I would wager that few people around here read the Office of Management and Budget's annual reports to Congress on the costs and benefits of regulations. That's understandable, they are very wonky and somewhat esoteric. On the other hand they contain valuable information about some of the most important actions taken by the government.
The Obama Administration issued its first annual report last month. The putative author of the report is Cass Sunstein, the somewhat controversial administrator of the Office of Information and Regulatory Affairs. Sunstein is also occasionally mentioned as a Supreme Court nominee and was a mentor to Obama at the University of Chicago.
This year's report is notable for two reasons. The first is true of every report but is widely ignored. The report demonstrates that the aggregate benefits of federal regulation vastly outweigh the costs. This doesn't mean that this is true for every regulation but when you add them together, it is not even close. Environmental regulations drive much of the calculation. Government regulation improves social welfare. Environmental regulation improves social welfare.
Now there are many criticisms of cost-benefit analysis, some of which are legitimate. But even if you believe that such analysis vastly understates the benefits of government action, these reports show that even with these faults the benefits are far greater than the costs (annual benefits are $126-663 billion; costs between $51 and $60 billion). If analytical techniques were modified to better count the intangible benefits of regulation the difference between benefits and costs would be even greater.
That brings me to the second notable aspect of the report. In Chapter III, "Recommendations for Reform," Sunstein outlines a series of changes to cost-benefit analysis that would improve its ability to assess regulation. Such improvements like the incorporation of findings from behavioral economics and more attention to the distributional impacts of regulation would serve to make the case stronger for many regulatory efforts.
These types of reports rarely see the light of day. But they deserve considerable attention. This one highlights the benefits of government intervention in the market in ways that transcend much of the rhetoric on the issue.