Cost - Benefit Analysis In Administrative Legislative Procedure

This article discusses the role of the cost-benefit analysis (CBA) in the process of the administrative legislation. In China, the legislature delegates some of the decision-making authority to the administrative agencies, who enact rules and regulations to implement the law effectively. How could the legislature monitor and control the bureaucrats exercising this authority and guarantee that the enacted rules and regulations are consistent with the spirit of the law? The CBA, which is a central part of the regulatory impact assessment, proves to be an effective tool. When the administrative agencies submit the draft legislation, they should use the CBA to disclose the information about various alternative regulatory actions, as well as the estimates of the quantified and monetized outcomes of the rules or regulations. As a result, the CBA improves the accuracy of the information reported to the legislature, and solves the problem of information asymmetry between the legislature and the executive branches.Firstly, by analyzing the Presidential Executive Order 12866, the guidance for regulatory impact assessment—"Circular A-4"and the Office of Management and Budget annual report to the Congress, the paper tries to explain why the CBA is treated as a tool for information disclosure, rather than the decision-making tools for administrative legislation. Furthermore, in the static and dynamic game of complete information, it discusses the game between the legislature and administrative agencies. In the infinite repeated games, with the CBA as the tool for information disclosure, the legislature stipulates a high penalty for deceit in the administrative legislation, by which it could control the administrative agencies. Finally, from the practice of regulatory impact assessment in the administrative legislation in China, the article points out the drawbacks of the practice and offers the way for improvement.