New foundations of cost–benefit analysis

This article responds to the criticisms of New Foundations of Cost–Benefit Analysis that appeared in a review by Amy Sinden, Douglas A. Kysar, and David M. Driesen. We argue that their criticisms are either based on misunderstandings of our approach or are too demanding, in the sense that no reasonable decision procedure would satisfy them. We illustrate this second argument by demonstrating that their preferred approach – feasibility analysis – has little to recommend it.     

The triumph of regulatory politics: Benefit–cost analysis and political salience

While benefit–cost analysis (BCA) is now a permanent part of the regulatory process in the United States, and many other countries around the world as well as the European Union have adopted it or are moving toward it, there have been few empirical attempts to assess either whether its use improves regulations or how BCA interacts with the political environment. We use a unique US database of the costs and benefits of 109 economically significant regulations issued between 2000 and 2009 to examine whether the amount of information provided in the BCA or political factors surrounding the regulation better correlate with the net benefits of the regulation. We find that there is little correlation between the information provided by the analysis and the net benefits. However, we find that regulations that receive few public comments and are not issued at the end of an administration, have the highest net benefits. These are the regulations that are the least politically salient. This interaction between the political environment and the economic performance of a regulation has been under‐examined and deserves further study.     

Continuity,change, and priorities: The quality and use of regulatory analysis across US administrations

This paper compares the quality and use of regulatory analysis accompanying economically significant regulations proposed by US executive branch agencies in 2008, 2009, and 2010. We find that the quality of regulatory analysis is generally low, but varies widely. Budget regulations, which define how the federal government will spend money or collect revenues, have much lower‐quality analysis than other regulations. The Bush administration's “midnight” regulations finalized between Election Day and Inauguration Day, along with other regulations left for the Obama administration to finalize, tended to have lower‐quality analysis. Most differences between the Bush and Obama administrations depend on agencies' policy preferences. More conservative agencies tended to produce better analysis in the Obama administration, and more liberal agencies tended to do so in the Bush administration. This suggests that agencies more central to an administration's policy priorities do not have to produce as good an analysis to get their regulations promulgated.     

Toward the usable recognition of individual benefits and costs in regulatory analysis and governance

Regulatory agencies in the United States and Europe have well‐deserved reputations for fixating on the total benefits and costs of proposed and final regulatory actions, without doing any more than anecdotally mentioning the subpopulations and individuals who may bear disproportionate costs or reap disproportionate benefits. This is especially true on the “cost” side of the cost–benefit ledger, where analysts exert little effort to even inform decisionmakers and the public that the costs of regulations might be distributed either regressively or progressively. Many scholars and advocates have observed that regulation can increase the efficiency of market outcomes, but caution about its untoward (or suboptimal) effects on equity. Here, we argue that without considering distributional information about costs and benefits, regulatory policies in fact can also cause violence to notions of efficiency, for two reasons: (i) society cannot hope to approach Pareto‐efficient outcomes without identifying those who must lose so that others can gain more; and (ii) because the harm experienced by involuntary risks and by imposed regulatory costs is likely non‐linear in its magnitude (at the individual level), efficiency is, in fact, a strong function of the shape of the distribution of these effects. This article reviews evidence about the distribution of regulatory costs and benefits, describes how agencies fail to incorporate readily available distributional information, and sketches a vision for how they could analyze costs and benefits to promote more efficient regulatory choices and outcomes.     

An evaluation of the quality of impact assessment in the European Union with lessons for the US and the EU

Governments throughout the world are requiring greater use of economic analysis as a way of informing policy decisions. This paper provides a comprehensive analysis of the use of impact assessment in the European Union, using US assessments as a benchmark. We find that recent EU impact assessments include more economic information than they did in the past, although important items are still missing. We also provide evidence that the quality of EU impact assessment increases with the expected cost of a proposal. Furthermore, we find that the quality of EU assessments that report high total costs is similar to that of US assessments.     

