A Foundational Problem with Regulations

December 12, 2011

The regulatory authority Congress grants to government agencies is an immensely powerful tool for altering behavior in the marketplace.  But while intended to solve problems that otherwise would not be addressed, the regulatory process often yields excessively broad and burdensome rules that fail to achieve the desired public objective.  Regulations are imposed prematurely, without any realistic examination of whether alternative approaches would be more effective or efficient at solving the problems, says the Mercatus Center.

All too often, the method of operations for a regulatory agency resembles the following:

  • Decide what it wants to do.
  • Write up a proposed regulation.
  • Perform analysis to justify the regulation.

The greatest problem with the status quo is that the economic analysis is conducted as an afterthought when it should instead be an integral part of the decision-making process.  Instead, the process should be expanded and reformed to match the following:

  • Define the problem.
  • Identify the desired outcome.
  • Consider all alternatives, including actions that can be taken by other governments and non-government actors.
  • Assess tradeoffs.
  • Review the efficacy of the regulation after the fact.

Decades of yielding presidential orders have failed to align regulatory agencies with this proven method of decision-making; this fact alone should compel Congress to act.  Statutory legislation will be required to force agencies to conform to the correct principles.

Source: "'Ready, Fire, Aim!' A Foundational Problem with Regulations," Mercatus Center, December 2011.

 

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