Executive Order 12866, which governs regulatory analysis and review in the executive branch, requires federal agencies to conduct a regulatory impact analysis (RIA) for all economically significant regulations. (An “economically significant” regulation has economic effects of at least $100 million annually or satisfies other criteria listed in the executive order.) The purpose of this analysis is to understand the problem the regulation aims to solve, identify alternative solutions, and assess the benefits and costs of the alternatives, in order to create regulations that solve real problems at a reasonable cost.
In 2009, the Mercatus Center at George Mason University initiated the Regulatory Report Card project to assess how well executive branch agencies conduct regulatory analysis. In a new study for the Mercatus Center, senior research fellow Jerry Ellig uses the data from this project to examine the quality of RIAs for all economically significant, prescriptive regulations proposed between 2008 and 2013. Report Card evaluations reveal that regulatory agencies often adopt regulations that affect several hundred million Americans and impose billions of dollars of costs without knowing whether the regulation will solve a significant problem, whether a more effective solution exists, or whether a more targeted solution could achieve the same result for a lower cost. Extensive statistical analysis of the scores suggests that institutional reforms are the most promising means of improving the quality and use of regulatory analysis.
Medicaid was established in 1965 as a joint state and federal program to provide medical insurance to Americans who are poor and have disabilities, and it has grown from 1 percent to 3 percent of GDP. The source of Medicaid’s growth over the past 50 years must inform efforts to reform the program and slow spending. The literature on the political economy of Medicaid provides strong evidence of interest group and political ideological influence, enabled by the open-ended federal match for state spending.
When Congress passes legislation that mandates prescriptive regulations, legislators are under no obligation to understand the problem they are trying to solve, assess alternative solutions, or understand the benefits and costs of their choices. Passage of the positive train control mandate in response to several high-profile train accidents amply illustrates how haphazardly the legislative branch can authorize regulations. Congressional hearings and committee reports on the Rail Safety Improvement Act of 2008 contain no analysis of the causes and extent of the safety problem, alternative solutions, and the benefits and costs of alternatives to this $12.5 billion mandate. Given that major regulations are often required by statute, the time has come for Congress to subject regulatory legislation to the same kind of analysis that presidents have required regulatory agencies to conduct for more than three decades.
Austrian macroeconomists of the interwar period saw the economy as a complex adaptive system, in which macroeconomic variables emerge from the interaction between millions of purposefully acting agents. Recent advances in computation technology allow us to build empirically salient synthetic economies in silico, and thereby formalize many Austrian insights.
Deirdre McCloskey’s trilogy on the Bourgeois Era has set a new intellectual standard in discussing the “Great Fact” of human history. McCloskey’s answer is it is not technological, it is not even institutional, it is ideological and without that ideological component you cannot explain the rise of the Western World. Our contribution to this symposium is to emphasize the role of “two-tiered” entrepreneurship in explaining this “Great Fact.”…
Our contribution in this chapter is to address the argument made by philosopher Samuel Freeman (2001) that libertarianism is not a liberal view. Freeman’s argument is based on the claim that full alienability of property rights is antithetical to liberal political institutions. We address Freeman’s argument by arguing twofold.
Over the past few years, the federal government and local governments have increasingly turned to “nudges” as solutions to many problems caused by behavioral biases. Such efforts often run into opposition owing to their paternalistic nature, but nonpaternalistic nudges can be equally effective at improving consumers’ choices. In contrast to paternalistic nudges, nonpaternalistic policies do not impose policymakers’ errors on consumers if policymakers misdiagnose the underlying behavioral bias, and they thus avoid harming consumers by pushing them toward suboptimal choices.
This paper discusses the consequences of John Maynard Keynes for the science of political economy, or the fields of economics, economic policy, and politics. It argues that the consequences of Keynes in all three fields were negative and resulted in a significant retrogression.
When directives rather than contracts determine rights to water flows, agents will substitute away from securing water rights by contract toward securing them through political directives. Especially when they are legitimated by court rulings, such directives alter the rules that govern social interaction.
In 2002, Congress passed the Medical Device User Fee and Modernization Act, with the aim of pushing the FDA to speed up the approval process for medical devices. This law levied large user fees on medical device manufacturers in exchange for the promise of shorter review times by the FDA. Whether the act has resulted in shorter review times has been unclear. This study conducted a regression analysis to address this question, using data on FDA review times for devices seeking approval between 1991 and 2012.
Information, investment and innovation are the engines of economic growth in the 21st century. Yet regulatory accumulation and outdated regulatory processes are preventing both the private and public sectors from effectively using the three “I’s” to solve problems and grow the economy.
Mercatus PhD Fellow Vipin Veetil, along with Akshaya Vijayalakshmi and Srikanth Viswanathan, address Amartya Sen's criticism of cash-transfer programs such as education vouchers in the Wall Street Journal.
Elinor Ostrom was the first woman to win the Nobel Prize in economics. She has been at the forefront of New Institutional Economics and Public Choice revolutions, discovering surprising ways in which communities around the world have succeed in solving difficult collective problems.