Agency Use Of Cost-benefit Analysis And Similar Analytical Methods V. B-193281

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B-193281 1 (1978-10-24)

handle is hein.gao/gaobachih0001 and id is 1 raw text is:

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Bl 93 October 24, 1978

Robert A. Mthony
The Administative Conference
of the United States
i- 2120 L St-ceet, NRW..
Washingto DC.o 20037

Dear Mr Anthony

In response to your September 29 request, we have reviewed the draft
recommenda tins on the use of cost-benefit and other similar analytical
methods in regulation, prepared by the Administrative Conference's Committee
on Agency Decisional Processes. We find the attempt to enhance the
effectiveness of agency decisionmaking both reasonable and constructive.
We have the following comments.

First, paragraph B recommends that Congress should also consider the
extent to which the legislation should provide specific guidance respecting
methods to be used in performing the analyses.' We find this recommendation
inappropriatc! Cost-benefit and other balancing analysis is highly technical
and compiea<, and involves constantly evolving methodologies. The Congress
should not be called on to offer specific guidance on matters of research
methodologies which will of necessity vary from case to case and over time,
We recomariend that the last sentence of paragraph B be deleted.

Second, we find an important distinction between quantitative analyses
such as cost-benefit and cost effectiveness; and qualitative analysis, or
non-numerative balancing. In the draft recommendation, all of these types
of analysis are referred to as cost-benefit and similar analyses. We feel
that, although they are all decision tools, there is a fundamental difference
between quantitative and qualitative analysis, which is important to recog-
nize. The former, in its purest form, is an objective decision tool, which
yields a numerical answer. The latter is by definition subjective, since
some or alL of the costs or benefits cannot be valued or measured. In
practice, cost-.benefit analysis also may involve subjective estimation of
some costs or benefits. Nevertheless, we feel that both quantitative analysis
and qualitative analysis have their appropriate uses, but that they are not
necessarily interchangable. Agencies must decide which type of analysIs is