The Biden administration has quietly changed the methodology used to evaluate the impacts of new regulations. The White House Office of Information and Regulatory Affairs, a branch of the Office of Management and Budget, recently released new rules that will be used to quantify and evaluate proposed new regulations.

This is something that the government has done for many decades, and I can remember many times when proposed legislation was put on hold until it was sent out for ‘scoring’ be economists, which meant that the cost of proposed legislation was compared to the value of the expected benefits that will be generated.

The formulas for doing this analysis have changed over time, and the last time the formulas were adjusted was under the George W. Bush administration. Many economists have been opining that those formulas don’t consider newer analytical tools used by economists today to quantify and measure both the benefits and harms caused by regulations.

Economists say there are several important changes in the new scoring methodology:

• The new formulas incorporate the latest economic theoretical methodologies and also better reflect current thinking on how to assign values to concepts.
• The new methods are more realistic in terms of interest rates and inflation, and the old formulas locked in low values for both based on several decades of constantly low rates.
• The new formulas give more value to future impacts of regulation. This was done by lowering the discount rate applied to future impacts to 2% annually from 3%. This means that a predicted benefit ten years from now carries more weight than using the old formulas.

Many economists have been arguing for this change for a decade and believe that the new formulas are more accurate. They question the value of assessing a proposed regulation if the assessment doesn’t reflect the most up-to-date way that economists outside of the government routinely do such assessments.

Critics of the new formulas argue that the new regulations are a way to impose high regulatory costs today that are justified by some theoretical future benefit. Other economists counter that it’s important not to ignore future benefits or risks that are known and understood.

This kind of government analysis has been routinely conducted for decades, but the public rarely even gets a peek at the results of the analysis. That’s probably most because only a few people can read and understand the benefit-cost analysis reports that heavily rely on complex mathematical formulas.

Why write this blog? I assume that this analysis is run for many different kinds of regulations. I would love to know how economists quantify the societal benefits from something like the ACP plan that provides broadband discounts to low-income families. I would love to understand how government economists would quantify the impact of providing more unlicensed spectrum compared to selling licensed spectrum to the big wireless carriers. It would be intriguing if the public (or at least folks like me) could more routinely see the results of such analysis.