Association for Public Policy Analysis & Management

This research evaluates the state of the practice of benefit cost analysis conducted by the U.S. Department of Transportation (DOT). Together with EPA, DOT promulgates more lifesaving regulations than all other agencies combined. The formal benefit cost analysis, known as a regulatory impact analyses (RIAs), is required for all major regulations of Executive Branch Agencies. Agency-produced RIAs provide detailed projections of the costs and benefits associated with “significant” regulatory interventions, usually those defined as those having more than a $100 million annual impact on the economy.

Our review of agency benefit cost analysis focuses specifically on transportation safety regulations. In the US, traffic crashes are the leading cause of death for individuals between 16 and 29. The principal benefits of these regulations is to reduce the risk of premature mortality and injury. In fact, annual traffic fatalities in the United States have declined from over 50,000 to about 32,000 in slightly over 30 years, while the vehicle miles driven over the same period have doubled. This relative safety trend is likely attributable to federal and state regulatory programs as well as market evolution toward safer vehicles.

The methodology used by the DOT for benefit cost analyses is first characterized, and then we rate the quality of the economic analysis for all significant DOT regulations issued from 2011 through the 2014.  Criteria include the clarity and balance of the presentation, the reasonableness of the baseline, the credibility of the incremental change from the baseline that the regulation is expected to cause, and the way the timing of capital investment and benefit streams are handled. A particular focus is on the nature of the uncertainty in each of the RIAs with respect to predictions of the lives that the rulemaking is estimated to save.  We couple this with other dimensions of life saving nature of these rules such as life-years saved and quality-adjusted life-years saved which may incorporate some dimensions of morbidity as well.

To develop a sample of regulations for the study, a search was made for “economically significant rules” in federal register web pages for the DOT by year.  We first determined if lifesavings were estimated during the rule’s evaluation. Once a rule was found that mentioned benefits associated with lives saved, the associated RIA was searched for in regulations.gov, using the docket number of the rule. 

The resulting sample provides a comprehensive representation of significant DOT rules for recent years, and the role that uncertainty analysis plays in this analysis. As such, this group of RIAs provides a secure foundation for characterizing current agency evaluation practices, and for assessing the quality of economic evaluations prepared by the DOT.  Our findings suggest that there is a very wide range of criteria used to estimate the baselines and the incremental change from the baselines, coupled with some inconsistences in the timing of capital investment and the nature of the uncertainty analysis. We end by comparing our findings with a similar analysis of rules at US. EPA.