Using A-4 to Make Regulatory Analysis Easier to Understand.

• Author: Shapiro, Stuart

Earlier this year, the Office of Management and Budget (OMB) published a draft revision of Circular A-4 and solicited public comment on the changes. The document provides guidance for executive branch agencies required to conduct Regulatory Impact Analyses (RIAs) of a subset of their regulations under Executive Order 12866. The circular was last revised in 2003, and few would argue that a re-examination of how regulatory benefits and costs are analyzed is not merited. In this article, we focus on what we view as a possible missed opportunity to encourage broader engagement with RIAs to allow them to play a more useful role in agency decision-making.

Improving transparency and process / The academic literature identifies at least three roles that analysis can play in the regulatory process:

* Serve as a decision-making criterion, especially since benefit-cost analysis provides the user with a clear decision rule regarding whether to proceed with a regulatory policy.

* Increase transparency to allow interested parties to both monitor a regulator's activities and engage in the rulemaking process.

* Aid agencies' regulatory planning, allowing them to compare potential regulatory approaches systematically while prioritizing regulatory needs.

The proposed updates to Circular A-4 generally focus on the first of these roles, and the justification given by OMB's Office of Information and Regulatory Affairs (OIRA) for the changes reinforces this impression. The first sentence of the preamble states, "Assessing benefits and costs of alternative regulatory options through analysis helps agency policymakers arrive at sound regulatory decisions." However, as it is used in practice, analysis generally does not function as a decision-making criterion in the regulatory process, especially because EO 12866 merely suggests that the rule's benefits should "justify its costs." Therefore, despite the attention given to analysis as a decision-making criterion, the direct effects of the proposed changes on actual regulatory decision-making may be more limited than many expect.

Still, further revisions to Circular A-4 could position RIAs to more effectively contribute to the other roles noted above. To do so, we offer the following thoughts.

Clarity and conciseness / RIAs accompanying rules are already long, complicated, and technical, and becoming more so. As a result, the typical interested party does not have the training to comprehend the level of analytical...