I have never agreed with those in the environmental community who are opposed to cost-benefit and cost-effectiveness analysis. Cost-effectiveness analysis just seems a no-brainer to me. As to cost-benefit analysis, we do it implicitly every time we write a regulation, and I don’t understand the unwillingness to do so explicitly.
All of which serves as burying the lede to Executive Order 562, issued by Governor Baker this week. The order applies to both existing regulations and those proposed or to be proposed, and has several important elements:
- Except as in compliance with the Order, all existing regulations must sunset as of March 31, 2016.
- Only existing regulations mandated by law or “essential to the health, safety, environment or welfare of the Commonwealth’s citizens” may be retained or modified.
- The regulation’s benefits must exceed its costs.
- The regulations may not exceed federal requirements.
- “Less restrictive and intrusive alternatives have been considered and found less desirable.” (This seems like an awkward formulation of a cost-effectiveness analysis; I hope that it is implemented basically to provide a requirement that the regulation simply be the most cost-effective alternative.)
- The regulations do not “unduly and adversely affect Massachusetts citizens and customers of the Commonwealth, or the competitive environment in Massachusetts.”
- All proposed regulations must now have a “business/competitiveness impact statement”.
Make no mistake, this is a far-reaching Order. If honored according to its terms, it will severely hamper Massachusetts environmental regulators. The key is that it does not simply require that regulations be justified under cost-benefit and cost-effectiveness criteria – which I would wholly support.
Even if a regulation’s benefits exceed its costs, and even if it is the most cost-effective approach to addressing the problem the regulation is meant to solve, it is still forbidden if it exceeds federal requirements or if it “unduly and adversely affects Massachusetts citizens.” I don’t know what that means, but logic dictates that it means something more than cost-effectiveness and cost-benefit criteria, since those are required separately.
To me, the Order thus goes too far, though time will tell how it is interpreted, and whether the benefits of requiring cost-benefit and cost-effectiveness analysis outweigh the obstacles that the Order places in the way of beneficial regulations.
That’s what we need – a cost-benefit analysis of the Order itself!