The Risks of Risk Regulation

The Risks of Risk Regulation

Adler Chapter In Ecology Liberty And Property
June 01, 2000

(Portions adapted from "Deadly Fallout of Too Many Rules" and "Regulated...Out of this World" in the Washington Times, June 2 and 3, 1992)

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Much of environmental regulation deals with risk—the risk of pesticides on food, the risk of groundwater contamination, the risk of industrial emissions, the risk of technological change, the risk of ecological disruption.  Were Americans not concerned with these and other similar risks, much of the environmental regulation that is so hotly contested today would not exist.

 

The debate over environmental risk usually proceeds as follows: The media or an environmentalist lobbying group claims to have uncovered a new, insidious threat to human health and the environment.  Almost immediately there is a call for the enactment of new regulations proscribing the use of some technology or process, and possibly even calling for the creation of a new government agency.  A risk has been identified, and it must be eliminated.  Through government regulation the world must be made a safer place.  Opposing a risk regulation because the costs may outweigh the benefits is tantamount to placing a price tag on human life.

 

This is a typical story; it is how much environmental policy develops.  Yet this story line, however familiar, is deceptive.  It ignores the true nature of risk.  Addressing risk always involves trade-offs; resources expended to reduce risk in one area cannot be used to reduce risk somewhere else as well.  When regulations focus on smaller risks, at the expense of more threatening ones, they can do more harm than good.  Regulations do not only impose economic costs, they can also harm human health and safety.

 

There are environmental risks, and many of them deserve to be addressed.  But it is wrong to think that merely because there are risks without government regulation that there are not risks created by government regulation.  Indeed, there are risks on both sides of the regulatory equation: the risk of too little regulation, but also the risk of too much; the risk of technological development going too quickly, but also the risk of it going too slowly.  When we only pay attention to one side of the trade-off between competing risks, we shortchange ourselves and encourage the formulation of bad environmental policy.

 

Consider the following example: The threat from asbestos seemed like a good reason to temporarily shut down schools in Peru, New York.  After all, according to the media and the federal government, asbestos posed an unacceptable cancer risk when used for most applications. So the Peru Central School District closed several school buildings for a month, while junior and senior high school students went to classes 10 miles away in Plattsburgh, NY—classes that ended at 8:30 at night.1

 

By the time the asbestos removal was finished, the district had spent $3.5 million, more than 15 percent of its annual budget, on the removal of asbestos.  Then the Environmental Protection Agency (EPA), the same agency that had enacted the asbestos ban, was forced to acknowledge that the threat of asbestos had been overestimated, and that the risks of improper removal were often greater than leaving it in place.  What this means is that, if anything, asbestos regulations may have had an adverse impact on human health.

 

While more may have been spent in Peru than in other school districts, the story is much the same.  Across the country, panicked parents and school administrators urged drastic action to protect their children from the threat of asbestos, a threat that had been greatly overstated. Nonetheless, defenders of the initial EPA policy will insist that such policies are justified as “insurance.”  After all, they ask, what are several thousand, several million, or even several billion dollars when you are seeking to protect human life?  When put in terms of dollars versus deaths, there is no contest.  Yet as the United States Fifth Circuit Court of Appeals stated in overturning several of the EPA’s asbestos regulations, these rules can cost much more than money.2

 

According to the EPA’s own estimate, these regulations would have prevented three premature deaths, over a period of thirteen years, at a cost of between $43 and $76 million per premature death averted.  Investing that same amount of money on highway safety, early detection of breast cancer, or infant nutrition—or simply leaving that money in private hands for the purchase of life-enhancing goods and services—would have saved more lives.  What is more, the EPA had even commissioned a study that indicated that asbestos substitutes might actually increase the number of fatalities.  Yet despite this evidence, the agency enacted the bans.

 

Fortunately, the Fifth Circuit recognized a pernicious regulation when it saw one, and ruled against the EPA in Corrosion Proof Fittings v. EPA.  “The EPA, in its zeal to ban asbestos, cannot overlook, with only cursory study, credible contentions that substitute products actually might increase fatalities,” noted Judge Jerry Smith in his opinion for the court.3

 

This asbestos regulation is not an aberration; there remain a host of regulations that are responsible for increasing mortality.  Compelling automakers to produce more fuel efficient vehicles forces individuals into lighter, less-safe cars, causing an estimated 2,000-4,000 deaths per year.4   Withholding potentially life-saving drugs and treatments pending Food and Drug Administration (FDA) approval risks unnecessary deaths, particularly for those with life-threatening conditions.5   Failure to chlorinate water for fear of minuscule cancer risks can cause thousands more deaths from outbreaks of cholera and other diseases.6   There certainly may be small risks created by chlorinating our water; but these risks are nothing when compared to the risks posed by bacteria and waterborne disease should water supplies remain untreated.

 

Similarly, the government may be concerned with the risks posed by minute traces of pesticides that remain on foods.  But insofar as pesticides increase food yields and enable more Americans to have balanced, healthy diets, the risks of fewer fruits and vegetables on America’s dining room tables needs to be kept in mind, too.  In 1996, the prestigious National Academy of Sciences confirmed that the risks of malnutrition are far greater than the risk of cancer from chemicals in the human diet.7   Yet existing government regulations increase produce prices by limiting the ability of farmers to increase agricultural productivity.

