Three Stages in the Use of Cost-benefit Analysis as a Tool for Evaluating U.S. Regulatory Policy

Abstract

Over the last thirty years a three-stage evolution has taken place in American politics with regard to the use of cost-benefit analysis as a tool for evaluating regulation. During that time, the appeal of costbenefit analysis has shifted from one side of the aisle to the other. In the first stage, in the early 1980s, the Republican Party adopted cost-benefit analysis as a way of constraining regulation. Many progressive groups fought back by rejecting cost-benefit analysis altogether. Several years ago, in a second stage, some progressive groups finally started to speak the language of cost-benefit analysis and it looked like a consensus approach might emerge. But the economic crisis of 2008 has led the way to a third stage in which conservatives, who began to realize that cost-benefit analysis could justify stringent regulation, reframed the debate to one about jobs. The essay argues that, despite pleas to abandon the technique, cost-benefit analysis has proven robust, in part because it provides a common ground where all interests are given weight.