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Valuing Health Risks, Costs, arid
Benefits for Environmental
Decision Making
REPOSIT OF A CONFERENCE
P. Bred Hammond and Rob Coppock, Editors
Steering Committee on Valuing Health Risks, Costs,
and Benefits for Environmental Decisions
Board on Environmental Studies and Toxicology
Commission on Physical Sciences, Mathematics and Resources
Commission on Behavioral and Social Sciences and Education
National Research Council
NATIONAL ACADEMY PRESS
Washington, D.C. 1990
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NOTICE: The project that is the subject of this report was approved by the Governing
Board of the National Research Council, whose membem are drawn from the councils of
the National Academy of Sciences, the National Academy of Engineering, and the Institute
of Medicine. The members of the committee responsible for the report were chosen for
their special competences and with regard for appropriate balance.
This report has been reviewed by a group other than the authors according to
procedures approved by a Report Review Committee consisting of members of the National
Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine.
The National Academy of Sciences is a private, nonprofit, self-perpetuating society
of distinguished scholars engaged in scientific and engineering research, dedicated to the
furtherance of science and technology and to their use for the general welfare. Upon the
authority of the charter granted to it by the Congress in 1863, the Academy has a mandate
that requires it to advise the federal government on scientific and technical matters. Dr.
Frank Press is president of the National Academy of Sciences.
The National Academy of Engineering was established in 1964, under the charter of
the National Academy of Sciences, as a parallel organization of outstanding engineers. It
is autonomous in its administration and in the selection of its members, sharing with the
National Academy of Sciences the responsibility for advising the federal government. The
National Academy of Engineering also sponsors engineering programs aimed at meeting
national needs, encourages education and research, and recognizes the superior achievements
of engineers. Dr. Robert M. White is president of the National Academy of Engineering.
The Institute of Medicine was established in 1970 by the National Academy of Sciences
to secure the services of eminent members of appropriate professions in the examination
of policy matters pertaining to the health of the public. The Institute acts under the
responsibility given to the National Academy of Sciences by its congressional charter to
be an adviser to the federal government and, upon its own initiative, to identify issues of
medical care, research, and education. Dr. Samuel O. Thier is president of the Institute of
Medicine.
The National Research Council was organized by the National Academy of Sciences
in 1916 to associate the broad community of science and technology with the Academy's
purposes of furthering knowledge and advising the federal government. Functioning in
accordance with general policies determined by the Academy, the Council has become the
principal operating agency of both the National Academy of Sciences and the National
Academy of Engineering in providing services to the government, the public, and the
scientific and engineering communities. The Council is administered jointly by both
Academies and the Institute of Medicine. Dr. Frank Press and Dr. Robert M. White are
chairman and vice chairman, respectively, of the National Research Council.
L.C. card no. 89-64210
ISBN 0-309-04195-3
Available from:
National Academy Press
2101 Constitution Avenue, N.~!
Washington, D.C. 20418
S096
Printed in the United States of America
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STEERING COMMITTEE ON VALUING HEALTH RISKS, COSTS,
AND BENEFITS FOR ENVIRONMENTAL DECISIONS
ROGER G. NOLL (Chair), Department of Economics, Stanford
University
PATRICIA ~ BUFFLER, School of Public Health, University of Texas
JOSEPH L. FISHER, Office of the President, George Mason University
ROBERT H. HARRIS, Environ Corporation, Princeton, New Jersey
ROBERT ~ KAGAN, Department of Political Science, University of
California
DOUGLAS E. MacLEAN, Center for Philosophy and Public Policy,
University of Maryland
PAUL R. PORTNEY, Resources for the Future, Washington, D.C.