The economic significance of “insignificant” rules

We know relatively little about the economic effects of “insignificant” rules because they are not typically analyzed. Yet, these rules could be cumulatively important. We provide an economic analysis of one proposed rule to control hazardous air pollutants, which is not considered to be economically significant. This rule is of particular interest because it is one of the first in a long series of rules that Environmental Protection Agency (EPA) will consider for limiting hazardous air pollutant emissions. Our analysis suggests that the proposed controls that EPA has considered are not likely to pass a benefit–cost test. We recommend that an agency base its decision to allocate additional resources to benefit–cost analysis on the expected value of the improved information. In addition, agencies should consider applying a rule of thumb that would specify a threshold level of risk reduction that needs to be achieved before some kinds of regulation are considered.     

Regulatory Analysis Procedures and Political Influence on Bureaucratic Policymaking

Well‐known theories suggest that administrative procedures may be used as mechanisms of political control of the bureaucracy. This study investigates whether three common regulatory analysis procedures—cost‐benefit analysis, risk assessment, and economic impact analysis—lead to greater influence by political officials on bureaucratic policymaking. Multivariate analyses of data from a unique survey of state administrators indicate that regulatory analysis requirements are associated with decreases in the perceived influence of elected political officials on the content of administrative rules. This association is particularly evident in cases where proposed rules are subjected to a cost–benefit test. These findings contradict prominent theories of administrative procedures, but are consistent with recent research on the political power of administrative agencies.     

Promoting customer engagement: A new trend in utility regulation

This paper traces a new development in regulation that encourages utilities to engage more directly with their customers. We make four contributions: First, we perform a comprehensive analysis of how regulators are using customer engagement, and offer a simple model for understanding different customer engagement initiatives. Second, we review assessments of customer engagement. We find that there are no quantitative, empirically robust assessments of the effectiveness of customer engagement as a regulatory tool. Third, we develop two detailed case studies of an energy regulator and a water regulator that are in the forefront of customer engagement efforts. We find that there is no direct link between the engagement strategy used and the economic incentives received by a firm. Finally, we propose a framework for improving the customer engagement process. The new framework relies on microeconomics, modern tools of program evaluation, and supplying the regulated firm with direct incentives to engage with the customer.     

Re-measuring left–right: A comparison of SEM and Bayesian measurement models for extracting left–right party placements

This paper demonstrates the relative strengths and weaknesses of SEM and Bayesian approaches to combining different sources of data when estimating latent variables. Data on party left–right positioning collected from party manifestos and surveys of party experts, MPs and voters are used to illustrate the two techniques. Although widely used and accepted, the SEM approach is less useful than the Bayesian approach, particularly when using the latent variable in subsequent predictive estimations.     

On the value of formal assessment of uncertainty in regulatory analysis

The US Office of Management and Budget introduced in 2003 a new requirement for the treatment of uncertainty in Regulatory Impact Analyses (RIAs) of proposed regulations, requiring agencies to carry out a formal quantitative uncertainty assessment regarding a regulation’s benefits and costs if either is expected to reach $1 billion annually. Despite previous use in other contexts, such formal assessments of uncertainty have rarely been employed in RIAs or other regulatory analyses. We describe how formal quantitative assessments of uncertainty – in particular, Monte Carlo analyses – can be conducted, we examine the challenges and limitations of such analyses in the context of RIAs, and we assess how the resulting information can affect the evaluation of regulations. For illustrative purposes, we compare Monte Carlo analysis with methods typically used in RIAs to evaluate uncertainty in the context of economic analyses carried out for the US Environmental Protection Agency’s Nonroad Diesel Rule, which became effective in 2004.     

Governing public–private partnerships: A systematic review of case study literature

Governance plays a critical role in determining the success and failure of public–private partnerships (PPPs). We conducted a systematic review of case study literature on PPP governance and developed a governance framework consisting of 21 issues in four groups: institutional, organizational, contractual, and managerial. Then, we investigate the dynamics of governance issues, including the relative importance, interrelationships, and connections with PPP success and failure. Results suggest that PPPs should emphasize cooperation, trust, communication, capability, risk allocation and sharing, competition, and transparency in their governance. We also found that the governance practice of emphasizing dominant and direct factors and ignoring recessive and indirect ones has hindered PPPs’ success.     

