Red tape is embodied in regulations created by governments. Best practice in regulation is encouraged through Regulatory Impact Assessment (RIA). In Queensland and across the world, governments use RIA to understand the consequences of changing regulations. RIA’s help decision makers do more good than harm. Cost-benefit analysis is an essential part of that framework.
Different jurisdictions have procedural manuals for how to do RIAs. This provides guidance to analysts. But when a RIA presents you with a lot of technical data, how can you as the decision maker be sure the recommended course of action is the best one?
Thankfully a diverse group of experts convened by the George Washington University Regulatory Studies Center has developed some tips to steer you through the RIA issues.
Next time you change some regulations, ask your regulatory analysts these questions:
- Does the RIA identify the core problem (compelling public need) the regulation is intended to address?
- What role do markets play when assessing regulatory policies?
- When are market forces inadequate?
- Are a lot of anecdotal or unrealistic justifications being supplied?
- Is there an objective, policy-neutral evaluation of the relative merits of reasonable alternatives?
- Does the RIA present a reasonable “counterfactual” against which benefits and costs are measured?
- Do totals and averages obscure relevant distinctions and trade-offs?
- Recognize that all estimates involve uncertainty and ask what effect fundamental assumptions, data, and models have on estimates?
- Is there sufficient transparency and objectivity of analytical inputs
- How do projected benefits relate to stated objectives?
- What is the evidence for and against a causal relationship?
- Does the analysis accurately characterize indirect benefits and costs?
- How does the law of diminishing returns affect the analysis?
- What “costs” are actually being considered?
- When are compliance costs an insufficient proxy for opportunity cost?
- Are estimated marginal costs increasing?
- How are benefits and costs being distributed?
- Are the benefits and costs are presented symmetrically?
Lytton Advisory provides cost-benefit analysis services to support regulatory impact assessment processes that address many of these questions. Contact us today to find out more.