Benefits and Costs

2004-03-26

In the latest issue of the newsletter I receive from the normally quite reasonable Property and Environment Research Center, Daniel K. Benjamin reports on the results of a study that attempted to quantify some benefits of EPA regulation in accordance with the Clean Air Act. Using the 1980-1982 recession as a proxy for the effects of reduced "total suspended particulates" or TSPs (small particles emitted by internal combustion engines), the study concluded that a 10% reduction in TSPs would lead to 100 fewer infant deaths per year in the United States. The lead-in to Benjamin's review reads: "A scholarly article supports Environmental Protection Agency regulation of air pollutants."

Now, I wonder. The costs of Clean Air regulations are reportedly on the order of $30 billion a year. If the only effect of spending that $30 billion is to save the lives of 100 infants (I'm not asserting that, just using it for the sake of argument), then "we" are spending $300 million for each life saved. Some would say: "How can you put a price on human life? Price no object!" Well, let us extend that line of thinking: what if the cost were $300 billion or $3 trillion to save those 100 lives? Would it make sense to spend 20% or 30% of U.S. economic production to save 100 lives? I doubt many people would argue for that. But why not?

The prima facie counter-argument to such spending is clear: while "we" certainly could spend $30 billion to save a single human life, it's clear that $30 billion could go a long way to saving more than one life. How many? I have no idea. But certainly "we" could spend $30 billion in ways that would be more productive of saving lives. The problem is that a lot of those ways are not very sexy: I've heard it said that painting new lines on the highways would probably save quite a few lives, but painting lines on the highways is a lot less sexy than ensuring clean air or saving the earth for future generations. So "we" spend money on the sexy stuff, thus saving fewer lives than we could otherwise. To put it most starkly: the fact that "we" follow fashion rather than reason is killing people.

You may have noticed that I keep putting the first person plural in scare quotes: "we". More fundamental than all the pseudo-economic reasoning presented above is that the $30 billion yearly cost of air pollution regulations is a forced cost exacted from every citizen of the United States. How would people spend that money if it were not taken from them? Again, I have no idea. Presumably some people would fritter it away, some would invest it, some would spend it on improving their health, and so on. The benefits of leaving that money in the hands of families and individuals are dispersed and nearly invisible, which is why the regulators and bureaucrats don't measure them and don't care about them. Does the dispersed spending of that $30 billion save more than 100 lives? Quite possibly. Now, let us not forget that $30 billion is a drop in the bucket: the budget of the U.S. Federal Government alone is $3 trillion or some ungodly sum. I maintain that the $3 trillion forcibly extracted from productive Americans would be much better spent by the individuals and families who create that wealth than by the swarms of regulators and bureaucrats who possess the fatal conceit of thinking that they know better than the rest of us.

But Frederic Bastiat said all this over 150 years ago. He called it the fallacy of the broken window.


Peter Saint-Andre > Journal