How does Executive Order 12291 relate to agency regulations?

Executive Order 12291, issued in 1981, established a framework aimed at enhancing the regulatory process and ensuring that regulations adopted by federal agencies are subject to cost-benefit analysis. This Executive Order directs agencies to assess the economic impacts of their proposed regulations, specifically prohibiting them from adopting any regulation if the costs would be excessive relative to the anticipated benefits. This emphasis on cost-effectiveness is crucial as it encourages agencies to make decisions that are both economically sound and aligned with public policy goals.

The rationale behind the approach adopted by Executive Order 12291 is to ensure that regulations do not impose undue financial burdens or lead to inefficient allocations of resources, emphasizing a balance between the benefits of regulation and the costs imposed on society. Therefore, the primary contribution of this Executive Order is to require a careful examination of the economic implications of regulations, ensuring that agencies consider both the potential benefits and costs before proceeding.