Counting Regulatory Benefits and Costs: Lessons for the U.S. and Europe

Robert Hahn and
Robert Hahn
Robert Hahn Director of Economics - Smith School of Enterprise and the Environment at the University of Oxford, Former Brookings Expert
Robert E. Litan

October 15, 2004


This paper reviews the U.S. and European experiences with regulatory oversight and the use of formal tools to analyze regulation. We conclude that the U.S. and Europe have made some progress in improving regulatory analysis and oversight, but they can do much more.

We offer six recommendations for improving the quality and transparency of regulatory oversight and analysis: three recommendations for the United States and three for Europe. For the U.S., we suggest that: 1. The Office of Management and Budget (OMB) apply its in-house expertise to evaluate the costs and benefits of regulations; 2. Congress pass a law requiring that all federal regulatory agencies submit annual cost and benefit estimates of major regulations to OMB; and 3. OMB issue a scorecard assessing the overall quality of regulation and ask the agencies to complete a scorecard for each major regulation.

For Europe, we suggest that: 1. The European Union (EU) pass a directive specifying that the primary objective of regulation is to maximize net benefits; 2. The EU create a strong centralized regulatory oversight unit to help evaluate regulatory proposals; and 3. The EU, as well as each member state, create a structure that is balanced, which promotes efficient regulation and discourages inefficient or ineffective regulation.