Doing Things Better

Mark Kleiman has a useful post on the problems with cost-benefit analysis, which is to say, the problems with the way we estimate the worth of regulatory changes. For instance:

Formal benefit cost analysis counts everyone's gains and losses equally. But common sense and the principle of diminishing marginal utility agree that a dollar's worth of gain is more valuable to someone with few dollars than it is with someone with many. Obviously, taking $1 each from 900,000 poor people to give $1 million to a hedge-fund billionaire doesn't reflect a social gain, but a formal benefit-cost analysis will show that it does: after all, the net benefit is $100,000. Thus gains and losses should be adjusted by (at least) dividing each gain or loss by the income or wealth of the person bearing it, so that a $20 gain to a family with an income of $20,000 weighs as a heavily as a $10,000 gain to a family with an income of $1 million.

Kleiman ends his post with the sort of policy prescription we actually don't see enough of:

The Congress should order the administration to commission a study by the National Research Council to establish a set of standards for regulatory benefit-cost analysis, which can then be written into the statutes that require such analysis before a regulation can be issued, and adopted by OMB for benefit-cost analysis done in other administrative contexts. The legislation establishing the study should tell the NRC to develop rules that embody distributional adjustments, Bayesian weighting of uncertain gains and losses, and willingness-to-pay evaluation of gains and losses that do not come with market prices attached.

There's a lot of focus in American politics on doing better things. But there's rather less attention paid to doing things better. If we change the process by which we pass laws, for instance, we might eventually arrive in a world in which we can actually pass good laws, rather than compromising them down to the point of maximum incoherence. If we increase the evidence available to lawmakers, or improve the analytical approach they use to judge policy success, we can help lawmakers craft better products. And the nice thing is, these changes are actually really cheap. A lot cheaper than, say, increasing health-care subsidies without knowing what treatments work.