One of the most controversial aspects of comprehensive regulatory reform is the potential role of courts in reviewing agencies’ Regulatory Impact Analysis or other similar economic analysis that informs regulatory decisions. The Securities and Exchange Commission provides a useful case study on the effects of such judicial review. The commission’s chief economist and general counsel pledge to improve the commission’s economic analysis in 2012, in the wake of the Business Roundtable decision. Business Roundtable was the most recent of several decisions that remanded SEC regulations due to flaws in the accompanying economic analysis.
A structured assessment I conducted found that the SEC’s analysis improved on all five criteria the commission staff targeted for improvement: analysis of the need for the regulation, assessment of the baseline, development of alternatives, and estimation of benefits and costs. The SEC’s economic analysis accompanying regulations is far from comprehensive, but it is a noticeable improvement compared to the pre-guidance years.
Jerry Ellig is a senior research fellow at the Mercatus Center at George Mason University.