Revising Circular A-4.

• Author: Brannon, Ike

Introduction

In general, Republican presidencies try to impose bureaucratic procedures that limit agencies' scope for issuing regulations, while Democratic presidencies tend to go in the opposite direction.

The last two administrations have not been exceptions to this. The Trump administration issued a requirement that an agency wishing to proffer one new rule would have to also propose to end two existing rules that were obsolete, unnecessary, or too costly to justify their continued existence. Shortly after taking office, the Biden administration ended that requirement and asked agencies to take special care to consider the effects of regulations on minority groups as well as the environment. The administration averred that those special interests do not get proper consideration when a regulatory agency is doing its cost-benefit analysis to impose a new rule. (See "Memos to the New OIRA Administrator," Spring 2022.)

More recently, the Biden White House proposed changes to two standard regulatory guidance documents designed to help agencies promulgate regulations and conduct cost-benefit analysis on any new rules. One of those documents is Circular A-4, which sets forth how agencies should do a Regulatory Impact Analysis (RIA).

One proposed change to A-4 would direct agencies to consider the possibility that labor market monopsonies may artificially depress wages, which might bias the values used when calculating the Value of a Statistical Life (VSL) in cost-benefit analysis. An artificially low VSL would lead to fewer regulations being deemed as cost-effective. In their essay below, Tom Kniesner and Kip Viscusi argue that there is no evidence that monopsony has a significant effect on U.S. labor markets. Moreover, even if our economy were rife with wage-depressing monopsonies, Kniesner and Viscusi's research indicates that would not affect VSL estimates in a material way.

In their essay, Stuart Shapiro and Christopher Carrigan suggest that proposed changes to Circular A-4 to have cost-benefit analyses consider the distributional analysis of the effects of a rule could have an inadvertent outcome in making such analyses more difficult to conduct and make the RLAs that accompany proposed rules longer and even less accessible to affected groups. While politicians value the distributional effects of a policy change, estimating those effects can be difficult and time-consuming, especially for relatively minor rules, and waiting for an agency...