Leading Entrepreneurship

In my second post of this series, Cost Benefit Analysis Definition, we defined the analysis, but failed to discuss its standardization - so let’s cover that in this post.

“…the Council on Wage and Price Stability (COWPS) [was] created in 1974 to study and to try to control the effect of inflation on the U.S. economy. COWPS quickly enlarged its role to include cost-benefit analyses of health, safety, and environmental regulations, reasoning that regulations which did not pass the test of economic efficiency would inevitably have an unacceptable impact on inflation. COWPS (followed by its successor in the Carter administration, the Regulatory Analysis Review Group, or RARG) presided over both the first major efforts at deregulation in this country, beginning with deregulation of the airlines, and the first major efforts to evaluate regulations according to the criterion of economic efficiency.

In 1981, the Regan administration reassigned the job of regulatory oversight to a new and obscure office within the White House’s Office of Management and Budget (OMB) – the Office of Information and Regulatory Affairs (OIRA). OMB’s OIRA is, by Executive Order, responsible for reviewing all major federal agency rules from the perspective of cost-benefit analysis. Thus OMB is the perfect place to institutionalize an antiregulatory stance within the federal government. The Clinton administration made little use of OMB’s cost-benefit judgments in practice, but did not reduce OMB’s formal authority over other agency’s rules. In contrast, the Regan, Bush I, and Bush II administrations have embraced OMB’s ability to roll back progressive regulations.”

Modified from Frank Ackerman & Lisa Heinzerling (2004)
Priceless: On Knowing the Price
of Everything and the Value of Nothing.
New York, NY: The New Press.

“Perhaps the most controversial reason for rejecting the production change to the [faulty] gas tank, however, was Ford’s use of cost-benefit analysis to justify the decision. The National Highway Traffic Safety Association (NHTSA, a federal agency) had approved the use of cost-benefit analysis as an appropriate means for establishing automotive safety design standards.”

Dennis A. Gioia, (1992)
Pinto Fires and Personal Ethics:
A Script Analysis of Missed Opportunities,
Journal of Business Ethics, 11, 5, 6, 379-389.