If Cost-Benefit Analysis is Good, Is More Cost-Benefit Analysis Always Better?

by Daniel Farber

October 26, 2011

Cross-posted from Legal Planet.

Of course, not everyone agrees that CBA is good in the first place.  It remains anathema to many environmentalists.  My own view is that it can be a useful tool so long as its limitations are clearly understood.

But just because something is good doesn’t mean that more is better.  My grandmother’s view was that if a recipe called for two eggs and one tablespoon of butter, four eggs and two tablespoons would produce an even tastier result — a theory that did not always prove valid.  Sometimes, you really just need two eggs!

The same is true of cost-benefit analysis.  There are a number of proposals in Congress to expand cost-benefit analysis to cover many additional regulations.  A very thoughtful analysis from the Congressional Research Service points out that these proposals may not themselves pass a cost-benefit analysis:

Although there is no “typical” cost-benefit analysis (just as there is no “typical” rule), the cost of conducting many individual regulatory analyses has been in the hundreds of thousandsof dollars.  If more agencies are required to prepare more detailed analyses for more rules, it is unclear how the agencies will be able to do so without more resources. As noted earlier in this report, if agencies are required to prepare cost-benefit analyses for rules that are not expected to be controversial and are unlikely to be improved as a result of the analysis, that type of requirement itself may not pass a cost-benefit test.

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Daniel A. Farber is the Sho Sato Professor of Law, Director of the California Center for Environmental Law and Policy, and Chair, Energy & Resources Group, University of California, Berkeley.

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