The U.S. Environmental Protection Agency recently finalized a rule that would reduce the maximum allowable level of arsenic in drinking water by 80 percent, from 50 micrograms per liter to 10 micrograms, by 2006. As soon as the rule was announced during the waning hours of the Clinton presidency, it became the topic of considerable debate as some experts argued that it is appropriate and necessary while others charged that its costs would far outweigh its benefits. The authors side with the latter group and argue that the costs may exceed the benefits by as much as $100 million annually.

The U.S. Environmental Protection Agency recently proposed a rule that would reduce exposure to radon gas in air and drinking water. The radon rule is expected to be the first rule finalized under the Safe Drinking Water Act as amended in 1996 and could therefore set a precedent for future rules developed under the act. The purpose of this analysis is to evaluate the costs and benefits of the EPA's radon rule relative to alternative approaches of reducing risks from radon. We find that the EPA's approach to regulating radon in drinking water cannot be justified on benefit-cost grounds by using the EPA's numbers. The EPA's numbers suggest that regulation of radon would result in total net benefits of about $250 million annually, but that the costs of regulating radon in drinking water would exceed the benefits by about $50 million annually. Unfortunately, the EPA failed to make that point, even though it had the data. On the basis of the EPA's numbers, we develop a cost curve for reducing radon in drinking water and an estimate of possible benefits. Our analysis of the rule suggests that it is highly likely that the economic benefits of the EPA's proposed radon reductions in water are lower than the costs. Moreover, it is possible that the total benefits of the rule fall short of the costs. A targeted approach to removing radon from larger water systems might be justified on benefit-cost grounds, but the net benefits would be quite small. We believe that it would be unwise to pass new federal regulations that require reductions in exposure to radon in drinking water. Instead, we prefer to address the problem of reducing radon exposure by providing useful information to citizens, as the states and the EPA are already doing. In addition, the EPA should disseminate information to drinking water systems on the likely benefits and costs of radon removal.

I. INTRODUCTION Although regulations often have no direct fiscal impact, they pose real costs to consumers as well as businesses. Regulations aimed at protecting health, safety, and the environment alone cost over two hundred billion dollars annually -- about two-thirds as much as outlays for federal, nondefense discretionary programs.(1) Yet, the economic impacts of federal regulation receive much less scrutiny than the budget.(2) To encourage the development of more effective and efficient regulations, Presidents Reagan, Bush, and Clinton have directed agencies to perform economic analyses of major regulations that show whether a regulation's benefits are likely to exceed its costs and whether alternatives to that regulation are more effective or less costly. Each president also attempted to increase agency accountability for decisions by requiring that the President's Office of Management and Budget (OMB) review all major regulations. More recently, Congress embraced reform and inserted accountability provisions(3) and analytical requirements into laws such as the Safe Drinking Water Act Amendments of 1996, the Small Business Enforcement and Fairness Act of 1996, and the Unfunded Mandates Reform Act of 1995.(4) The most prominent and far-reaching of these reform efforts are President Reagan's Executive Order 12,291 and President Clinton's Executive Order 12,286. Both require agencies to prepare a Regulatory Impact Analysis (RIA) for all major federal regulations.(5) Agencies have prepared RIAs for almost twenty years in accordance with the executive orders and guidelines for economic analysis provided by the OMB.(6) This Article suggests that the impact of RIAs has fallen short of the expectations of reform advocates in part because agencies do not fully comply with OMB's guidelines.(7) The RIAs typically do not provide enough information to enable agencies to make decisions that will maximize the efficiency or effectiveness of a rule.(8) This conclusion is based on the results of an evaluation of forty-eight major environmental, health, and safety regulations and their associated RIAs.(9) The authors completed a regulatory scorecard for each of the forty-eight regulations, which includes a checklist of the requirements for a good economic analysis outlined in the Executive Order and the OMB guidelines.(10) The study of RIAs shows that agencies only quantified net benefits -- the dollar value of expected benefits minus expected costs -- for 29 percent of the forty-eight rules, even though the Executive Order directs agencies to show that the benefits of a regulation justify the costs.(11) The agencies also did not adequately evaluate alternatives to the proposed regulation, another element of the Executive Order. Agencies failed to discuss alternatives for 27 percent of the rules and quantified the costs and benefits of alternatives for only 31 percent. In addition, the agencies often failed to present the results of their analysis clearly. Agencies provided executive summaries for only 56 percent of the rules. This Article also offers specific suggestions for improving the quality of RIAs, which will in turn improve the allocation of resources. These include: (1) the use of clear executive summaries; (2) the provision of on-line RIAs; (3) improved evaluation of alternatives; and (4) improved assessment of net benefits. Part II of the paper describes the methodology of the study. Part III presents the results. Part IV describes in detail the policy recommendations to improve RIAs. II. METHODOLOGY This study builds on previous efforts to evaluate the quality of RIAs.(12) Whereas previous studies evaluated a few RIAs in great detail, this study assesses the quality of forty-eight RIAs published from April 1996 to July 1999.(13) This approach is advantageous because it is possible to identify common strengths and weaknesses among many RIAs, a task that no previous study has undertaken. …

Cellular phone subscribership in the United States has grown dramatically in recent years, from 92,000 people in 1985 to more than 77,000,000 in 1999. Cellular phones in cars provide important conveniences, including the ability to check on children, get help in an emergency, and coordinate schedules. In addition, drivers sometimes use cellular phones to report accidents and alert police and firefighters to problems that need to be addressed. Unfortunately, cellular phones can also impose costs on society. One of the potentially significant costs of cellular phone usage while driving is the increased risk of vehicle accidents, some leading to serious injury or death. We estimate that several hundred people die each year in the United States as a consequence of collisions related to cellular phone use. While small in comparison to the 41,000 people who die in all vehicle accidents each year in the United States, municipalities, states, and even some countries have proposed a large array of restrictions on the use of cellular phones. Although only a few American municipalities have implemented a ban on people’s use of hand-held cellular phones while driving, several foreign countries have enacted laws, including limited and total bans. In this article we provide an economic evaluation of cellular phone regulatory options. Our primary conclusion is that banning cellular phone usage by drivers is a bad idea. A ban in the United States is estimated to result in annual economic welfare losses of about $20 billion.

This study provides the most comprehensive evaluation of the quality of recent economic analyses that agencies conduct before finalizing major regulations. We construct a new dataset that includes analyses of forty-eight major health, safety, and environmental regulations from mid-1996 to mid-1999. This dataset provides detailed information on a variety of issues, including an agency's treatment of benefits, costs, net benefits, discounting, and uncertainty. We use this dataset to assess the quality of recent economic analyses and to determine the extent to which they are consistent with President Clinton's Executive Order 12866 and the benefit-cost guidelines issued by the Office of Management and Budget (OMB). We find that economic analyses prepared by regulatory agencies typically do not provide enough information to make decisions that will maximize the efficiency or effectiveness of a rule. Agencies quantified net benefits for only 29 percent of the rules. Agencies failed to discuss alternatives in 27 percent of the rules and quantified costs and benefits of alternatives in only 31 percent of the rules. Our findings strongly suggest that agencies generally failed to comply with the executive order and adhere to the OMB guidelines. We offer specific suggestions for improving the quality of analysis and the transparency of the regulatory process, including writing clear executive summaries, making analyses available on the Internet, providing more careful consideration of alternatives to a regulation, and estimating net benefits of a regulation when data on costs and benefits are provided.