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The following Articles were re-printed
from The Los Angeles Times, February
25, 2004
Commentary:
Balancing Lives Against Lucre
Cost-benefit analysis is an exercise in moral
bankruptcy. How can anyone put a dollar value on not
dying of mad cow disease?
By Frank Ackerman and Lisa Heinzerling,
The recent outbreak of mad cow disease led to immediate,
soothing reassurances from the U.S. Department of
Agriculture, resting on what sounded like hard, scientific
facts. Don't worry, the official story went, we have
a rigorous inspection program designed to ensure with
95% certainty that fewer than one in a million cattle
have the disease. Doing more than that would be unnecessarily
expensive because we are already, it seems, safe enough.
Instead of resolving to find every case of mad cow
disease and eradicate it from the United States, the
USDA engaged in a how-much-is-too-much conversation
in which it balanced the safety of our meat supply
with the beef industry's bottom line.
That cost-benefit approach is how regulatory Washington
makes decisions these days, and the mad cow fiasco
is the perfect example of the moral bankruptcy of
the method. With 36 million cattle slaughtered annually
in the United States, the "one-in-a-million"
threshold would actually allow more than one case
of mad cow disease every two weeks.
Would that make it a success? In cost-benefit land,
there is no such thing as an absolute priority on
safety of the food supply or prevention of disease.
Rather, everything is a matter of cold dollars and
cents. A human life saved is worth some fixed price,
and if the cost of keeping the beef supply safe exceeds
that price, we don't pay it. We may take half steps
-- as the administration has chosen to do -- but we
don't adopt a zero-tolerance standard or test every
slaughtered animal (as Japan does).
Outside the Beltway, it may seem bizarre to talk
about the dollar value of avoiding a case of mad cow
disease. But on that, and other matters -- the cost
of keeping the public safe from lead or mercury poisoning,
or of protecting our national parks and forests --
the administration's reliance on cost-benefit analysis
all too frequently concludes that we can't afford
to be as safe as most of us want to be.
John Graham, the former head of the Harvard Center
for Risk Analysis who is now President Bush's "regulatory
czar," is the man in charge of policing the cost-benefit
profiles of all the administration's programs. He
has installed an aggressive system to root out regulations
that don't pass his version of a cost-benefit test
-- derailing or undermining rules on everything from
hog farms to power plants.
In George W. Bush's Washington, Graham's ideas are
more popular than ever. The debate over arsenic in
drinking water, in which the Bush team initially wanted
to roll back Bill Clinton's standard, centered on
the minutiae of a cost-benefit analysis of reducing
arsenic poisoning. In a particularly shameless application
of economics to human life, cost-benefit advocates
in the U.S. and in Europe have suggested that smoking
may be a financial net gain for society because it
kills off senior citizens who would otherwise have
lived longer and consumed expensive medical care,
pensions and other services.
At first glance, cost-benefit analysis and the related
field of risk analysis do not appear to be biased.
Indeed, they are presented as impartial, objective
standards for figuring out which environmental programs
and regulations make sense and which do not. They
seek to mimic the workings of the free market, which
automatically compares costs and benefits for a private
business. A company selling toothpaste or software
makes a profit if its sales (benefits) exceed its
costs. If costs are greater than revenues, the product
is not worth making.
Cost-benefit analysis tries to apply the same standard
to health and safety. It fails because the benefits
of most public programs are nothing like sales revenues.
Rather, the benefits include priceless values such
as the protection of life, health and nature.
Consider the information that is needed for a cost-benefit
analysis related to mad cow disease. The costs include
additional testing and the losses imposed on the meatpacking
industry if marginal or diseased cattle cannot be
slaughtered and sold. In principle, there is no problem
with assigning dollar values to all of these costs.
On the other hand, the benefits can be impossible
to calculate in dollar terms. They include prevention
of incurable, fatal disease in humans and animals,
peace of mind for consumers and protection of export
markets that might reject U.S. beef.
What is the dollar value of not dying of mad cow
disease? Or of not being poisoned by lead? Or of protecting
our parks and forests from logging?
As it happens, a "science" has emerged
among economists to produce artificial dollar values
for life, health and nature. It relies on the flimsiest
of analogies and inferences. Saving a human life is
often valued, for the purpose of risk analysis, at
$5 million to $7 million, based on the differences
in wages between more and less risky jobs.
The Bush administration has also been relying lately
on the results of surveys asking people what they
would be willing to pay for hypothetical, small reductions
in the risk of death. This generally produces lower
numbers, "showing" that a death is worth
only $3.7 million.
It is not only life and death that are valued by
torturous, indirect means. Lead poisoning, for instance,
is valued by studying the link between IQ and income
-- because one of the effects of lead poisoning is
to lower a child's intelligence. Researchers therefore
estimate the reduction in lifetime earnings for a
lead-poisoned child because of lowered IQ. In another
infamous example, Graham's regulatory office reported
that the value of protecting about 60 million acres
of roadless areas in national forests was a measly
$219,000 -- reflecting only the money saved by not
building roads.
It is ludicrous to use these values as the basis
for deciding whether to protect health and the environment.
