways on interpretation, as explained below.

This blog series is a partnership of the Society for Benefit-Cost Analysis On Balance blog and Dr. Zoë Plakias’ Spring 2021 Benefit-Cost Analysis (AEDECON 5330) class at The Ohio State University. Students interviewed experts in benefit-cost analysis to learn about what they do and why they do it. All interviews have been edited for brevity and clarity with the help of Dr. Plakias and are shared with the approval of the interviewer and interviewee.

• Expert: Dr. James Hammitt
• Interviewer: Loryssa Lake

Dr. James Hammitt is a Professor of Economics and Decision Sciences at Harvard University. He is also the director for the Harvard Center for Risk Analysis and has affiliations with the Harvard University Center for the Environment, Harvard School of Public Health, Harvard Center for Risk Analysis, Harvard Environmental Economics Program, the Harvard China Project, and a joint appointment at the Toulouse School of Economics. 

Q: I know you started in applied mathematics. Is that something that you knew you wanted to get into or did you find out about environmental economics as you were studying?

This blog series is a partnership of the Society for Benefit-Cost Analysis On Balance blog and Dr. Zoë Plakias’ Spring 2021 Benefit-Cost Analysis (AEDECON 5330) class at The Ohio State University. Students interviewed experts in benefit-cost analysis to learn about what they do and why they do it. All interviews have been edited for brevity and clarity with the help of Dr. Plakias and are shared with the approval of the interviewer and interviewee.

• Expert: Dr. Sandra Hoffmann
• Interviewer: Melissa Ferruso

Dr. Sandra Hoffmann is a Senior Economist with the Food Economics Division of the USDA Economic Research Service (ERS). She received her undergraduate education at Iowa State University and went on to earn a J.D. from the University of Michigan Law School. She holds a Ph.D. from the Department of Agricultural and Resource Economics, University of California, Berkeley and an M.A. in Agricultural Economics from the University of Wisconsin-Madison.  She worked on pesticide regulation as an attorney.  She also served on faculty at the University of Wisconsin-Madison and was a research fellow at Resources for the Future before joining USDA Economic Research Service. Most of her work with the USDA concentrates on food safety and on valuation of the health benefits related to public policies. I had the wonderful opportunity to meet with Dr. Hoffmann to discuss her work with the USDA, as well as the career and education paths that brought her to where she is today.

Q: What was your undergraduate degree in, and how did you end up going from there, to studying law, to studying agricultural economics?

This blog series is a partnership of the Society for Benefit-Cost Analysis On Balance blog and Dr. Zoë Plakias’ Spring 2021 Benefit-Cost Analysis (AEDECON 5330) class at The Ohio State University. Students interviewed experts in benefit-cost analysis to learn about what they do and why they do it. All interviews have been edited for brevity and clarity with the help of Dr. Plakias and are shared with the approval of the interviewer and interviewee.

• Expert: Lisa A. Robinson
• Interviewer: Katherine Bowman

Lisa A. Robinson is Deputy Director of the Center for Health Decision Science and Senior Senior Research Scientist at the Center for Health Decision Science and Center for Risk Analysis at the Harvard T.H. Chan School of Public Health. She served as the President of the Society for Benefit-Cost Analysis in 2014.

Q: How did you get interested in benefit-cost analysis?