For decades, the Environmental Protection Agency has calculated the health benefits of reducing air pollution, using the cost estimates of avoided asthma attacks and premature deaths to justify clean-air rules.
Not anymore.
Under President Trump, the E.P.A. plans to stop tallying gains from the health benefits caused by curbing two of the most widespread deadly air pollutants, fine particulate matter and ozone . . .
It’s a seismic shift that runs counter to the E.P.A.’s mission statement, which says the agency’s core responsibility is to protect human health and the environment, environmental law experts said. . .
Now to the specifics:
Under the Biden administration, the E.P.A. tightened the amount of PM2.5 that could be emitted by industrial facilities. It estimated that the rule would prevent up to 4,500 premature deaths and 290,000 lost workdays in 2032 alone. For every $1 spent on reducing PM2.5, the agency said, there could be as much as $77 in health benefits.
But the Trump administration contends that these estimates are doubtful and said the E.P.A. would no longer take health effects into account in the cost-benefit analyses necessary for clean-air regulations, according to the documents. Instead, the agency would estimate only the costs to businesses of complying with the rules.
And some background:
Over the past four decades, different administrations have used different estimates of the monetary value of a human life in cost-benefit analyses. But until now, no administration has counted it as zero.
But they’re not ignoring health outcomes; they’re just not including them in the cost-benefit calculation:
Carolyn Holran, an E.P.A. spokeswoman, said in an email that the agency was still weighing the health effects of PM2.5 and ozone, but wouldn’t be assigning them a dollar value in cost-benefit analyses. “E.P.A., like the agency always has, is still considering the impacts that PM2.5 and ozone emissions have on human health,” Ms. Holran said. “Not monetizing does not equal not considering or not valuing the human health impact.”
In a Dec. 11 email reviewed by The Times, an E.P.A. supervisor wrote to his employees that political appointees in the Office of Air and Radiation planned to insert language about the “uncertain” benefits of reducing PM2.5 and ozone in all new clean-air rules.
The language states that “historically, the E.P.A.’s analytical practices often provided the public with false precision and confidence regarding the monetized impacts of fine particulate matter (PM2.5) and ozone.” It says that “to rectify this error, the E.P.A. is no longer monetizing benefits from PM2.5 and ozone.”
It’s possible that this won’t make it through the courts, though:
James Goodwin, the interim co-executive director and policy director at the Center for Progressive Reform, an advocacy group, said the move appeared to ignore the 2015 Supreme Court case Michigan v. E.P.A. In the majority opinion, Justice Antonin Scalia wrote that if an agency considers the benefits of a regulation, it must also consider the costs, and vice versa.
“Scalia was making the point that you can’t judge a regulation’s reasonableness just by looking at one side of the ledger,” Mr. Goodwin said.
Cost-benefit analysis, putting dollars and lives on a common scale
As a political scientist, what’s most interesting to me about this to me is the government’s objection to putting dollars and lives on a common scale.
This sort of cost-benefit analysis is something I’ve read a lot about and thought a lot about (as in this paper with Phil on decision making for home radon risks and remediation), and I associate criticisms of cost-benefit analysis as coming from the left.
The usual argument, as I’ve seen it, goes as follows. An environmental regulation is being considered. From the right or the technocratic center, the position is that the potential benefits of the regulation (typically health improvements, although in some settings there can be economic benefits as well relating to tourism or property values or whatever) should be weight against the costs of compliance. On the left, the position is sometimes taken that exposure thresholds should be set at zero and that no dollar value can be placed on a human life. In this setting, cost-benefit analysis is being used to calibrate, and possibly reject, environmental regulations.
For reasons discussed amply in the literature on decision analysis and in our own above-linked paper, I think it does make sense to put dollars and lives on a common scale, not because dollars and lives are equivalent but because this is a way to formalize the tradeoffs that must always be made when considering risks. I won’t get into all that here except to say that I think our position in that paper is, roughly speaking, the center-right position, as compared to the position on the left that such a tradeoff is inherently problematic.