Should we accept several deaths a year from mad cow
disease if it would cost more than $7 million per
death to control the disease? Should we let logging
proceed throughout our parks and forests if the logging
companies are willing to pay more than we would save
by not building roads?
Our deliberations are not made more profound or precise
by the economists' artificial values. Polls repeatedly
show that Americans want the government to do more
to protect health and the environment; nothing in
law or economics proves they are wrong.
Frank Ackerman, an economist at Tufts University,
and Lisa Heinzerling, a law professor at Georgetown
University Law Center, are the authors of "Priceless:
On Knowing the Price of Everything and the Value of
Nothing" (The New Press, 2004).
Risk analysis is no soulless monster of science.
It's a valuable way to make choices that help the
most people at the least cost.
By James K. Hammitt and Milton C. Weinstein
A risk that kills thousands of Americans every year
surely seems like something the government should
regulate. But what if that risk also comes with a
benefit, providing people with a service that improves
their lives?
Take the case of cellphones and driving. Drivers
using cellphones cause 2,600 deaths and 330,000 injuries
in the United States a year, according to our estimates.
But Americans are deeply attached to their cellphones
and are willing to spend billions of dollars for the
convenience and business and social contact that cellphones
provide when they are driving. A ban would save lives
but deprive people of a benefit they badly want.
The decision is not as obvious as it seems. If you
were in charge, what would you do?
In recent years, the Clinton and Bush administrations
have put more of these decisions to the test of risk
analysis, a decades-old process that attempts to consider
comprehensively the complexities inherent in risk.
This means studying the nature of the hazard, where
we're exposed to it, how much of it we're exposed
to and the severity of the consequences (death or
something less) -- as well as the benefits and costs
of various risk-reduction strategies. Risk analysts
try to weigh all these factors, determining how many
lives would be saved and how much health would be
protected, at what cost, for each given strategy.
After all, money and time are limited, even when
it comes to saving lives. And a million dollars spent
protecting against one risk might save more lives
if spent protecting against another.
Here's a simple example of how risk analysis can
work. Some women who get Pap smears are told that
their results are uncertain and that they should get
follow-up tests every year. Totaled across all the
women tested, annual follow-ups cost about $800,000
per year of life saved, according to our analysis.
On the other hand, if those women got follow-up tests
every two years, the reduction in cervical cancer
rates would be almost the same -- while the cost per
year of life saved would decline to about $200,000.
That means that the healthcare system would save tens
of millions of dollars per year that could be used
to screen more women or to provide other health benefits.
The implications of risk analysis to policymakers
are obvious. Yet to its critics, it is profanity.
They say quantifying the value of human lives in dollar
terms is an unacceptably cold and mechanistic metric
for decision making, that it forces us to decide whether
some lives are worth more or less and whether there
is, in fact, a limit to what society should spend
to reduce fatality risks.
Such valuation indeed seems unpleasant, but in fact
we do it all the time in our courts, at our insurance
companies and in our own lives. As individuals, we
frequently make choices about how much to spend on
our own health and safety. Should we buy a new smoke
detector? New tires? More comprehensive health insurance?
A more expensive but safer car?
We make these decisions based on an intuitive balancing
of how much benefit we'll get against how much it
will cost and how much we can afford.
In fact, the way risk analysis often sets the value
for a life saved is by asking people what they'd be
willing to pay to reduce their risk of death by a
certain amount, or in some cases by looking at people's
spending, to see what consumers actually do pay for
various things in their lives that reduce risk. The
valuation numbers directly reflect individuals' own
choices.
The goal of risk analysis is, in fact, ultimately
equitable. Debates about risk are often emotionally
heated and charged with competing values. Risk analysis
adds a cooler, fact-based perspective, favoring no
ideology, no political or corporate agenda. It argues
against certain regulations but supports others.
What can be fairer than to use the neutral tools
of decision science and risk analysis to sort through
a complex world of threats to human and environmental
health so we can identify the choices that will do
the most people the most good at the least cost?
Let's go back to cellphones.
We estimate that a ban on nonemergency use by drivers
would save $43 billion in reduced deaths, injuries
and property damage. But by calculating cellphone
bills and estimating how much time a month cellphone
customers are driving while phoning, we estimate that
people are willing to pay about the same amount --
$43 billion per year -- to use their mobile phones
while they drive. The benefits and costs of a ban
are about the same.
Admittedly, these numbers are only estimates. Risk
analysis makes assumptions (for example, no one is
precisely sure just how many hours a month cellphone
users are at the wheel) that can lead to uncertainties
in the results. The numbers above are central estimates,
the most likely values that fall within a wide range.
But a risk analysis that is open about its assumptions
and uncertainties can still offer powerful insights.
Our ancestors lived in a simpler world in which the
threats were lions and hunger and the dark. The obvious
first choice of what to do about such threats was
usually the right one. But we no longer enjoy the
luxury of that simplicity. Our modern world, with
all its benefits, comes with a bewildering web of
threats, and the instinctive response might not be
the best.
Thinking logically about the perils we face and carefully
analyzing our choices for dealing with them provide
an important way to identify solutions that maximize
public health and safety.
James K. Hammitt is the director of the Harvard Center
for Risk Analysis. Milton C. Weinstein is the director
of the Harvard Program on Economic Evaluation of Medical
Technology.
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