The Office of Management and Budget's Office of Information and Regulatory Affairs (OIRA) proposed new guidance February 3 that instructs federal agencies how to make regulatory decisions, including the specific analytical methods that should be employed.
Specifically, the guidance:
Emphasizes monetization and "net benefits" decision-making. OIRA's proposed guidance demands that agencies put health and safety benefits in terms of dollars and cents, so they can calculate and demonstrate "net benefits" (benefits minus costs).
Requires discounting of lives saved in the future. OIRA's proposed guidance directs agencies to use two separate discount rates - 7 percent and 3 percent - in calculating the "value of a statistical life" and present the results of both. This rests on the assumption that a life saved in the future is worth less than a life saved today.
Demands cost-effectiveness analyses for all major health and safety standards. OIRA's proposed guidance requires cost-effectiveness analyses - looking at the ratio of costs to units of benefits (number of lives saved) - for all major health and safety rules.
Advises agencies to consider potential technological innovations by regulated entities. Frequently, regulated entities are able to drive down compliance costs over time through technological advances or "learning by doing," which are not typically predicted by cost-benefit analysis. OIRA's proposed guidance instructs, "Estimates of costs should be based on credible changes in technology over time," adding that "regulatory performance standards and incentive-based policies may lead to cost-saving innovations that should be taken into account."