Cost-benefit analysis is the test the guests on The Bob Zadek Show most often apply to government policy: a rule, a tax, a prohibition or a jail is judged by whether its benefits exceed its costs, and by whom each is borne. Across the episodes, the phrase is used both as a management doctrine — Gary Johnson’s promise to run New Mexico on “best product, best service at the lowest price” — and as an economic verdict on prohibition and pretrial detention. The show’s host, Bob Zadek, frames the concept as a general question about whether laws receive the same scrutiny as regulations.
Gary Johnson and governing by cost-benefit
In the 2010 episode, former New Mexico Governor Gary Johnson told Bob Zadek that his promise to voters was that everything would be a cost-benefit analysis, and that he believed he was re-elected on the basis of over-delivering on that first promise. He described the test as “best product, best service at the lowest price,” and said that for him everything is a cost-benefit analysis Libertarians For Change (2010).
Johnson applied the frame to fiscal promises, saying that politicians had made promises that should never have been made, citing pension funds and the fact that about 50 states were underwater on state pension funds. He contrasted the states with the federal government, which he said could print money, with the ramifications of a weaker dollar and inflation. In the same conversation he said that as governor he never claimed to have created a single job, because government does not create jobs; what it can do, he said, is create a level of confidence, by slashing spending and looking at lowering taxes. He called raising taxes completely unacceptable, arguing that raised taxes address problems of the day and then become largesse that commits the government to future spending. Bob Zadek, for his part, described printing money as a tax on everybody that sucks value from every person.
The episode also tied the concept to biography. Johnson said he started a one-person handyman operation in Albuquerque in 1974 and by 1994 had a thousand employees in electrical, mechanical, plumbing and pipefitting work, and that he sold the business in 1999 with nobody losing their job. Bob Zadek used that record to press the case against career politicians, naming Obama, Schumer, Pelosi and Barney Frank as people who never had to deal with the financial issues they themselves create, and noting that small business accounts for 70 percent of jobs in the country depending on the number you read.
Regulation and the regulatory budget
The 2017 episode with Sam Batkins turned on whether cost-benefit analysis applies to laws as it does to regulations. Bob Zadek said that regulations are required by statute to go through a cost-benefit analysis, and that for major rules this makes sense even when a regulation objectively makes sense, because it simply might be too expensive; he then asked whether the same analysis exists for laws A Lame Duck’s Last Stand (2017).
Batkins, described by Bob Zadek as being with the American Action Forum, answered that there is cost-benefit analysis to some extent on a fiscal realm: when Congress passed the Affordable Care Act or Dodd-Frank, it got a sense from a fiscal component of how much money was going out, how much was coming in, and what it would do to affect revenues, but there was very little discussion of what the legislation would mean for regulation. He said the Congressional Budget Office, which does this analysis, said it would impose significant regulation but just did not have the apparatus, and he described a new move to create a division within the Congressional Budget Office — a regulatory budget office — that would scrutinize legislation for regulatory implications and look at pending or recent regulations to determine their overall macroeconomic effect on the economy.
Batkins placed the idea in a separation-of-powers frame, calling it an Article I versus Article II issue — Article I being legislative power and Article II executive power — and said Republicans were starting to realize they had delegated too much power. He noted that Jimmy Carter talked favorably about a regulatory budget and regulatory modernization, and that a regulatory budget is not so much a left-right issue. On the outlook, he said he could pretty much guarantee there would be less regulation than in 2016, because President Obama was about to break his own record for major regulation: he issued 100 regulations with at least $100 million in impact in 2010 and was likely to issue more than 100 in 2016. Batkins also said President-elect Trump had pledged to remove two regulations for every new rule, which he described as a formal regulatory budget already happening in the United Kingdom. Earlier in the conversation he explained that the Congressional Review Act, which he said passed almost unanimously in 1996, allows certain resolutions of disapproval to proceed without 60 votes in the Senate, and that Congress could say of a rule that it may not be reissued in substantially the same form.
Drug prohibition as a failed cost-benefit test
In the 2017 episode with Jeffrey Miron, Bob Zadek asked why the libertarian community opposes drug prohibition on principle, framing the show as born of a governing philosophy rather than discrete issues. Miron turned the question around, asking why it would not be legal for individuals to produce, sell, distribute, buy and consume drugs, given that it is legal to do all manner of things, some of which are very dangerous when used inappropriately Miron vs. Sessions on the Drug War (2017).
Miron said he comes to libertarian issues as an economist, thinking about any policy in terms of what benefits and costs it generates for society and for different people within society — who is harmed and who is helped. He said his analysis is that prohibitions of alcohol, drugs, gambling and prostitution do not generate much in the way of anything anyone would consider a benefit and typically have very large costs. The alleged benefit, reducing drug use, he said, has some evidence behind it but not to a dramatic degree, and probably mainly reduces use by people who would use the substances in moderation and responsibly if they were legal. Against that modest benefit he listed the costs: increased violence, other types of crime fostered by higher drug prices, corruption generated because the industries regulated by prohibition cannot lobby and instead bribe politicians, police officers and judges, the disruption of other countries, restrictions on the medical uses of controlled substances, infringements on civil liberties, and the exacerbation of racial tensions. He concluded that if you think about it as a cost-benefit analysis, prohibition utterly fails as a sensible policy.
Miron also grounded the position in a presumption of liberty: he said the question is almost comical because the presumption should be that everybody is allowed to do whatever they want with respect to drugs or anything else as long as they are not harming anyone else, and he described the same position as a non-interference principle or a right to be left alone.
Bail, jail costs and reform
The 2018 episode with Scott Shackford applied the concept to pretrial detention. Bob Zadek said it made him angry that bail reform has to be a reform instead of the government doing its job to assure people who deserve to be free that they are free, and he argued that on a pure cost-benefit analysis the case for reform is overwhelming How Bail Traps the Poor in Jail with Scott Shackford (2018).
Bob Zadek noted that Shackford had written about how expensive it is to jail somebody, that the cost of jailing somebody is overwhelming, and that people are in jail often for months because they could not make bail. He compared the modest risk that defendants fail to appear to the way his dental hygienist runs her office, calling to remind him in the most annoying way that he has to have his teeth cleaned in a couple of days, and said that is all the system is being asked to do. Shackford said the amazing thing is how expensive these reforms are going to be because of poor record-keeping and communication, and mentioned that Alaska had already started something in this area. Shackford also said that Senator Bernie Sanders had introduced legislation the week before to try to eliminate cash bail at the federal and state level in the next three years, that he did not think the legislation would go much of anywhere, and that California might be the next place where something big happens.
Across episodes
The topic recurs in four episodes spanning 2010 to 2018, and the excerpts show the same test applied to different objects rather than a development in the concept itself: Gary Johnson applies it to budgeting and tax promises in 2010, Sam Batkins to regulatory review in 2017, Jeffrey Miron to drug prohibition in 2017, and Bob Zadek and Scott Shackford to bail and jail costs in 2018. No speaker in the excerpts revises or responds to another’s formulation of cost-benefit analysis.
What the sources do not cover
The excerpts do not define cost-benefit analysis formally, describe its statutory basis beyond Bob Zadek’s statement that regulations are required by statute to undergo it, or name the statute. They do not give the outcome of the Sanders bail legislation, the details of the Alaska reform, or any court decision applying cost-benefit review to a regulation. The Batkins excerpt ends before the discussion of sub-regulatory guidance and “dark matter,” and the Johnson excerpt breaks off at the immigration and work-visa segment, so neither topic is treated here.