The Benefit-Cost Analysis of Security Focused Regulations

Abstract

Security focused regulations have been largely exempt from the benefit-cost type of analysis required for major Federal regulations and done routinely in areas such as transportation, environment and safety. Among the reasons offered for exemption are the analytical difficulties of security issues involving complex or poorly understood probabilities and consequences. This paper investigates the magnitude of security focused regulations, a framework for developing an expected costs analysis of regulations, and the current “break-even” analysis used by the Department of Homeland Security. Key assumptions implicit in the current analysis are identified and suggestions are made for the difficult evolution of security regulations toward a more explicit benefit-cost analysis.