This is not to say that I disagree with all leftist critiques of cost-benefit analyses. Indeed, one of the earliest posts on this blog, back in 2004, discussed the research of left-leaning economist Peter Dorman explaining what was wrong with the work on compensating wage differentials for workplace risk. I found Dorman’s arguments entirely convincing. To link this to my paragraph immediately above, my objection in that setting is not to putting dollars and lives on the same scale; rather, it’s an objection to the statistical method (regression without adjusting for enough pre-treatment variables), to the workflow involved (fitting lots of regressions and stopping when the resulting estimate has the right sign and seems to have a reasonable magnitude), and to the disconnect between the model of decision making and evidence from real-world decision making, as Dorman explains in detail in his book.
I’m not claiming that linear dollars-per-life analysis is how people think or how they make decisions; rather, I think it’s a useful normative baseline for resource allocation, which is why we applied it in our radon analysis. The workplace risk scenario is different because people were using empirical data on wages and risk to estimate, or attempting to estimate, or claiming to estimate, the dollar value of risks–and that won’t work because that’s not how people are making their decisions. So it’s complicated. It’s not that cost-benefit analysis is always correct or always incorrect; it’s that it’s a good idea to set up decisions in that way, while recognizing that all the numbers involved are open to question.
The horseshoe rears its ugly head
So, to continue, there’s nothing exactly wrong with the government’s refusal to perform a cost-benefit analysis that puts dollars and lives on a common scale. I think such analyses are useful, but it’s just one possible technique. It’s also legitimate cost-benefit analysis if you estimate the “dollars” ledger and the “lives” ledger separately. As they said, “Not monetizing does not equal not considering or not valuing the human health impact.”
That said, there does seem to be a legitimate concern with the new government policy. It depends how it’s implemented. On one hand, “the E.P.A. would no longer take health effects into account in the cost-benefit analyses necessary for clean-air regulations, according to the documents. Instead, the agency would estimate only the costs to businesses of complying with the rules”; on the other hand, the financial cost-benefit analysis is only part of the decision, so it depends how the health risks are entered into the decision making. One thing I like about formal inclusion of dollars and lives (and qalys) into the decision process is that it requires a paper trail, a set of justifications for the necessary tradeoffs. If they say they’re gonna consider health impacts but they don’t say how, I get concerned.
Anyway, it’s interesting to see the political horseshoe here. On the far left, don’t equate dollars and lives because it’s too capitalist and you can’t put a value on human life. On the far right, don’t equate dollars and lives because then you might have to put a dent in some corporate profits.
I hate that horseshoe shit.
That said, sometimes people label something as a horseshoe and it’s not. And, even here, the right-wing rationale against cost-benefit analysis is nothing like the left-wing rationale. They’re both problematic but for different reasons.
P.S. And this horseshoe is just fine.
I haven’t read the various publications you cite, but I have read (and written) others on this topic. One issue not addressed here (and possibly not addressed in the literature you cite), concerns the other side of the ledger.
Most of the discussion seems to assume that the “cost” to business and others is easy to estimate. My impression is that these estimates may be off by orders of magnitude, insofar as they can be ultimately measured and compared to predictions. Typically, businesses (especially large ones) seem to adapt in ways that lower costs substantially. But sometimes some glitch arises that pushes the cost way up, or simply causes some businesses to quit entirely (which again raises the question of valuation of the business activity itself).
We are dealing with very crude approximations everywhere. A bigger one still is the implicit assumption that the value (utility) of money does not depend on who spends or receives the money. But I agree that this practice now employed for risk regulation is very much better than relying on the intuitions of the public, as reflected in legislators (as explained in detail by Stephen Breyer in “Breaking the vicious circle”, 1993).
Jon:
That’s a good point. There’s so much focus (including in my own post) on the challenge of putting dollars and lives on a common scale, and not enough focus on the noisiness and often arbitrariness of the estimated costs and benefits measured separately.