 

State and local governments face the trade-offs between risks in another way.  Local health officials are entrusted to reduce the health threats in their communities.  When resources are expended in one area, they are not available to be expended in another.  Thus, when federal policy forces a community to spend thousands of dollars to reduce one risk, other risks remain unaddressed.  In this manner some federal policies actually frustrate efforts to reduce risk.  In some communities significant risks, such as crime, cannot be adequately dealt with because thousands of dollars are required to be spent addressing hypothetical cancer risks instead.  For example, for the cost of averting one premature death from the EPA’s standard for benzene emissions, over three thousand police officers could be hired in a major city.8   For the amount of money spent to avert one premature death under regulations governing coke ovens, over 470 lives could be saved through the purchase of lung cancer screenings.  In economics this is known as an opportunity cost, and it is a real cost of environmental regulation.

 

A death is a death, whether caused by workplace exposure to airborne toxics or by less-effective, asbestos-free brake pads.  When the policies of the federal government are directly responsible for the additional loss of life, those policies should be repealed.  Government agencies with a mission to make our lives “safer” should not be permitted to make us less safe.

 

While federal fuel economy standards and FDA drug lag are examples of “death by regulation,” the federal government is increasingly causing death by regulation in an indirect manner as well.  When advocates for increased regulation insist that the burdens of federal rules are more than compensated for by the benefits they provide, there is one item that they conveniently leave out of the equation: Burdensome regulations, in and of themselves, can increase mortality.

 

It is an indisputable fact that wealthier societies are healthier societies. Wealthier societies simply have more wealth to spend on things that improve the quality of life, from nutrition and health care to bicycle helmets and automobile child-safety seats.  By the same token, societies and communities with fewer resources are less safe than they could otherwise be.9

According to James MacCrae, then acting-administrator of the Office of Information and Regulatory Affairs, “when national income falls, there is often a significant increase in mortality and a decline in health status.”10   For example, a 1984 study by Congress’s Joint Economic Committee found that declines in real per capita income in the early 1970s led to a corresponding increase in total mortality, amounting to as many as 60,000 additional deaths.11  Other studies estimate that every loss of between $3 million to $8 million to the economy will result in a premature death.12   From a personal standpoint, losing one’s job is one of the unhealthiest things that can happen due to the loss of a steady income.  This means that when the economy sours, people die.  The point is that regulations that depress national income—for whatever reason—create new risks from other less apparent sources.

 

The current economic burden of federal regulations is approximately $670 billion per year, according to the General Accounting Office—nearly $7000 per household.13   Making the conservative assumption that there is a premature death for every $10 million lost to the economy, this would mean that federal regulations are responsible for as many as 64,700 premature deaths each year.  It should also be no surprise that the vast majority of these deaths would occur in financially strapped communities where there is less institutional ability to compensate for economic losses.  In a similar fashion, poorer countries are less able to mitigate the impact of economic declines than wealthier ones.

 

There certainly are environmental risks that merit attention, yet just as government regulation may alleviate risks, it may create them as well.  Just because environmental risks exist does not mean that eliminating those risks with regulation will always produce a less risky world.  Risks weigh against other risks, in everything we do.  In this the environment is no different than anything else.

 

End Notes

 

1.  “School District in Chaos Over Asbestos Removal,” New York Times, October 22, 1991.

 

2.  Corrosion Proof Fittings v. The Environmental Protection Agency, 947 F.2d 1201 (5th Cir. 1991).

 

3.  Ibid.

 

4.  See Robert Crandall and John D. Graham, “The Effect of Fuel Economy Standards on Automobile Safety,” Journal of Law and Economics (April 1989), pp. 110-115.

 

5.  Sam Kazman, “Deadly Overcaution: FDA’s Drug Approval Process,” Journal of Regulation and Social Costs (September 1990), p. 48.

 

6.  World Health Organization, “Cholera update, end of 1993,” Weekly Epidemiol. Rec., vol. 69 (1993), pp. 13-20.

 

7.  National Research Council, Carcinogens and Anticarcinogens in the Human Diet (Washington, DC: National Academy Press, 1996), pp. 303-312.

 

8.  John C. Shanahan and Adam Thierer, “Can We Save Even More Lives?  Understanding the ‘Opportunity Costs’ of Regulation,” Heritage Foundation F.Y.I., no. 11, February 28, 1994.

 

9.  Aaron Wildavsky, Searching for Safety (New Brunswick, New Jersey: Transaction Books, 1988).

 

10.  James B. Macrae, Jr., Statement before the Senate Committee on Governmental Affairs, March 19, 1992.

 

11.  US Congress, Joint Economic Committee, “Estimating the Effects of Economic Change on National Health and Social Well-Being,” J842-38 (Washington, DC: Government Printing Office, 1984).

 

12.  See, for example, Ralph Keeney, “Mortality Risks Induced by Economic Expenditures,” Risk Analysis, vol. 10, no. 1 (1990), pp. 147-159.

 

13.  Thomas D. Hopkins, “Prepared Statement of Thomas D. Hopkins: Rochester Institute of Technology, Rochester, New York Before The House Government Reform and Oversight Committee, National Economic Growth, Natural Resources and Regulatory Affairs Subcommittee,” May 16, 1996.