Event Transcript: Putting a Price on Human Life: The Costs and Benefits of Cost-Benefit Analysis, February 25, 2004
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Right up to the day they died, Russian immigrants Mariya Diment and Liya Murkes loved to take long walks together along the oceanfront near the senior residence where they lived in Santa Monica. One summer day in the year 2000, Cheryl Chadwick, reportedly talking on a cell phone while driving her Mercedes-Benz, plowed into Diment and Murkes while they were strolling, killing them both.
What happened to Mariya Diment and Liya Murkes is not unusual, and almost certainly will become less so; as many as 1,000 people a year now die in car accidents caused by what some are calling “phoneslaughter.” Researchers have found that people who are talking on cellular phones while driving are four times more likely to get into car accidents than people who are not — about the same as the increased risk from driving after several drinks (around the legal threshold for drunk driving in most states). Ten years ago, only 10 million people worldwide had ever even used a cell phone; by now, cell phone users number a billion and counting. The vast majority of Americans with cell phones talk on them while driving.
Most states, and many cities and towns, are deciding whether to do something to prevent these accidents. Some places have banned cell phone use while driving. Others have used laws already on the books — even homicide laws — to try to get at the problem.
Some of the country’s most influential economists, however — based on research conducted with the help of generous funding from wireless providers — have concluded these restrictions are a bad idea. Why? Because the people who are talking while driving are willing to pay a lot to talk on the phone — more than many people who face deadly risks are willing to pay to avoid the risk of being killed. What these researchers have done is compare the price of phone calls made while driving with the “price” of deadly risks. Since risk is not, like cell phones and calling plans, directly bought and sold in the marketplace, economists have tried to find places where it is sold indirectly. They have focused mainly on risky workplaces, where extra wages are, in theory, required to convince workers to accept increased risks of death. In comparing levels of wages and risk, economists have estimated that groups of workers doing dangerous jobs are paid, on average, a total of about $5–6 million more, per work-related death.
By comparing the price of cell phone use with this “price” of risky work, economists have concluded that banning cell phone use in cars makes no economic sense. The technique of translating lives into dollars is complex, but the bottom line of the cell phone studies is simple to state: the Cheryl Chadwicks of the world can go on talking into their cell phones while driving their Mercedes-Benzes, even though it means that quite a few of the Mariya Diments and Liya Murkeses of the world end up in the morgue. All based, amazingly enough, on the price of someone else’s phone call.
It was “a colorless liquid of sweetish odor, very poisonous if absorbed through the skin, resulting in lead poisoning almost immediately.” In 1922, Pierre du Pont, the head of General Motors (GM), used these words in a letter to his brother Irenee, the head of Du Pont Chemical, describing the leaded gasoline a GM scientist had just developed to prevent auto engine “knocking.” For the next 50 years, the makers of leaded gasoline would deny this basic fact about lead: it is a poison. When faced with the warnings of public health authorities about the potentially dire effects of millions of automobiles spewing lead into the atmosphere, the leaded gas industry had a simple response: prove it.
The trouble was, it was hard to prove that the day-to-day, low-level exposures to lead caused by leaded gasoline hurt people. The kinds of health effects we now know come from leaded gasoline — reduced learning capacity, neurological disorders, and high blood pressure — are so common that it is difficult to say which portion of these effects is due to lead and which to other causes. Thus, although the U.S. government suspected the risks of adding lead to gasoline from the very beginning, it would not seriously try to regulate leaded gasoline until lead had been pouring from almost every automobile in the country for half a century.
With the passage of the federal Clean Air Act in 1970, the era of leaded gas finally began to draw to a close. The Act directed the federal Environmental Protection Agency (EPA) to set pollution limits based on public health. Although EPA could not put exact numbers on the health effects caused by lead, it thought the existing scientific evidence was strong enough to justify strict limits on lead in gas. Of particular concern to the agency were the terrible effects lead could have on the cognitive and neurological development of children.
After a hard-fought court battle in which the leaded gasoline industry argued that EPA should not be allowed to regulate unless it could prove leaded gasoline had actually harmed identifiable people in the past, EPA’s new restrictions on leaded gasoline were upheld. The court’s ultimate decision in the case is considered a landmark in U.S. environmental law because it established that EPA could act in a precautionary fashion rather than wait for scientific certainty about the harmfulness of a substance before acting. EPA set its initial standards for lead based on the goal of protecting virtually all children from lead exposures that would harm their health and cognitive development.
In the 1980s, EPA decided to phase out lead in gasoline entirely.
