Rules for the rulemakers: asymmetric information and the political economy of benefit-cost analysis

David Besanko (), Avner Kreps and Clair Yang
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David Besanko: Northwestern University
Clair Yang: University of Washington

Journal of Regulatory Economics, 2024, vol. 66, issue 1, No 1, 51 pages

Abstract: 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.

Keywords: Benefit-cost analysis; Rule-making process; Environmental regulation; Asymmetric information; Information supplementation in signaling games (search for similar items in EconPapers)
JEL-codes: D82 H11 K20 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11149-024-09483-4

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