The estimated gain or loss in life from a policy is just an estimate, and the estimated gain or loss in dollars is also just an estimate. But when we do cost-benefit analysis we often seem to forget about that uncertainty.
There is an inherent contradiction in the argument that (a) one can’t properly quantify health benefits and (b) one can clearly quantify costs. Anyone who has worked on budgets, forecasting, etc. knows that the latter is also fraught with guesses, assumptions, and ungrounded speculation.
+1
I think we should distinguish between putting e.g. financial costs and health benefits on (1) a common scale and (2) a common *dollar* scale.
(2) seems to presume that the dollar is some essential unit of value, but it too must be valuated. You could say that the value of a dollar is what you can buy for it, but that doesn’t solve it. Let’s say a dollar – as a means of exchange – is worth 0.2 Jamaican beef patties*. But what’s the value of a Jamaican beef patty then?
So, getting things commensurable by placing them on a monetary scale does not necessarily bring us any closer to commensurating their values.
von Mises made this point more eloquently than me.
* I have no clue what this is or what it costs.
Mattias:
In the official exchange rate, 12 Jamaican beef patties cost $17.25.
But I’m pretty sure the price has gone up since then.
This was posted today on the website of the Canadian Broadcasting Corporation:
https://www.cbc.ca/arts/commotion/how-much-would-you-pay-for-a-jamaican-patty-9.7049087
I have no opinion on the content of the article; I just thought it was funny to see a headline that reflected this blog’s discussion in real time.
Anon:
Coincidentally, just yesterday I checked out a nearby Jamaican beef patty place. It was recommended by Bob, who’d seen it reviewed somewhere. The patty cost $15! C’mon. OK, I guess it was a bit larger than a Golden Krust, but, hey, I’d rather pay $7.50 for one patty than $15 for a double-wide. The patty itself was fine but nothing special. I won’t be going back.
I guess I should weigh in on this one. What I wasn’t as clear about as I should have been back then but try to be clearer about today is this: *economic* costs and benefits are an important component of the decision process and should be estimated as carefully as possible. But the key is delimiting what’s economic. I’ve come to the conclusion that the economic world is the world of tradeable goods and services, such that, within broad limits, they are fungible; you can buy more of one by giving up some of another according to predictable price ratios. There are two issues here: is the allocation subject to the income-expenditure identity and are the ratios consistent? While I agree with other commenters that measurement of such items can be tricky, in principle they work this way. (Accounting isn’t always easy.)
Then there is the world, or the many worlds, of non-fungibles. There is no reason why they should trade off in a consistent fashion, and sometimes they don’t trade off at all. (There’s a longer analysis behind this statement.) They can definitely be measured — and they should be — but in their natural units. Then they can be inputs into a decision process just like the net economic costs or benefits. You can also estimate breakeven prices of non-fungibles, which can be informative.
Note that there are often tradeable and nontradeable aspects of the same things. Injuries and deaths have measurable economic components, as I understand “economic”. There are disruptions to production, medical costs, and so on. I’ve worked on measurement of some of these in the context of developing countries in order to demonstrate that, while the economic costs of health impairments may be lower in societies with less institutionalized medical care, they are hardly zero. Home care can also be monetarily expensive, as well as generating non-fungible costs (like increases in child labor).
So back to EPA and its zeroing out of VSL (value of statistical lives). Of course I don’t like having an essentially arbitrary value slapped on them, nor do I think any particular value would be appropriate due to the range of values (in the broad sense) they can possess. But no horseshoe please. (a) EPA should not restrict itself to estimating the financial cost of compliance but should also estimate the financial benefits to all parties affected by their decisions. (b) Their procedures should be revised so that a positive net economic benefit estimate is not a precondition for adoption. EPA should respect economic outcomes and non-economic ones alike. It should justify their rules as explicitly as possible drawing on these findings.
