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Cost/Benefit Analysis

New Report Documents Systemic Over-Estimation of Regulatory Costs

“Not Too Costly, After All: An Examination of the Inflated Cost-Estimates of Health, Safety and Environmental Protections,” by Ruth Ruttenberg and Associates, examines the reasons federal agencies regularly over-estimate regulatory costs, weighting the scales of cost-benefit analysis against regulation. Looking back over a thirty year period, the report examines over 28 regulations and finds that cost exaggerations are the result of three inherent flaws in agency practice. First, cost information is normally provided to agencies by regulated industries that have financial incentives to skew the cost-benefit analysis against the proposed regulation. Second, agencies tend to base estimates on conservative and/or inappropriate assumptions about how to distinguish compliance costs from other capital expenditures or avoid double counting regulatory costs when more than one regulation is involved. Third, agencies often apply only static market analysis, failing to consider new and innovative ways that industry can, and regularly does, comply with new regulations.

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