Costs of certain secondary effects were reported to be higher than incremental costs

As stated earlier, the costs of secondary effects were excluded from incremental costs. However, many companies reported instances where the costs of secondary effects were even higher than incremental costs. For example:

• Several companies reported significant delays in construction of new plants and equipment due to regulatory restrictions. Frequently, the delays occurred after the projects had begun and after millions of dollars had been invested. In some instances the delays amounted to many years.

Incremental costs vary considerably among the six agencies

High cost regulations are characterized by certain attributes

• Certain regulations encourage the increased use of oil, and others encourage the use of low sulfur oil. Since the demand for oil, particularly low sulfur oil, has not been satisfied by domestic production, the result is to increase reliance on foreign oil and affect the U.S. balance of payments adversely.

Many companies reported that where regulations prescribe the specific method by which regulatory goals must be achieved, there was often an adverse effect on productivity of both equipment and labor. Companies reported that they could have achieved the goals in a more cost-effective manner had they been given the latitude to do so. For example, companies do not agree with OSHA's insistence upon feasible engineering controls to control worker exposure to noise, when they believe that personal protective equipment would be just as effective at far less cost.

The complexity and rate of change of many regulations has caused companies to spend a considerable amount of executive and managerial resources to comply with existing regulations and to keep current with new and revised regulations.

Incremental costs vary considerably among the six agencies. Figure 1-10 shows incremental costs for each agency.

Analysis of regulations in the study and compliance actions taken by companies indicates that regulations with high incremental costs are usually associated with certain common attributes. Conversely, the absence of these attributes tends to be a characteristic of regulations with lower compliance costs. If the attributes are proven to be reliable indicators of high cost regulations, they may be used to predict which proposed regulations will be most likely to have a high incremental cost impact on the industries affected. In that way, the economic impact studies for the potentially costly regulations may be performed with greater care. Some of the more important attributes identified in the course of the study are shown in Figure 1-11.

This is not necessarily an exhaustive list of all of the attributes of all high cost regulations; however, it does represent a comprehensive list of the types of attributes which were associated with high incremental costs for the regula

The results developed by this unique methodology are not directly comparable to other regulatory cost studies, but the results are not inconsistent with their estimates that the costs are high

tions included in this study. Arthur Andersen & Co. believes this list of attributes may be useful to business and regulators in identifying proposed regulations with potentially high cost. The presence of one or more of the attributes in proposed regulations or legislation should provide a predictive capability in making that identification.

A number of estimates have been made of the costs to the private sector of government regulations. Some estimates have included all levels of government, all businesses in the U.S., and both economic and social costs. Others have focused on individual areas of regulation, selected types of cost and specific industries. For example:

Murray L. Weidenbaum and Robert De Fina of the Center for Study of American Business at Washington University estimated the total cost of federal regulation in 1977 to be $79.1 billion. Roughly $9.5 billion of this was attributed to environmental regulations. Their estimate was based in part on estimates provided by several industry and agency specific studies conducted by others.

The Office of Management and Budget (OMB) estimated the 1975-total costs of regulation to be in the range of $113.3 to $135.4 billion. The General Accounting Office's (GAO) economic evaluation of OMB's study concluded that OMB's estimate was significantly overstated, but did not establish an alternate estimate.

Edward F. Denison of the Brookings Institution estimated the incremental costs to protect the environment and the safety and health of workers in 1975 was $10.5 billion, $9.5 billion of which was attributed to environmental regulations. He also estimated that in 1975 these factors resulted in a 0.5% annual reduction in growth of output of net national product per unit of input. Denison's method of calculating incremental cost was substantially different from that used in the Business Roundtable study.

The Council on Environmental Quality (CEQ) study estimated the incremental cost for all businesses to comply with pollution abatement control requirements in 1977 to be $12.8 billion. The CEQ's method of calculating incremental cost was also different from that used in the Business Roundtable study.

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The foregoing studies each made important contributions to the public's awareness that the costs of regulation to our economy and to our society are very high.

The Business Roundtable study's major objective—to provide specific data that will contribute to improving the regulatory process dictated a study with a different scope. It was concerned with identifying the costs of a specific group of regulations, not the total cost of regulations. The Business Roundtable study's results nonetheless are not inconsistent with earlier studies in concluding that the cost of regulation is high.