In the News

Environmentalists and public health advocates have a reason to stand up and cheer: Finalized rules to cut down on mercury air pollution are set to be announced today by the EPA.

But economists can also feel good about this holiday-season gift of clean air: Two decades of agency analysis have found the EPA’s new mercury standards for power plants to be overwhelmingly cost-benefit justified. With annual compliance costs around $11 billion, and health benefits estimated to be up to $140 billion per year, even the most hard-nosed bean counter should be feeling festive.

Some folks seem to imagine that there’s a small, semi-secret team of economist-bureaucrats in the White House toiling away to scuttle environmental regulations. Others think this office of experts has unleashed a regulatory tsunami on businesses, drowning profits and washing away jobs.

There is, in fact, such a group—though it’s not doing either of those things, at least not intentionally. It’s the unsexy but important Office of Information and Regulatory Affairs (OIRA), charged with weighing the economics of any regulation worth more than $100 million. Carefully reviewing the cost-benefit analyses agencies perform for each major rule, these (mostly) economists look to see if the experts have accurately examined whether, say, a rule requiring new scrubbers on smokestacks is worth the price of implementation.

This week, as Congress continues to work to approve legislation that will prevent the lights from going out in Washington, legislators would be wise to leave blocks to EPA’s new clean-air rules out of their negotiations.

While many stipulate that these measures will further deflate an already sagging economy, in reality, they will have little, if any, negative economic impact. In fact, if the rules are allowed to stand, as it seems they will be, their benefit will far exceed their cost.

In a similar way, the dean of NYU’s law school, Richard Revesz, and his colleague Michael Livermore argue that the REINS Act puts undue emphasis on the “costs” of regulation. On the Huffington Post, they write:

“By focusing exclusively on the downsides of regulation, and not the benefits, the implication of this proposed legislation is that protecting the health and safety of Americans is not worth the costs that regulated entities must pay. But in fact, the opposite is often true: These rules can produce billions of dollars in net benefits.”

Jason Schwartz, legal director for the Institute for Policy Integrity, said Friday that an additional requirement of the REINS Act that puts a time limit on how long Congress has to consider a major new rule is especially troubling.

“Congress does not need the REINS Act to help it review rules, and in fact the REINS Act is not likely to help Congress review rules; the more likely fate for rules will either be a pro forma approval by Congress, which just adds an unnecessary step to the already lengthy rulemaking process, or else death by congressional inaction or political bickering,” Schwartz said.

The office in the White House that considers the costs and benefits of new regulations is being accused of bias in a recent report report by the Center for Progressive Reform (CPR). Concerned that the Obama administration is using its political compass to reduce public protections, the report lays blame at the feet of the somewhat obscure but extremely important Office of Information and Regulatory Affairs (OIRA).

The report takes issue with the number of changes this office makes to the rules it reviews. Before dealing with the specific complaints, we underscore that it is OIRA’s job to address questions that are brought up in public comments or by other agencies. Sometimes these comments are justified and require a response. This is the review process at work, not proof of bad faith. If OIRA were simply to stamp each regulation “approved” without making adjustments, there would be no purpose to having the office at all.

In the net neutrality debate, Internet Service Providers like AT&T and Verizon, have said they need to charge content providers for prioritization so they can invest in improving infrastructure: faster internet service for all, they say.

But placing a price on prioritizing content creates an inherent disincentive to expand infrastructure. ISPs would profit from a congested Internet in which some content providers will be more than willing to pay an additional fee for faster delivery to users. Content providers like the New York Times and Google would have little choice but to fork it over to get their information to end users. But end users would be unlikely to see the promised upgrades in speed. Those are some of the results of research we conducted on the Internet market.

Considered collectively, President Obama’s clean air rules will have relatively small negative impact on the economy and a major positive impact on health and the environment. Those claiming otherwise are likely looking only at the costs of these clean air regulations and not considering the benefits.

A study released by the Institute for Policy Integrity in October describes how a weakening of the principle of network neutrality might impact the Web. Based on an analysis of Internet usage, it finds that Internet infrastructure and content work together to generate huge economic benefits for consumers—possibly as much as $5,686 per user, per year.

Eliminating network neutrality, as some have proposed, may reduce incentives to invest in Internet content and infrastructure.

The NYU study represents a smart new way of looking at an old problem; an economic evaluation that strips away some of the emotion (and demagogeury) that surrounds any discussion of crime and justice. It’s easier to be “tough on crime” when you can pay the price, right? But now we can’t. And the collective poverty within our criminal justice systems isn’t going to ease on its own. So bring in the economists! And let the stale, old law-and-order crowd step aside.