By GABRIEL NELSON of Greenwire
New York Times
January 18, 2011
How much would you pay to avoid a slight chance of death?
Government economists think they have a pretty good idea, but they are thinking about a rebranding campaign to mend ties with the public, which has often bristled at the idea that bureaucrats might be putting a price on human lives.
During a meeting this week in Washington, D.C., officials from U.S. EPA will meet with their economics advisers to discuss a planned makeover (pdf) for the process. At issue is the “value of a statistical life,” or VSL, an accounting technique used across the government to weigh the benefits of life-saving regulations.
Different agencies use different estimates. U.S. EPA puts it at $8 million in today’s dollars, while the Department of Transportation bumped up its standard figure to $6 million in 2009. Other agencies do not have formal rules, but in the past, the Food and Drug Administration has used estimates of both $5 million and $6.5 million while running the numbers on its regulations.
It might sound dry and bureaucratic, but these number-crunching operations can have a major impact on public policy. Whether officials are looking at limits on air pollution, mine safety rules or stricter food inspections, the number that is chosen can influence whether an agency decides that the deaths avoided are worth the cost to businesses, consumers or taxpayers.
And the statistic has an especially controversial history at EPA.
In 2003, the George W. Bush administration was challenged by the AARP and other advocates for the elderly after EPA economists thought about using a lower value for older people. The agency had concluded that there was less reason to protect these people from health risks because they had fewer years left to live, but it backed down after the idea was derided as a “senior death discount.”
Another outcry followed five years later, when it was reported that the value used by EPA had fallen by $1 million dollars from just a few years earlier. The agency claimed that the decision was prompted by new research, but environmentalists accused the Bush administration of cooking the books to justify weaker rules.
“EPA may not think Americans are worth all that much, but the rest of us believe the value of an American life to our families, our communities, our workplaces and our nation is no less than it has ever been,” Senate Environment and Public Works Chairwoman Barbara Boxer (D-Calif.) said at the time. “This new math has got to go” (Greenwire, July 14, 2008).
That controversy quickly fizzled out, but not before it became a front-page story in The Washington Post and caught the attention of comedian Stephen Colbert, who aired a segment on his television show satirizing the attempt to “devalue life.”
After President Obama took office, EPA returned to the value that was chosen under President George H.W. Bush and used while Bill Clinton was president. But looking back on the previous controversies, EPA officials now say a new name would help. The phrase “statistical life” has caused “needless confusion and controversy, especially among non-economists,” agency staffers say in a new white paper.
Some critics would like to scrap the calculation entirely, but under an executive order that requires a cost-benefit analysis for all new regulations, EPA and other agencies rely heavily on the figure to make the economic case for protecting public health.
With the Obama administration getting ready to issue stricter limits on smog, for example, about 90 percent of the regulations’ projected benefits would come from stopping between 1,500 and 12,000 premature deaths per year. They were valued at $8.9 million apiece, taking into account that Americans will have more income by 2020, when the rules would be in place.
To many economists, that kind of analysis is crucial to making regulations more efficient. Though people might not be willing to put a price on their lives, they make choices about risks every time they head to work, board a plane or eat a raw oyster, the economists say — choices that can be used to estimate how much their safety is worth to them and might suggest whether extra protections are worth the trouble.
But even supporters of the technique agree that it has a public relations problem.
“It’s a real naughty issue,” said Steven Hayward, an environmental policy fellow at the conservative American Enterprise Institute. “Every one of us individuals puts an infinite value on our own life, right? And the cold-hearted among us put a value of zero on someone else’s life. It’s very difficult to put an objective value on saving lives, and it strikes ordinary people as unseemly.”
The recurring debate over the VSL cuts to the heart of the questions around cost-benefit analysis, said Frank Ackerman, an environmental economist at Tufts University. Many environmentalists and public health advocates are deeply skeptical of the whole process, claiming that environmental protection and human lives are impossible to put into dollars and cents.
Agencies are used to stacking up the costs and benefits of their rules. But people tend to get upset when lives are at stake, reflecting a profound discomfort with seeing people treated like commodities, said Praveen Amar, director of science and policy at Northeast States for Coordinated Air Use Management (NESCAUM), during a recent interview.
