The cost of regulation

Advocates of regulatory benefit-cost analysis are right in theory, albeit somewhat impractical. In a sense, they have put the cart before the horse. Right now we cannot satisfactorily estimate the costs of government regulation, let alone its benefits. We must understand what drives cost before we can make satisfactory cost estimates. But, first of all, we need good cost measures, to figure out what drives cost. We don’t now measure the costs of regulation. Accurate measurement of the cost of regulation is, therefore, the first step to better regulatory practice. This means accounting for the regulatory burdens on firms and subordinate governments and allocating those burdens to the regulatory policies that induced them.