In coming to this decision, however, the agency not only looked at the public health effects of leaded gasoline; it also tried to determine how much these health improvements were worth in dollars. In justifying additional policies to reduce lead poisoning of children, EPA returned to the issue several times in the 1990s. The agency’s analyses have considered the costs of medical care for lead poisoning, the costs of remedial education for children whose cognitive development had been impaired by lead, and the children’s expected loss of future income due to their lowered IQs. In deceptively simple terms,EPA has asked how much an IQ point is worth to an individual. Published estimates have ranged as high as $8,346.
Now, analysts — including economist Randall Lutter,of the American Enterprise Institute — are busily working to show that EPA got it wrong when it looked at the economics of banning leaded gasoline almost two decades ago. Rather than assessing the “worth” of children’s health by considering lost income or the costs of remedial education, Lutter thinks EPA should have relied on what parents spent pursuing one particular treatment known as chelation therapy — a standard treatment for very high levels of lead poisoning,but less common and less clearly effective for chronic, low-level exposures.
Most of the costs associated with this treatment reflect the time parents spent taking their children to the doctor — most often, in fact, the costs consist of the value that economists have assigned to the time of mothers who stay home with their children. Since the value of this time, and the cost of the treatment, are not very high, these analysts say EPA has overvalued the health of the children affected by exposures to lead and, as a consequence, has overreacted to the exposures themselves. Using the chelation yardstick, an IQ point is worth as little as $1,100 — a fraction of the previous value. On this view, the appropriate level of spending on lead removal would be only a fraction of the amount that EPA endorses.
Almost one-third of the land in the United States is owned by the federal government. The national forest system — one part of the public lands — was created at the turn of the twentieth century with a view toward using forest resources to achieve their greatest benefit through time — a view promoted by the first head of the Forest Service, Gifford Pinchot, and one that has contemporary resonance in the concept of “sustainable development.” Over time, however, the national forests came to be used more in the service of timber companies and related interests, for short-term gain, than in the service of broader interests, for long-term stability. Throughout much of the twentieth century, the national forest system was characterized, and ravaged, by policies such as below-cost timber sales, in which the national forests were auctioned off to private interests for less than the government spent preparing the forests for sale.
At the turn of the twenty-first century, the U.S. Forest Service proposed taking the remaining roadless areas of the national forests — among the most pristine and, by definition, least traveled, places in the country — and setting them aside, off-limits to roads and the timber interests that would use the roads to take the trees. Hundreds of thousands of citizens applauded the idea, and wrote to the Forest Service expressing their enthusiasm. It would be one of the largest single decisions preserving wilderness — affecting some 60 million acres in all—in the history of the United States, perhaps in the history of the world. The “roadless area” policy would, the Forest Service announced, protect not only the trees themselves but the watersheds, flora, and fauna dependent on them — not to mention the burgeoning ecotourism industry. Timber interests immediately challenged the new policy in court. When, at about the same time, the Bush administration came into office, it did nothing to defend the policy. Usually known for its aggressive and effective defense of government initiatives and prerogatives, the Justice Department in this case simply sat on its hands and let the environmental groups answer the lawsuit alone. Perhaps even more remarkable, however, was the government’s official tallying of the costs and benefits of this historic policy.
In a 2002 report to Congress, the Office of Management and Budget (OMB) announced that the new forest initiative would cost about $184 million and produce benefits of only $219,000 a year. This lopsidedly negative result made forest protection look, in narrow economic terms, like one of the least defensible regulatory ideas of the previous year. So little, indeed, did OMB think of the forest initiative that the office put the policy on its infamous “hit list” of regulatory policies to be reconsidered by the agencies that had dreamed them up. How did a rule protecting 60 million acres of publicly owned lands, containing fragile and precious sources of water, wildlife, and plant species, come to look so bad in economic terms? The answer is simple: just ignore most of the good things one wants to protect forests for — both the good things that could comfortably be stated in dollar terms (such as the economic value of a forest for tourism) and the good things that money cannot buy (such as the knowledge that pristine forests are being protected in perpetuity). What did the tiny annual benefit of $219,000 reflect in this case? The savings from not building roads. Every park and forest that we protect “saves money” in this sense: imagine the cost of the asphalt that would have been required to pave the entire area. But is the avoided cost of exploiting nature — as OMB assumed — the only benefit of protecting it? At the start of the twenty-first century, the clock is starting to run backward as laws and regulations protecting health, safety, and the natural environment — some of the proudest accomplishments of the past 30 years — are now under attack.
The attackers do not explicitly advocate pollution, illness, and natural degradation; instead, they call for more “economic analysis.” And the stories of “phoneslaughter,” lead poisoning, and forest despoliation show where their kind of analysis all too often leads.
The new trend toward economic critique of health and environmental protection has caught on in every branch of the federal government — within the White House, in Congress, and even in the courts. Environmental advocates, decision makers, and citizens concerned about the environment often find themselves on the defensive, without an effective response to the arcane arguments and imposing data offered to show why, when it comes to protective regulation, less is better.
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