Does Increased Safety Have to Reduce Efficiency?
Edited by Carol Mansfield and V. K. Smith
Chapter 3: Lessons from risk assessment, economics, and risk management at EPA
Economic analysis is a key component of risk management; it has been required for ‘economically significant’ federal regulations as part of regulatory review requirements under Executive Orders 12291 (issued in 1981) and 12866 (issued in 1993) and their successors. Even without the requirements of 12866, economic analysis, and particularly benefit–cost analysis, of proposed regulations is an important undertaking in its own right. Benefit–cost analysis can identify where investments of scarce resources provide positive net returns, and can be a valuable input into prioritizing policy actions. Those actions that cannot demonstrate positive net benefits should be considered carefully because they are not a step toward economic efficiency, although they may well be justified on other important grounds. Even when all benefits and costs cannot be quantitatively included in an analysis, careful enumeration of the types of benefits and costs expected, and qualitative information on their importance, can inform policy makers and the general public.
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