Administrative agencies, courts, and litigants are just coming off two years of intense debates over the legality of agency deregulation through delay. One fascinating development has been how significant cost-benefit analysis has been in these debates. Cost-benefit analysis has formed the basis for several important court losses suffered by the administration. (See Air Alliance 2018; California 2017.) Now agencies have proposed to repeal many big-ticket rules, including the Clean Power Plan, the Clean Water Rule, and vehicle emissions standards. A key question is what role cost-benefit analysis will play in the upcoming legal battles over repeals.

The 2019 Annual Conference and Meeting of the Society for Benefit-Cost Analysis took place March 13-15 at George Washington University’s Marvin Center. The conference was attended by 329 friends of benefit-cost analysis, the largest number of attendees since the first conference in 2008. The attendees were treated to a cornucopia of benefits and costs, eminent speakers, and good conversation.

Since the 1964 Surgeon General’s report linking smoking cigarettes to adverse health outcomes, numerous federal, state, and local governments have passed regulations designed to reduce the prevalence of smoking and related externalities. Examples of such regulations include cigarette taxes, public health campaigns, minimum purchasing ages for tobacco, and – the focus of this post – smoking bans in bars and restaurants. While the links between smoking and health are clear, the effects of these bans on social welfare, which includes other types of risky behavior as well as smoking, are less well understood. This post describes work-in-progress to address some of the gaps. Preliminary results will be presented at the Annual Conference and Meeting of the Society for Benefit-Cost Analysis in March 2019.

There is growing skepticism among both academics and government officials about the benefits of large-scale sport and cultural events. Although Input-Output (IO) has long been the dominant approach to estimating the impacts of these events, the method faces criticism for both its lack of realism and the incompleteness of its results. Consequently, economists have begun to turn to two alternative approaches: computable general equilibrium (CGE) and cost-benefit analysis. These approaches can take into account effects not captured within an IO framework. They also often produce strikingly different results than those obtained using an IO model. This post reports some preliminary results from ongoing research evaluating nearly 60 studies that use cost-benefit methods to evaluate events. More complete results will be presented at the Society for Benefit-Cost Analysis Conference in March 2019.

An IO approach is fundamentally a multiplier approach, converting expenditures (on infrastructure, for example) into gross production in the host city. One limitation is that IO treats expenditures, such as those for infrastructure or by the local population, as fully additional; since this approach does not take account of substitution (i.e., that these resources have been diverted from other uses), it may overstate the favorable economic impact of an event. Another concern is IO’s focus only on gross domestic product and other related impacts, rather than on welfare, which also recognizes externalities and opportunity costs (Massiani 2018).

Fomenting revolution brings to mind crowds storming the barricades, not analysts struggling to debug a spreadsheet or craft a clear sentence. Yet in his book, The Cost-Benefit Revolution, Cass Sunstein (Robert Walmsley University Professor, Harvard Law School) argues that benefit-cost analysts are doing exactly that. The barricades we surmount are decision-making errors resulting from overreliance on intuition and emotion, our weapons are science and economics, and our achievements are better policies.

Since 2010, I have been a practitioner of practical benefit-cost analysis at Environment and Climate Change Canada (ECCC), working with colleagues to inform policymakers and stakeholders about the likely impacts of proposed federal environmental regulations. I would like to examine a key issue in developing estimates of the benefits and costs of these regulations: the development of the baseline in a benefit-cost analysis.

The Congressional Budget Office (CBO) plays an important role in the federal legislative process. CBO’s score on a given bill—that is, its estimate of how it would affect the federal budget deficit—can determine whether Congress decides to go forward with the bill, modify it to get a more favorable estimate, or simply drop it. Given their importance, debates over CBO’s scores and the methods they use to produce them can be as controversial as the bills that are being considered. While this controversy can be politically motivated (with advocates on either side of an issue arguing for a score that is more favorable to their position), it also stems from limited understanding of CBO’s intended role in the process—and reflects the difficulty of conducting analyses of benefits and costs in the context of policy decisions.

If you had billions of dollars to make the world a better place, and could spend it however you wanted, how would you maximize your impact? This is not just a thought experiment, but a daily concern for the world’s governments, philanthropists, and multilateral institutions. Since 2004, Copenhagen Consensus has been using cost-benefit analysis to help decision makers identify highly effective interventions. While most cost-benefit analysis seeks the best solution for a single problem, Copenhagen Consensus takes a wider view, looking across all major domains for policies that improve social welfare.

Gothenburg, Sweden hosted the 2018 World Congress for Environmental and Resource Economists, which met from June 25-29, 2018. The five-day conference was held at the School of Business, Economics, and Law, which is part of the University of Gothenburg. The conference was made possible by the joint effort of three major economics associations: the Association of Environmental and Resource Economists (AERE), the East Asian AERE (EAAERE), and the European AERE (EAERE).

Under the 1990 Clean Air Act Amendments, the U.S. Environmental Protection Agency (EPA) was required to establish standards limiting air toxics emissions from industrial plants. An article in the latest issue of the Journal of Benefit Cost Analysis  (JBCA), “Retrospective Analyses Are Hard: A Cautionary Tale from EPA's Air Toxics Regulations,” takes a retrospective look at 5 of the largest rules issued by EPA in the initial round of air toxics rulemaking over the period 1995 to 2000. For the rules examined, our estimates suggest mixed results, in terms of the reductions in emissions that were achieved. However, our efforts during the project also reinforce the difficulty of obtaining adequate plant emissions data, even where there is an established database--in this case, the Toxic Release Inventory (TRI).