Overview
        1. What is cost-benefit analysis (CBA)?
        2. The role of CBA in agency regulation
           • Congress
           • Executive branch
           • Courts
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         Overview, cont.
         3. The Theory of CBA
            • Welfarism
            • Transparency
         4. Controversies
            • Hard valuations: life, culture
            • Uncertainty
            • Discounting
         5. The Future of CBA
            • In the executive branch
            • In the courts
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        1. What is CBA?
        • Example: Regulator (Environmental Protection Agency) must decide 
          whether power plants should install scrubbers in smokestacks.
            • Costs: the cost of installing scrubbers x number of factories
            • Benefits: avoided medical costs (for example, less emphysema) x affected 
              people
                 Regulation    Benefits     Costs         Net           Decision
                 Weak          $1 million   $10 million   - $9 million  Reject
                 Moderate      $16 million  $15 million   +$1 million   CB-justified
                 Strict        $22 million  $20 million   +$2 million   Optimal
                 Super-strict  $23 million  $30 million   -$7 million   Reject
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        What is CBA?, cont.
        • Issues and problems
            • Informal or rigorous?
            • Determining costs
                • Purchase price of scrubbers; maintenance costs; labor costs; etc.
                • Predicting technological change that may reduce costs
            • Determining benefits
                • Research on effect of pollution on people’s health
                • Research on medical costs
                • What about intangible quality of life?
            • Determining costs and benefits can be expensive!
                • Data analysis
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        2. The Role of CBA in Agency 
        Regulation
        • U.S. government structure (roughly)
            • Congress has set up numerous regulatory agencies
                • Environmental Protection Agency (pollution)
                • Securities and Exchange Commission (corporate disclosure)
                • Office of the Comptroller of the Currency (bank safety and soundness)
                • Occupational Safety and Health Administration (workplace safety)
            • Congress gives agencies (usually) vague instructions to promote the public 
              interest
                • EPA: reduce “unreasonable risk to health and environment”
                • SEC: consider effects on “efficiency, competition, and capital formation”
            • Courts must ensure that agency complies with statute but difficult to enforce 
              vague standards
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