Incidentally, despite the less-than-complete precision of financial factors, they are generally far more precise than the imputed ones. It pains me to see very careful methods used to estimate monetary values of some items, only to have them thrown into a soup with others that are little better than guesses. The sum of a well-measured item and a poorly-measured one is poorly measured, weighted by their relative magnitudes. If accuracy were random, there might be little we could do about this, but it’s in the nature of nontradeable items that they will be slippery to monetize.
Agreeing with Peter (and Mattias above) here: putting benefits and costs on a “common scale” is different than measuring them in currency. There are rules in economics, despite the inevitable ambiguities in these rules. The “value” of statistical lives or healthy life-years must be derived from some theory of value, and it is wrong to think that economists have solved the issues of measuring value.
Here is a brief concrete example I’ll offer. Let’s say you accept measuring the value of a statistical life by estimating the willingness to accept $X in increased wages to “compensate” for a Y% increased risk of fatal injury. There’s a lot to unpack there, but let’s just sweep all that under the rug. But what if the employees at question have a different racial background than employees in other occupations, and said racial group has different income characteristics than other groups. Do we accept this racial group’s implicit valuation of the tradeoff or do we somehow adjust it for the differences in income levels.
Put more bluntly, if we measure health damages should we take into account the racial backgrounds of those impacted by pollution? Should global warming damages be estimated by somehow “adjusting” for the fact that most damages will occur for very poor people (who are not willing to pay much to avoid such damage or who are willing to accept small amounts as “compensation” for such damages)?
My point is that these essential value judgements are necessary in such an exercise – they are not settled issue, nor are they technical details. So, if the EPA decides that there is a category of values that is not to be made commensurate with other values, I think they are on solid philosophical ground. At the same time, it is a fact (at least I think so) that failure to monetize environmental costs while doing so for business costs is likely to skew the decision making process (in favor of less environmental protection). I consider the result a sort of Faustian bargain: either swallow the distasteful philosophical pill of monetizing all effects or suffer the consequences of the economic reality that dollars seem more “real” than these other non-monetized impacts.
My proposal would be to turn this upside-down. Rather than pre-defining cost of human life, calculate “expense per human life saved”, which is an unambiguously given quality, and then see if it’s palatable at all
How about “cost saved per death”? Let’s see some executives sweating when they have to explain “Yeah, somebody died, but we saved nearly 500 bucks!”
Beef:
In our 1999 paper, we use the unit, “dollars per microlife.”
Am I wrong to assume that the EPA under Trumpofascism will still effectively put a dollar value on human lives, only that value will be set to zero?
There’s a similar (but and in my view more difficult) debate about economizing ecosystem services. It’s preposterous to put a dollar value on the ecosphere – without it there would exist no humanity, no economy, no dollars anyway.
But perhaps not putting such a value is worse because the belief that nature has no value is still the default teaching of business schools and the predominant belief among the political and economic elites. So perhaps it will help if mainstream economists tell them ecosystem services do actually have a value. Except I don’t think this has helped in the past, and it will impress our current oligarchic fascist overlords even less!
I think you are correct.
In fact, I am not convinced this is a horseshoe.
The “left” (in brackets, because many on the left are ok with valuing lives) puts the value of life to +infinite. Therefore, whatever is possible and acceptable to do to save a life, must be done. Sure, shutting down the factory and close all economic activities is not acceptable, so we don’t do that. But f*** profit, you should diminish pollution to the point that your profit is marginally larger than 0.
The new proposal puts the value of a life to 0. If there is a dollar cost larger than 0 to pollute less/implement a regulation, then it should not be done.
In fact, they are a +infinite away (pun intended) from each other
Jacob:
I disagree with your statement that anyone is putting an infinite value on life. I say this for the reasons discussed in section 6 of this paper, Some class-participation demonstrations for decision theory and Bayesian statistics.
This is a well known point; I’m just pointing to my own article for convenience.