August 2017

Consumer’s Guide to Regulatory Impact Analysis: Ten Tips for Being an Informed Policymaker

Susan Dudley
Richard Belzer
Glenn Blomquist
Timothy Brennan
Christopher Carrigan
Joseph Cordes
Louis A. Cox
Arthur Fraas
John Graham
James Hammitt
George Gray
Kerry Krutilla
Peter Linquiti
Randall Lutter
Brian Mannix
Stuart Shapiro
Anne Smith
W. Kip Viscusi
Richard Zerbe

Abstract

Regulatory impact analyses (RIAs) weigh the benefits of regulations against the burdens they impose and are invaluable tools for informing decision makers. We offer 10 tips for nonspecialist policymakers and interested stakeholders who will be reading RIAs as consumers.

1.
Core problem: Determine whether the RIA identifies the core problem (compelling public need) the regulation is intended to address.

2.
Alternatives: Look for an objective, policy-neutral evaluation of the relative merits of reasonable alternatives.

3.
Baseline: Check whether the RIA presents a reasonable “counterfactual” against which benefits and costs are measured.

4.
Increments: Evaluate whether totals and averages obscure relevant distinctions and trade-offs.

5.
Uncertainty: Recognize that all estimates involve uncertainty, and ask what effect key assumptions, data, and models have on those estimates.

6.
Transparency: Look for transparency and objectivity of analytical inputs.

7.
Benefits: Examine how projected benefits relate to stated objectives.

8.
Costs: Understand what costs are included.

9.
Distribution: Consider how benefits and costs are distributed.

10.
Symmetrical treatment: Ensure that benefits and costs are presented symmetrically.

Regulatory impact analyses (RIAs) weigh the benefits of regulatory proposals against the burdens they impose. They are invaluable tools for informing decision makers about the effects of regulatory choices; even regulatory decisions that are ultimately made on political, legal, ethical, or other grounds will benefit from the structured evaluation of trade-offs and alternatives that a good RIA provides.

Although RIAs are a core feature of regulatory practice in the United States and other countries (Kirkpatrick & Parker, 2007; OECD, 2016) they can be difficult to interpret. Key methodologies, assumptions, limitations, and uncertainties can be obscured by dense, technical writing, and RIAs sometimes appear to be “used to justify decisions already made, rather than to inform those decisions” (Carrigan & Shapiro, 2016; see also Harrington, Heinzerling & Morgenstern, 2009). RIAs often serve as legal documents, running to hundreds or even thousands of pages, prepared by agencies in anticipation of litigation.

U.S. regulatory agencies develop RIAs before issuing significant new regulations, and nongovernmental interests may also present their own analyses of how different policies will affect outcomes. Dense or complex RIAs can be challenging for policy officials and interested parties to comprehend and interpret, making it difficult to distinguish facts from conjecture and to understand the likely consequences of alternative policy choices.

While numerous technical guidelines exist to aid development of RIAs (OMB, 2003, 2010; OECD, 2008), none are geared toward nonspecialist policymakers and interested stakeholders who will be reading RIAs as consumers. This guide attempts to fill that gap. It first reviews the purpose of an RIA, and then offers policy makers and other consumers of RIAs 10 tips for asking informed questions when reviewing and interpreting them.

The guide is designed to (1) explain why RIAs are valuable, review their key elements, and describe best practices; (2) point out the ways in which RIAs might fall short of achieving these best practices; (3) help readers to better judge the quality of information provided in RIAs, and make discerning assessments about the methods employed; and (4) improve readers’ capacity to critically evaluate the justification offered to support regulatory actions.