“It’s funny. A human life is worth $6.2 million,” Amar said, referring to a value that was used by EPA in the past. “What do you need — about 150 people to die? And that’s a billion dollars. It sounds kind of cold, but that’s how it’s done.”
While the Obama administration has been more critical of cost-benefit analysis than its predecessors, EPA and other agencies have kept working on the estimates that go under the hood — mainly, in ways that could put a higher value on avoiding risks to the public.
For instance, the agency is thinking about placing a premium on preventing cancer. Studies have shown that people are so afraid of cancer that they would pay more to avoid it than they would pay to lessen the risk of other deadly diseases.
Agency economists are also looking at new research on altruism, which suggests that people put a higher value on regulations that protect their neighbors as well as themselves. Studies have found that people would pay more to clean up a public water reservoir, for example, than they would pay for water filters that would do the same job at home.
But even if EPA settles on a higher estimate, critics won’t be satisfied. No matter where EPA sets the value of avoiding fatal risks, the agency is making the mistaken assumption “that there is a single number, and just a little more research will get us there,” Ackerman said.
Choosing a new name
To the economists who want a new name for the value of a statistical life, the reason for the change boils down to one basic problem: The public just doesn’t understand.
While some critics have described the estimates as an attempt to calculate how much a person is worth, that is not what the government is doing, according to the white paper, which will be discussed Thursday by members of EPA’s Environmental Economics Advisory Committee.
The paper cites the spat, back in 2008, over EPA’s decision to adopt a new estimate. That outcry was prompted by an Associated Press story that ran with the headline “American life worth less today.”
The headline was wrong, supporters of cost-benefit analysis say, because the government is not predicting the value of saving people who would otherwise die. Instead, regulations reduce the risk of death by a tiny amount — say, by one-in-a-million — for millions of people.
Economists devised the VSL to summarize how much people would pay to avoid those incremental risks. The studies are usually based on the extra pay that laborers get for high-risk jobs, or on surveys that ask people what they would give up to avoid an extra one-in-a-million chance of terminal cancer, a heart attack or a fatal car crash.
This tiny chance of death has sometimes been called a “microrisk” or “micromort.” But when it is presented to policymakers, the units are added up for clarity’s sake; showing the value as if a policy would allow some people to move from certain death to total safety.
EPA’s white paper suggests a new name for the dollar figure: “value of mortality risk reductions.”
The agency is asking the economics advisory committee to comment on the name change, along with other potential tweaks to the way the VSL is calculated. Some of them could be implemented in the short term, the white paper says, but others will likely require more research.
Supporters of the cost-benefit analysis process say the name change might not be enough to appease critics. They might dismiss it as “putting lipstick on a pig,” wrote Trudy Cameron, an economics professor at the University of Oregon, in a recent article.
Cameron declined to comment for this story because she is a member of the panel that will review EPA’s white paper this week. But it is crucial to pick a name that is less provocative and more precise, she wrote in the Review of Environmental Economics and Policy.
“Our goal is to prevent the VSL from being mistaken for a bureaucratic attempt to dictate arbitrarily the worth of a human being,” the article said. “Relabeling the concept more carefully, to describe precisely what it actually means, is entirely appropriate and, in my view, absolutely necessary.”
While most environmentalists and public health groups are happy with the Obama administration’s willingness to issue new regulations to protect public health and the environment, they feel the new leadership has not made its mark on cost-benefit analysis. That is despite an increased level of skepticism among Obama’s appointees, such as Georgetown University law professor Lisa Heinzerling, who led EPA’s policy office for the past two years.
She and Ackerman had co-authored a book, titled Priceless, that challenged the use of cost-benefit analysis to make decisions about environmental regulations. The issues they raised about the VSL would not be addressed by putting a new face on it, Ackerman said.
“The name doesn’t matter,” he said. “It will fool a few people for a few days until they catch on. But it’s the same idea, whatever you call it.”
Click here (pdf) to read EPA’s white paper.
Copyright 2011 E&E Publishing. All Rights Reserved.
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