The Costs and Benefits of Regulation: Review and Synthesis

Abstract

Hahn and Hird provide the first comprehensive analysis of the costs and benefits offederal economic and social regulation. They assess several alternative methods of measuring the effects of regulatory policies, noting the advantages and drawbacks of each. They find that previous estimates of the costs of economic regulation probably overstated the true costs by failing to distinguish between transfer payments and net changes in economic efficiency. Their study separates transfers from efficiency costs for each estimate and updates the figures for sixteen industries and seven areas of social regulation. Overall, they find that the efficiency cost due to economic regulation is large and that the benefit from social regulation is positive but small. Their study also finds a huge variation in estimates of the costs and benefits of particular regulatory policies, particularly in the transportation sector and in environmental protection. This variation indicates that most estimates may be merely "guesstimates. " Nevertheless, Hahn and Hird argue that since the current political climate has increased the pressure on Congress to add regulatory burdens, the need to introduce such information into policy making has never been greater