Is there a role for benefit-cost analysis in environmental, health, and safety regulation?

Science

Volumn 272, Issue 5259, 1996, Pages 221-222

  Arrow, Kenneth J ^a   Cropper, Maureen L ^b   Eads, George C ^c   Hahn, Robert W ^d   Lave, Lester B ^e   Noll, Roger G ^a   Portney, Paul R ^f   Russell, Milton ^g   Schmalensee, Richard ^h   Smith, V Kerry ⁱ   Stavins, Robert N ^j  

^a STANFORD UNIVERSITY   (United States)

^b WORLD BANK   (United States)

^c CHARLES RIVER ASSOCIATES   (United States)

^d AMERICAN ENTERPRISE INSTITUTE   (United States)

^e CARNEGIE MELLON UNIVERSITY   (United States)

^f RESOURCES FOR THE FUTURE   (United States)

^g UNIVERSITY OF TENNESSEE   (United States)

^h MASSACHUSETTS INSTITUTE OF TECHNOLOGY   (United States)

ⁱ DUKE UNIVERSITY   (United States)

^j HARVARD UNIVERSITY   (United States)

more..

Author keywords

[No Author keywords available]

Indexed keywords

COST BENEFIT ANALYSIS; ENVIRONMENTAL HEALTH; LAW; PRIORITY JOURNAL; SAFETY; SHORT SURVEY;

COST-BENEFIT ANALYSIS; ENVIRONMENT; HEALTH POLICY; LEGISLATION; SAFETY; UNITED STATES;

EID: 15844368450     PISSN: 00368075     EISSN: None     Source Type: Journal    
DOI: 10.1126/science.272.5259.221     Document Type: Short Survey

References (23)

1. T. D Hopkins, "Cost of Regulation: Filling in the Gaps" (report prepared for the Regulatory Information Service Center, Rochester, NY, 1992); Office of Management and Budget, Budget of the United States Government, Fiscal Year 1996 (Government Printing Office, Washington, DC, 1995).
2. R W. Hahn, in Risks, Costs, and Lives Saved: Getting Better Results from Regulation, R. W. Hahn, Ed. (Oxford Univ. Press, Oxford, and AEI Press, Washington, DC, in press).
3. J. F Morrall, Regulation 10, 25 (November-December 1986)
4. These figures represent the incremental direct cost of part or all of proposed regulations relative to specified baselines. For examinations of issues associated with estimating the full costs of environmental protection, see (16).
5. Office of Management and Budget, Regulatory Program of the United States Government: April 1, 1992-March 31, 1993 (Government Printing Office, Washington, DC, 1993).
6. If the goals of a program or the level of a particular standard have been specified, economic analysis can still play an important role in evaluating the costs of various approaches for achieving these goals. Too frequently, regulation has used a one-size-fits-all or command-and-control approach to achieve specified goals Cost-effectiveness analysis, which identifies the minimum-cost means to achieve a given goal, can aid in designing more flexible approaches, such as using markets and performance standards that reward results.
7. L. Lave, in (2)
8. Several statutes have been interpreted to restrict the ability of regulators to consider benefits and costs, Examples include the Federal Food, Drug, and Cosmetic Act (Delaney Clause); health standards under the Occupational Safety and Health Act; safety regulations from the National Highway and Transportation Safety Agency; the Clean Air Act; the Clean Water Act; the Resource Conservation and Recovery Act; the Safe Drinking Water Act; and the Comprehensive Environmental Response, Compensation, and Liability Act. On the other hand, the Consumer Product Safety Act, the Toxic Substances Control Act, and the Federal Insecticide, Fungicide, and Rodenticide Act explicitly allow regulators to consider benefits and costs.
9. In particular cases, such as the phasing out of lead in gasoline and the banning of certain asbestos products, benefit-cost analysis has played an important role in decision-making (17).
10. For a more extended discussion, see (18)
11. In this context, "major" has traditionally been defined in terms of annual economic impacts on the cost side.
12. For example, potentially irreversible consequences are not outside the scope of benefit-cost analysis The combination of irreversibilities and uncertainty can have significant effects on valuation.
13. For a conceptual overview of methods of estimating the benefits of environmental regulation and a brief survey of empirical estimates, see (19) For examinations of regulatory costs, see (16)
14. For a description of problems that arise when benefit-cost analysis is used in the absence of standardized peer review, see (20).
15. G. B. Christiansen and T. H. Tietenberg, in Handbook of Natural Resource and Energy Economics, A V. Kneese and J. L Sweeney, Eds (North-Holland, Amsterdam, 1985), vol. 1, pp. 345-393
16. R. Schmalensee, in Balancing Economic Growth and Environmental Goals, M. B. Kotowski, Ed. (American Council for Capital Formation, Center for Policy Research, Washington, DC, 1994), pp 55-75; A. B. Jaffe, S. R. Peterson, P. R. Portney, R N. Stavins, J. Econ Lit 33, 132 (1995).
17. R. Schmalensee, in Balancing Economic Growth and Environmental Goals, M. B. Kotowski, Ed. (American Council for Capital Formation, Center for Policy Research, Washington, DC, 1994), pp 55-75; A. B. Jaffe, S. R. Peterson, P. R. Portney, R N. Stavins, J. Econ Lit 33, 132 (1995).
18. A. Fraas, Law Contemp. Probl. 54, 113 (1991)
19. K. J. Arrow et al., Benefit-Cost Analysis in Environmental, Health, and Safety Regulation (AEI Press, Washington, DC, 1996).
20. M. L. Cropper and W. E Oates, J. Econ. Lit 30, 675 (1992); A. M. Freeman, The Measurement of Environmental and Resource Values (Resources for the Future, Washington, DC, 1993)
21. M. L. Cropper and W. E Oates, J. Econ. Lit 30, 675 (1992); A. M. Freeman, The Measurement of Environmental and Resource Values (Resources for the Future, Washington, DC, 1993)
22. W. N. Grubb, D. Whittington, M. Humphries, in Environmental Policy Under Reagan's Executive Order: The Role of Benefit-Cost Analysis, V. K. Smith, Ed. (Univ. of North Carolina Press, Chapel Hill, 1984), pp 121-164.
23. This work was sponsored by the American Enterprise Institute, the Annapolis Center, and Resources for the Future, with funding provided by the Annapolis Center. The manuscript benefited from comments from an editor and a referee, but the authors alone are responsible for the final product