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US presidents since Ronald Reagan have required regulatory agencies to conduct cost-benefit analyses of proposed regulations,1 currently governed by Office of Management and Budget Circular A-4.2 On its surface, requiring such analyses makes sense; after all, why burden businesses with costly regulations if there is little benefit to the public? There are, however, several problems with cost-benefit analysis, including the facts that the costs are often borne by different people than receive the benefits, the tendency of cost-benefit analysis to overstate costs and understate benefits and the pro-business bias within the economics profession.3 The net effect of requiring cost-benefit analyses is to make it more difficult to develop, implement and defend regulations to protect public health and the environment.
These problems are clearly manifest in the cost-benefit analyses done for the proposed tobacco product regulations by the US Food and Drug Administration (FDA), first as part of its unsuccessful 2011 attempt to require graphic warning labels on cigarette packages4 and its 2013 proposal to assert jurisdiction over non-cigarette tobacco products.5 In both cases, the FDA grossly underestimated benefits and overstated costs.
We6 criticised the cost-benefit analysis of the warning label rule4 on the grounds that it discounted any health benefits by 50% to account for the lost ‘consumer surplus’ that would result from smokers being denied the pleasure of smoking. …
Funding This work was supported in part by grant 1P50CA180890 from the National Cancer Institute and Food and Drug Administration Center for Tobacco Products. SAG is the American Legacy Foundation Distinguished Professor in Tobacco Control.
Competing interests None.
Provenance and peer review Commissioned; internally peer reviewed.