P. BRETT HAMMOND, Study Director
ROB COPPOCK, Senior Research Associate
RUTH O'BRIEN, Consultant
ROSE K MEADOWS, Administrative Assistant
CAREY Lo O'BRIEN, Administrative Assistant
NANCY ~ CROWELL, Administrative Secretary
· ·-
1D
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BOARD ON ENVIRONMENTAL STUDIES AND TOXICOLOGY
GILBERT S. OMENN (Chair), School of Public Health and Community
Medicine, University of Washington
FREDERICK R. ANDERSON, Washington College of Law, American
University
JOHN BAILAR, Department of Epidemiology and Biostatistics, McGill
University School of Medicine, Montreal, Canada
DAVID BATES, Department of Medicine, University of British Columbia
Health Science Center Hospital, Vancouver, Canada
JOANNA BURGER, Biological Studies, Rutgers University
RICHARD ~ CONWAY, Engineering Department, Union Carbide
Corporation, South Charleston, West Virginia
WILLIAM E. COOPER, Department of Zoology, Michigan State
University
SHELDON K FRIEDLANDER, Department of Chemical Engineering,
University of California, Los Angeles
BERNARD GOLDSTEIN, Department of Environmental and
Community Medicine, University of Medicine and Dentistry of New
Jersey
DONALD MADISON, Department of Obstetrics and Gynecology,
University of Arkansas for Medical Sciences
DUNCAN T. PAl lE;N, Center for Environmental Studies, Arizona State
University
EMIL PFITZER, Department of Toxicology and Pathology,
Hof~nan-LaRoche, Inc., Nutley, New Jersey
WILLIAM H. RODGERS, School of Law, University of Washington
F. SHERWOOD ROWLAND, Department of Chemistry, University of
California, Irvine
LIANE B. RUSSELL, Biology Division, Oak Ridge National Laboratory,
Oak Ridge, Tennessee
1V
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COMMISSION ON PHYSICAL SCIENCES, MATHEMATICS,
ANI) RESOURCES
NORMAN HACKERMAN (Chair), Scientific Advisory Board, Robert
Welch Foundation, Houston, Texas
GEORGE F. CARRIER, Division of Applied Sciences, Harvard
University
HERBERT D. DOAN, The Dow Chemical Company (retired), Midland,
Michigan
PETER S. EAGLESON, Department of Civil Engineering, Massachusetts
Institute of Technology
DEAN E. EASTMAN, IBM T.J. Watson Research Center, Yorktown, New
York
MARYE ANNE FOX, Department of Chemistry, University of Texas
GERHART FRIEDLANDER, Brookhaven National Laboratory, Long
Island, New York
LAWRENCE W. FUNKHOUSER, Chevron Corporation (retired), Menlo
Park, California
PHILLIP ~ GRIFFITHS, Office of Provost, Duke University
CHRISTOPHER F. McKEE, Department of Physics, University of
California, Berkeley
JACK E. OLIVER, Director of INSTOC, Cornell Universitr
JEREMIAH P. OSTRIKER, Department of Astrophysical Science'
Princeton University
FRANK L. PARKER, Department of Civil and Environmental
Engineering, Vanderbilt University
DENIS J. PRAGER, MacArthur Foundation, Chicago; Illinois
DAVID M. RAUP, Department of Geophysical Sciences, University of
Chicago
RICHARD J. REED, Department of Atmospheric Sciences, University of
Washington
ROY F. SCHWI'l liters, Physics Department, Harvard University
ROBERT E. SIEVERS, Department of Chemistry, University of Colorado
LEON T. SILVER, Division of Geological and Planetary Sciences,
California Institute of Technology
LARRY L. SMARR, Department of Astronomy and Physics, University
of Illinois, Urbana-Champaign
EDWARD C. STONE, JR., Downs Laboratory, California Institute of
Technology
KARL K TUREKIAN, Department of Geology and Geophysics, Yale
University
v
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COMMISSION ON BEHAVIORAL ANI) SOCIAL SCIENCES
AND EDUCATION
ROBERT McC. ADAMS (Chair), Smithsonian Institution, Washington,
D.C.
ARTHUR S. GOLDBERGER, Department of Economics, University of
Wisconsin
BEATRIX ~ HAMBURG, Mt. Sinai School of Medicine, New York
LEONID HURWICZ, Department of Economics, University of
Minnesota
JOSEPH B. KADANE, Department of Statistics, Carnegie Mellon
University
EDWARD O. LAUMANN, Department of Sociology, University of
Chicago
ALVIN M. LIBERMAN, Haskin Laboratories, New Haven, Connecticut
STEWART MACAULAY, School of Law, University of Wisconsin
ROGER G. NOLL, Department of Economics, Stanford University
SAMUEL PRESTON, Population Studies Center, University of
Pennsylvania
FRANKLIN D. RAINES, Lazard Freres, New York
LAUREN B. RESNICK, Learning Research and Development Center,
University of Pittsburgh
JOHN M. ROBERTS, Department of Anthropology, University of
Pittsburgh
ELEANOR B. SHELDON, New York (sociology)
JEROME E. SINGER, Department of Medical Psychology, Uniformed
Services University of the Health Sciences, Bethesda, Maryland
MARSHALL S. SMITH, School of Education, Stanford University
JOHN ~ SWETS, BEN Laboratories Incorporated, Cambridge,
Massachusetts
SIDNEY VERBA, University Library, Harvard University
V1
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Contents
PREFACE
EXECUTIVE SUMMARY
1 INTRODUCTION
THE MAKING OF CRUEL CHOICES
Milton Russell
3 THE POLITICS OF BENEFIT-COST ANALYSIS
R. Shep Melnick
4 BENEFIT-COST ANALYSIS AS A SOURCE OF
INFORMATION ABOUT WELFARE
Peter Railton
COMPARING VALUES IN ENVIRONMENTAL POLICIES:
MORAL ISSUES AND MORAL ARGUMENTS
Douglas E. MacLean
ENVIRONMENTAL POLICY MAKING: ACT NOW
OR WAIT FOR MORE INFORMATION?
