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Rules for the Rulemakers: Asymmetric Information and the Political Economy of Benefit-Cost Analysis, Journal of Regulatory Economics

Abstract

This paper presents a model of an executive administration that decides whether to mandate benefit-cost analysis (BCA) of newly proposed regulations. A regulator has private information about the social benefit of a new rule but may differ from the executive’s preferences for regulation. BCA, which provides a noisy signal of the rule’s social benefit, is most valuable when the executive is regulation neutral. Extremely regulation-averse administrations may be harmed by BCA unless they can bias it. Our results are consistent with use of BCA by U.S. presidential administrations since Reagan.

Type

Article

Author(s)

David Besanko, Avner Kreps, Clair Yang

Date Published

2024

Citations

Besanko, David, Avner Kreps, and Clair Yang. 2024. Rules for the Rulemakers: Asymmetric Information and the Political Economy of Benefit-Cost Analysis. Journal of Regulatory Economics. 66(1): 1-51.

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