THE “INVASION” OF MANUFACTURED CIVIL SOCIETY: GOVERNMENT–NONPROFIT PARTNERSHIPS IN A BRAZILIAN STATE

The growth of the nonprofit sector in Brazil has been conceptually similar to that of the Anglo‐Saxon Third Way, where the government promotes the creation of partnerships with civil society. This process has been criticized for creating a “manufactured civil society”. This study will investigate whether the same pattern can be observed in the Brazilian context, particularly within the Management Shock Reform implemented by Minas Gerais, one of the principal Brazilian states. Management Shock is guided by a governmental partnership discourse that promotes contractual partnerships with both businesses and nonprofits. We opted for a bottom‐up oriented research approach, aiming to comprehend the rationale for initiating and sustaining the partnerships revealed in the narratives that emerged from both government and nonprofit partners. Data were collected through semistructured interviews and content analysis of documents and the media. Results show the predominance of agency‐type partnerships, highlighting the centrality of the government and its techno‐bureaucratic role in fostering and maintaining Organização da Sociedade Civil de Interesse Público or Civil Society Organization of Public Interest designs. Differing from the Anglo‐Saxon context, we observed the “invasion” of market‐driven values in nonprofits and, to some extent, in government narratives. Copyright © 2011 John Wiley & Sons, Ltd.     

Public–private partnerships and developing‐country agriculture: Evidence from the international agricultural research system

This study examines the role of public–private partnerships (PPPs) in promoting pro‐poor productivity‐enhancing technological innovation in the international agricultural research system. The study examines the extent to which PPPs are being used to overcome market and institutional failures that otherwise inhibit the development and dissemination of technologies targeted specifically to small‐scale, resource‐poor farmers in developing countries. Drawing on a survey of 75 PPP projects in the international system, findings suggest that while PPPs are changing the way the system manages its research agenda, few partnerships lead to joint innovation processes with the private sector. This indicates the need for closer examination of organizational practices, cultures, and incentives in the international agricultural research system. Copyright © 2010 John Wiley & Sons, Ltd.     

DIFFERING OPINIONS DO NOT SPOIL FRIENDSHIPS: MANAGING PUBLIC–PRIVATE PARTNERSHIP (PPP) INFRASTRUCTURE PROJECTS IN JORDAN

This research investigates the approaches, strategies and challenges facing the management of the implementation phase of public–private partnership (PPP) projects in Jordan. Jordan is a newer but common user of PPPs in the Middle Eastern region, where PPPs not only are of economic strategic importance but also entail significant investment risk given resource scarcity. This research involves semi‐structured interviews with senior managers representing different partnering organisations in two case study organisations in Jordan. The research finds that, despite the management difficulties confronting PPP managers, strategies adopted by them limit the impact of these challenges. The research makes an important theoretical contribution in providing a detailed analysis of effective PPP management approaches in response to difficulties at the implementation phase, which had not been systematically explored in extant PPP research, and broadens PPP research to the Jordanian context. Moreover, the research contributes greater understanding of how partnerships should be effectively managed. Copyright © 2013 John Wiley & Sons, Ltd.     

De facto independence after delegation: A fuzzy‐set analysis

The phenomenon of delegating public authority from elected politicians (or ministries headed by elected politicians) to formally independent regulatory agencies (RAs) is becoming increasingly widespread. This paper examines the relation between formal independence, as prescribed in the constitutions of agencies, and de facto independence. Toward this end, it conceptualizes and assesses de facto independence of RAs, and discusses organizational, institutional, and political explanations for divergence from formal independence. The complex relations between de facto and formal independence are examined with a cross‐national, cross‐sectoral comparison of 16 Western European RAs using fuzzy‐set analysis. The results show that formal independence is neither a necessary nor a sufficient condition for explaining variations in the de facto independence of agencies. Other factors, such as the lifecycle of agencies, veto players, and European networks of agencies, have a decisive impact.     

