Toward a Political Economy of Cost-Benefit Analysis

This is a substantially revised, refocused, and updated version of an earlier draft paper, exploring the significant role Cost-Benefit Analysis (CBA) plays in facilitating or impeding legislative and regulatory policy decisions. The paper centers around three case studies of CBAs EPA prepared for: (1) Clinton Administration changes to Clean Air Act air quality standards for ozone and particulate matter; (2) President Obama's recent decision to suspend EPA's reconsideration of the Bush Administration's air quality standard for ozone; and (3) the George W. Bush Administration's "Clear Skies" legislative initiative. The first two case studies demonstrate, between them, how well-constructed CBAs can facilitate social welfare-enhancing and impede welfare-reducing rules, even in cases where explicit consideration of costs is legally prohibited. The third case study tells a more complex story of how CBAs can be manipulated either to promote welfare-reducing regulations or impede welfare-enhancing regulations. When that happens, however, the virtuous transparency of CBAs renders those efforts liable to discovery and disclosure, as in the case of the Bush Administration's failed "Clear Skies" initiative. The paper concludes with an assessment of implications of the case studies for our understanding of the role of CBA in political (both legislative and regulatory) processes, and with a call for more qualitative and quantitative empirical research on the use and abuse of CBA as a political tool