Fred and Eleanor Glimp Professor of Economics, FAS
Sensible regulatory requirements can reduce illnesses and accidents, protect the environment, and maintain quality of life. But when regulations are onerous and poorly designed, they can cause serious harm — overwhelming small businesses, reducing economic growth, eliminating jobs, squelching innovation, and causing serious hardship. Many studies have found that entrepreneurship is the lifeblood of urban regeneration, meaning that business regulations that stymie entrepreneurship, like the ones in Boston, can have particularly large costs, especially during times of economic difficulty. While regulation is an important tool for governments, it is vital that the authors of such rules strike the right balance, giving careful consideration to the track records of old rules and the likely consequences of any new requirements.
For more than three decades, under both Democratic and Republican presidents, the national government has attempted to strike this balance and discipline the regulatory process by requiring detailed analysis of both the costs and benefits of new regulations. Only if the benefits of a proposed rule justify the costs can regulatory agencies go forward and burden the private sector. Cost-benefit analysis provides an important mechanism for evaluation; it also operates as a safeguard against the power of interest groups, including big businesses, which often try to encourage agencies to regulate with their interests in mind. This kind of analysis is intrinsically neither anti- nor pro-regulation. It is simply a tool that helps policymakers produce good regulations and prevent bad ones from being made law. Whether or not the tool has proved adequate — and at the national level, things could surely be far better than they are — it has certainly made things better than they would otherwise be.
Glaeser, Edward, and Cass R. Sunstein. "Regulatory Review for the States." National Affairs 20 (Summer 2014): 37-54.