Authors: Eric A. Posner
Center for Business and Government, John F. Kennedy School of Government
This paper considers the possibility of giving agencies "net benefit accounts," which are devices for keeping track of the benefits and costs of regulations. When an agency issues a regulation, the net benefits of the regulation would be added to the account (or the net costs subtracted). Agencies would start with a surplus and be forbidden to issue regulations that in the aggregate would reduce the balance of the account below zero. Net benefit accounts have two purposes: (1) to reduce the cost of monitoring agencies' regulatory activities; and (2) to provide agencies with carrots as well as sticks for issuing efficient regulation. The carrot takes the form, paradoxically, of the option to issue inefficient regulations that are close to the agency's sense of mission.
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