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The Marketization of Health, Safety and the Environment
Tue, 03/08/2011 - 16:08
A memorable Dilbert cartoon strip features Dogbert as a “creativity consultant” who is directed by his boss to come up with some hard quantitative data. The boss barks: “The only way to make decisions is to pull numbers of the air, call them ‘assumptions,’ and calculate the net present value.” The punchline: “Of course, you have to use the right discount rate, otherwise it’s meaningless.”
That encapsulates the faux-rigor of regulatory decisions for protecting health, safety and the environment. Ascertaining the dollar value of human life using the most rigorous science possible is a politically useful charade.
As the New York Times recently reported, the scientifically determined value of a life at the Environmental Protection Agency has gone up from $6.8 million in the Bush II years to $9.1 million at present. Across town, the FDA decides whether to ban an unsafe drug based on a valuation of $7.9 million per life. In deciding whether automakers will install new safety features, the Transportation Department figures $6 million.
When asked about the subjectivity of such valuations, a spokesperson for the Office of Management and Budget sniffs, “This administration utilizes the best available science in assessing the benefits and costs of any potential regulations, drawing on widely accepted methodologies.”
Oh, well if “science” has reached these conclusions, then it must be okay. In truth, it all comes down to the Dilbert principle: Pull the numbers out of the air, call them “assumptions” and calculate the net present value – but make sure you use the right discount rate! It’s all a load of crap designed to dress up the actual reasons for politically motivated regulations with a suit of "hard" science. This has the extra benefit of casting citizens -- the beneficiaries of regulation -- as non-experts who have no credibility in participating in regulatory decisions.
A favorite technique used by regulators is to ask people how much they would spend to avoid a certain kind of hazard. This then becomes the “market price” for a human life. The “willingness to pay” criteria is skewed against the interests of the working poor, of course, because low-income people are more "willing” to assume the risks of working in coal mines than rich people. But who are you to argue with the verdict of science?
The cynicism behind cost-benefit analysis becomes clear when one probes why the dollar value of life varies from one agency to another, and why it has not been standardized. Political insiders concede that setting a single standard would provoke a political firestorm from both sides; business would say that the valuation is too high and consumers and unions would say that the valuation is too low. Why invite a messy confrontation?
Moreover, regulatory agencies find it highly convenient to cook the numbers to suit the particular political circumstances. The FDA valued life at $5 million when issuing a rule requiring warning labels on bottles of acetaminophen and other drugs – but then used a $7 million valuation on another decision before reverting back to the $5 million valuation for a rule to protect against salmonella poisoning.
Theoretically, the results of cost-benefit analysis are only supposed to “guide” regulators in "setting priorities," and blah-blah-blah. But in practice, the “hard numbers” tend to be dispositive in determining whether a given rule should go forward.
Regulation of health, safety and environmental hazards was originally seen as a matter of social policy and ethics. It was about the humane use of government to prevent needless suffering. No more. The introduction of cost-benefit analysis in the late 1970s and its mandatory use by all regulators under Ronald Reagan effectively redefined the very purpose of regulation. It is not to prevent death and injury; it is to provide a scientifically defensible rationale for minimal regulation. This task depends critically upon monetizing the value of human life and well-being. All the world's a market -- and there is a price tag out there somewhere for the "costs" of preventing global warming.
If that means pulling numbers out of the air while rigorously calculating the discount rate, there are plenty of economists willing to do that dirty work. It's only “statistical lives,” in any case, not real lives, the economists are quick to note. How convenient: no one is really to blame for preventable cancers and maimed workers except the numbers. That’s how debased health and safety regulation has become.