International Cooperation to Manage High‐Skill Migration: The Case of India–U.S. Relations

Highly skilled people are among the most valuable factors of production in the contemporary world economy. Some have characterized the competition among nations for these people as a “brain drain” or “war for talent,” which imposes significant costs on the countries of emigration. However, the distribution of costs and benefits that results from high‐skill migration is not necessarily zero‐sum or fixed. It may be altered through international cooperation, producing a self‐reinforcing “win–win” scenario for sending and receiving countries. Bilateral cooperation, focused on specific sectors affected by migration, is the most promising approach for realizing such a scenario. This paper explores the prospects and potential for such cooperation between India and the United States, which comprise what is probably the world's largest high‐skill mobility relationship. After sketching the broad contours of the relationship, we explore the prospects for mutually beneficial cooperation in three specific fields of high‐skill migration: information technology services, medicine and nursing, and graduate education.     

Changing the Tobacco Use Management System: Blending Systems Thinking with Actor–Network Theory

Managing “wicked” issues like the tobacco epidemic is addressed using a combination of Open Systems Thinking (OST) and Actor–Network Theory (ANT). OST was used to construct a model of the tobacco problem as a management system acting in a broader environment. This highlighted several problems with the current system but provided no mechanism for reform. ANT, the “sociology of translation,” was used for understanding how change occurs. Unlike systems thinking, ANT focuses the contest for change on heterogeneous networks of human and nonhuman actors that must be constructed through a process of defining and defending models of change, building alliances, gaining public acceptance, and finally achieving institutional acceptance of the reform (or of some compromise). We then show how this dual approach can shed light on a current challenge in controlling tobacco, the issue of product regulation, and the broader issue of harm reduction versus harm elimination.     

Brazil's South–South development cooperation: Principles and experiences of the domestic bureaucracy

How did Brazilian bureaucrats view President Lula's approach to the provision of development assistance in the context of South–South cooperation (SSC)? How did they see their own bureaucracy's role, as a provider of such assistance? This paper addresses these questions within the broad context of Brazil's development assistance program. The analysis begins with an elaboration of the internal legal and political structure supporting the country's provision of development assistance. Then, it addresses the research questions by drawing on original material obtained from 54 interviews, conducted in Brasilia, with diplomats and public servants from 25 federal ministries and institutions directly involved with implementing technical cooperation agreements. Evidence leads to three main observations: (a) the bureaucracies' limited autonomy vis‐à‐vis the Presidency's command of the Brazilian development assistance program; (b) great convergence in the worldviews and principled values upheld by public servants and diplomats in regard to Brazilian foreign policy; and (c) the existence of interbureaucracy complaints and struggles related to the operational side of agreement implementation. These findings are relevant for understanding the inner workings of Brazilian SSC, as well as in comparison to other national bureaucracies' involvement in the conceptualization and implementation of South–South knowledge transfers.     

Horses and hippos: Why Italian government bills change in the legislative arena, 1987–2006

Scholars interested in legislative processes pay relatively little attention to the changes made to bills in parliamentary democracies. On the one hand, comparative research has often described parliamentary institutions as ineffectual vis‐à‐vis cabinets throughout the lawmaking process; on the other hand, for a long time the rational choice literature has focused more on the formal rules regulating amendatory activity than on amendatory activity itself. Hence, very few studies have tried to explain how much government bills are altered in parliament and why. This article investigates the changes made to governmental legislation in Italy. Taking the modifications occurring during the legislative process as the dependent variable, a number of explanatory hypotheses derived from both existing scholarship and original arguments are discussed and tested. This also allows the identification of some usually unobserved aspects of the decision‐making process within the cabinet. The findings can also be relevant for comparative research since Italy has been characterised during the period under scrutiny (1987–2006) by two distinct electoral systems, two extremely different party systems (pivotal and alternational), governments with various ideological orientations and range, and both partisan and technical ministers.     

Party system dynamics in post-war Japan: A quantitative content analysis of electoral pledges

Qualitative accounts of Japanese party politics allude to the standard left-right spectrum, but they invariably devote much more space to discussions of foreign policy differences than to socioeconomic conflict. Quantitative estimates of Japanese party positions treat short party responses to newspaper interviews as if they were true manifestos, and fail both to confirm the claims of the qualitative literature and to demonstrate any consistent basis for party differentiation at all. We address both puzzles by applying a text scaling algorithm to electoral pledges to estimate Japanese party positions on three major policy dimensions. Our analysis largely confirms the findings of the qualitative literature, but also offers new insights about party movement and polarization over time.