The new OMB Social Welfare Function

Healthcare Economist October 4, 2024
Jason Shafrin

Recently, the Office of Management and Budget has released new procedures to assess government regulation (Circular A-4) and economic policies (Circular A-94). What is unique about this guidance is that it weights benefits and costs of new regulations and policies based on the income of the individuals impacted. The goal is to help reduce inequality. Costs and benefits that accrue to low-income individuals are weighted more; those that accrue to high-income individuals are weighted less.

A paper by Viscusi et al. (2024) explains what this policy is and some of its challenges. First, Viscusi explains that the policy puts explicit weights on policies by income group using the following formula:

So how does this formula impact the weight we place...

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