Jeffrey E. Harris
CHOICE UNDER UNCERTAINTY: PROBLEMS SOLVED
AND UNSOLVED
Mark J. Machina
8 CONCLUSIONS
APPENDIX: SETTING NATIONAL STANDARDS FOR
INORGANIC ARSENIC EMISSIONS FROM PRIMARY
COPPER SMELTERS: A CASE STUDY
Ralph ~ Luken
· -
V11
IX
1
3
15
23
55
83
107
134
189
209
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Preface
A major analytical and policy challenge facing government officials is
how to evaluate the risks, costs, and benefits of health and safety poli-
cies. This volume contains essays that address philosophical, political, and
economic aspects of evaluating programs that ameliorate risks to life. As
such, it is the third in a series of studies about risk policy undertaken by
the National Research Council (NRC). In 1983 the NRC published Risk
Assessment in the Federal Government: Managing the Process, which focused
on improving policy-relevant scientific descriptions of risk and risk decisions
within the government. More recently, the NRC reported on its examina-
tion of measures for improving social and personal choices on technological
issues by better risk communication (Improving Risk Communication, 1989~.
The project on valuing risks to life and health was initiated in response
to a request from the Environmental Protection Agency (EPA). The EPA
and other regulatory agencies have sought to develop analytically sound
and politically feasible approaches to gauging the costs and benefits of
programs to reduce various risks associated with national environmental
policies. In pursuing this objective, regulatory agencies have encountered
differing guidance from the courts, Congress, and the Office of Manage-
ment and Budget regarding the use of benefit-cost analysis in regulatory
decision making. These signals led the EPA to ask the NRC for assistance
in identifying some sound scientific basis for approaching the problem of
valuing risks. Because many of the different points of view about applying
benefit-cost analysis to environmental health and safety regulation reflect
differing scientific, economic, philosophical, and administrative assump-
tions, the NRC seemed to provide an ideal forum for a major discussion
to clarify underlying issues and distinctions and to point toward areas in
which practical analytical and procedural solutions might be sought.
BY
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x
PREFACE
In response to this request, the National Research Council formed
the Steering Committee on Valuing Health Risks, Costs, and Benefits for
Environmental Decisions. In order to reflect the breadth of issues to be
addressed, the committee was made responsible to two units of the National
Research Council: the Commission on Behavioral and Social Sciences and
Education and within the Commission on-Physical Sciences, Mathematics
and Resources-the Board on Environmental Studies and Toxicology. The
committee represents a cross section of relevant experience and expertise
and includes experts on the economics, philosophy, and politics of risk and
health and safety regulation; the use of scientific risk assessment in valuing
risks; and the management of the regulatory process.
The committee's charge was to identify areas of disagreement and
agreement regarding the use of benefit-cost analysis for environmental
health and safety regulation, as well as ways the government might begin
to resolve disagreements. The committee concluded that the participants
in the policy process disagree about several fundamental underlying as-
sumptions of benefit-cost analysis. Consequently, the committee could
not formulate a "manual" for conducting risk analyses acceptable to all
policy participants. It concentrated instead on identifying key issues and
procedures that might form a basis for developing common understandings.
In planning the conference, the committee met twice in the fall of
1986 to formulate key policy-relevant economic, political, philosophical,
and scientific issues, to commission papers from leading scholars, and
to formulate a conference agenda. The conference was held in June
1987 and brought together approximately 100 government policy analysts,
policy makers, legal and environmental health experts, academic scholars
(e.g., economists, political scientists, philosophers, natural scientists) and
journalists for two days to discuss issues raised by commissioned papers.
Lively discussions of these issues were grounded both by a case study
on fugitive arsenic emissions prepared by EPA staff (see the Appendix)
and by the comments of agency analysts, jurists, congressional staff, and
other participants familiar with the practical challenges of environmental,
occupational, transportation, and other health and safety issues.
The principal product of the conference is this volume which contains
an introduction (Chapter 1) and a summary of conference discussions and
conclusions (Chapter 8), prepared by the committee. Between these two
chapters there are six individually authored papers representing the views
of the scholars commissioned by the committee to stimulate discussion on
key issues. The views expressed in these papers are those of the authors
and do not necessarily reflect positions taken by the committee.
The committee wishes to acknowledge the contributions of several
individuals and organizations to the conference and to the report. In par-
ticular, the Environmental Protection Agency, especially the EPAs Office
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PREFACE
X1
of Policy Analysis, provided support for the conference, and its director,
Richard Morgenstern, and analytical staff members, Robert Wolcott and
Mark Thayer, all participated fully in the conference.
Although the report's introduction and conclusions represent the views
of the committee, it would not have been produced without the support
of the professional staff from the National Research Council, who drafted
these chapters and worked with authors in revising their papers: P. Brett
Hammond and Rob Coppock. Their intellectual contributions greatly ad-
vanced the committee's efforts throughout the project. The report was
substantially improved by the diligent work of its editors, Christine Mc-
Shane and Leah Mazade. In addition, invaluable support was provided by
Rose Meadow, Ruth O'Brien, and Carey Gellman.
The committee's conclusions present several insights regarding the
need to specify carefully the analytical contributions and limitations of
benefit-cost analysis to the problem of valuing health and safety risks. It
recommends modest changes in procedures for conducting major analy-
ses, particularly through increased use of peer review mechanisms. The
committee's conclusions, if heeded, could enhance the appropriate use of
analysis for regulatory policy making.
Roger G. Noll, Chair
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