MERCATUS CENTER AT GEORGE MASON UNIVERSITY 3
BEST AND WORST PRACTICESBest Practice: Any Use o Analysis
In 2011, the
Department of Justice (DOJ) proposeda regulation intended to reduce incidence of rape in America’s prisons. The regulation emerged as a resultof the Prison Rape Elimination Act of 2003. The leg-islation established a commission to study the effectsof prison rape and to recommend improvements toprevent it. The law also mandated that the DOJ avoidnational standards “that would impose substantial addi-tional costs compared to the costs presently expended by Federal, State, and local prison authorities.”
Thedepartment commissioned an independent contractorto perform a cost analysis of the commission’s recom-mended standards.In the RIA for the rule,
DOJ did not estimate how muchits proposed standards would reduce prison rape. How-ever, the department performed a breakeven analysisthat began by estimating the value to society of reducing the prevalence of prison rape and sexual abuse by 1 per-cent. The department did this by estimating the mon-etary benet of avoiding prison rape, a number deter-mined by consulting relevant literature on the
of prison rape. Costs of the proposed regulation were thencompared to theoretical reductions in order to deter-mine what level of reduction would justify the costs. As a result of the breakeven analysis, DOJ estimatedthe standards would only have to yield a small percentreduction from the baseline level of prison rape in any given year, without even considering benets that wereunquantiable, in order to justify the regulation. DOJfound its proposal to be more cost-effective than thecommission’s recommendations, for which the agency also did a cost-effectiveness analysis. While analysisof net benets was absent in the RIA, the agency stillmade good use of the information it had available andclearly referenced the economic analysis as a reason formodifying some of the commission’s recommendationsto carry out the law’s directives.
Best Practice: Maximizing Net Benefts
Also in 2011,
the Department of Transportation issueda regulation mandating use of electronic on-boardrecorders on commercial motor vehicles. In the RIAfor the rule,
DOT explicitly stated that it chose thealternative that maximized net benets. DOT analyzedthree alternatives against multiple baselines and chosethe alternative that produced the highest net benetsagainst each of the baselines. The rst baseline reectedthe level of noncompliance under current regulations,while the alternative baselines reflected proposalsconsidered under another rule DOT was considering simultaneously.Unfortunately, the range of alternatives consideredwas not very broad, since the alternatives differed only with respect to who is subject to the regulation. Eachoption required the use of electronic on-board record-ers on certain commercial motor vehicles. The optionsonly varied in terms of which vehicles would be subjectto the regulation. Thus, it is not clear if the regulationmaximized net benets compared to all possible alter-natives, but DOT clearly indicated how the net benetcalculations affected the choice among the alternativesthat were considered.
Best Practice: Explaining Factors OtherThan Net Benefts
In 2012, the
Department of Agriculture (USDA) pro-posed a regulation to modernize its system of poultry slaughter inspection. The rulemaking came as a resultof President Obama’s Executive Order 13563 requir-ing executive branch agencies to review existing rules.The goal was to have agencies assess “rules that may beoutmoded, ineffective, insufcient, or excessively bur-densome, and to modify, streamline, expand, or repealthem in accordance with what has been learned.”
Inresponse to this executive order, USDA reviewed itspoultry slaughter inspection system to see if it couldidentify ways to increase efciency and improve safety.Shortly thereafter, USDA completed a qualitativerisk assessment measuring how different inspectionprocedures affect the prevalence of human illnessesassociated with tainted poultry.
USDA determinedthat its resources could be better utilized if it allowedestablishments to sort out more potentially tainted birdsprior to inspections, allowing USDA to concentratemore of its own resources on verifying compliance andsanitation standards.Using information garnered from the risk assessment,USDA conducted a benefit-cost analysis for severalalternative ways of modernizing its poultry inspectionsystem.
One of the striking aspects of this RIA, as dem-onstrated in Table 1 below, is the small difference in the