Bunting Through the Policy Making Process. J. Glauber, C. Narrod, and S. Schaffer, USDA
The U.S. Department of Agriculture typically publishes over 400 regulation each year covering a variety of areas. Of these, about 60-80 are considered major or economically significant and require a regulatory impact analysis. A handful of these also require a risk assessment to assess the affects of a major environment and human health.
While many of the regulations explicitly consider risk assessments in determining the effects of regulatory actions, costs and benefits are typically estimated without consideration of the underlying probability distribution of outcomes. Ignoring the underlying distribution of costs and benefits not only overstates the certainty of the analysis, it can potentially lead to regulatory actions where the expected costs can exceed the benefits. In its guidance to federal agencies on "best practices: for preparing cost-benefit analyses under Executive Order 12866," the Office of Management and Budget stresses the importance of careful valuation of risk levels and changes.
This talk examines regulation published by USDA in 1996 and 1997 that regulated the production and use of wheat grown in the area where Karnal Bunt was known to occur. It reviews the analytical process surrounding the accidental introduction of Karnal Bunt into the United States via importation of agricultural commodities. It discusses the pros and limitations to the following three separate components: the risk assessment, the cost-benefit analysis, and the resulting compensation programs. It concludes with recommendations for how future analysis might be done for application to decision-making in management of risks in domestic production and international trade.
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