How Well Does the U.S. Government Do Cost-Benefit Analysis?

To make prudent recommendations for improving the use of cost-benefit analysis in policy settings, some measures of how well it is actually done are essential. This paper develops new insights on the potential usefulness of government cost-benefit analysis by examining how it is actually performed in the U.S. We assess the quality of a particularly rich sample of cost-benefit analyses of federal regulations. The data set we use for assessing the quality of regulatory analysis is the largest assembled to date for this purpose. Theseventy-four analyses we examine span the Reagan administration, the first Bush and the Clinton administration. The paper is the first to assess systematically how government cost-benefit analysis has changed over time. There are three key findings. First, a significant percentage of the analyses in all three administrations do not provide some very basic economic information, such as information on net benefits and policy alternatives. For example, over 70% of the analyses in the sample failed to provide any quantitative information on net benefits. Second, there is no clear trend in the quality of cost-benefit analysis across administrations. Third, there is a great deal of variation in the quality of individual cost-benefit analyses.