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8 Conclusions In valuing risk reduction and human life extension, the substantive regulatory problems encountered by benefit-cost analysts are often signif- icant but are far from standardized. They vary in terms of the legal and administrative context in which they appear, the types of potential threats they pose to life and health, and the characteristics and availability of infor- mation about those threats. The family of approaches and techniques we have labeled benefi~-cost anahysis has not been systematically evaluated for its application to specific topical and conceptual problems in environmental health and safety. Moreover, as practiced in regulatory contexts, benefit- cost analysis is limited by the complex administrative, legal, and political process that characterizes health and safety policy making. The steering commmitee, on the basis of its conference papers and discussions, believes that the current challenge for those who perform or use benefit-cost analysis is twofold: to acknowledge and adequately identify the limited role of benefit- cost analysis and analysts in the entire process of regulatory policy formation and enforcement and to distinguish systematically applications of current risk-control approaches and techniques that are appropriate for specific types of regulatory issues. These themes run through the comments of many conference partic- ipants, including those with sharply opposing views on specific topics de- bated in the various sessions. Several scholars, for example, point out that benefit-cost analysis is a small part of a very large, continuous decision- making process for health and safety regulation that also encompasses Congress, many administrative agencies and interest groups, scientists, the courts, and public perceptions. Some question the ability of those charged with valuation analyses to convey adequately uncertainties associated with the underlying scientific information on the risks of pollutants and toxins. 189

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190 CONCLUSIONS Others focus on the need for decision makers and analysts to consider a broader range of factors, including the concerns of future generations, in current analyses and decisions. Still others express a disbelief in the ability of any analysis that depends on trade-offs at the margin to reach what are considered by them to be absolute goals, such as health and environmental protection. Some practicing benefit-cost analysts wonder if they are asked to do too much with a set of tools that does not yet enable them to meet those expectations. Taking into account the range of perspectives present at the conference, the steering committee noted several problems related directly to the role of analysis and analysts and the need to distinguish appropriate applications. For example, there is serious disagreement among scholars, analysts, and others familiar with the use of benefit-cost analysis as to whether current approaches to characterizing and valuing risks can or should be asked to accommodate the full range of factors that decision makers must implicitly take into account, especially for those problems involving intertemporal or purely qualitative comparisons. Even those who would support what they believe to be appropriate use of benefit-cost analysis in environmental policy making express the view that current methods can be employed more effectively in evaluating some types of issues than others- for example, employment effects compared with quality-of-life effects. In particular, there may be an irreducible tension between a desire to reduce value considerations to a single metric and a desire for symbolic protective action in health and safety regulation. A related problem is the one of expectations versus constraints in doing benefit-cost analysis for regulatory policy making. For any area of regulation, legal, administrative, and political factors can set severe constraints on the conduct of analysis, as well as on the weight given to analytic results. In contrast, there are incentives, some in response to these constraints, for analysis and analysts to broaden their scope to show that all relevant factors have been treated. Consequently, benefit-cost analysis cannot now be considered to be a formal decision-making mechanism accounting, for example, for the need for symbolic action or the full range of qualitative costs and benefits asso- ciated with policy alternatives. Benefit-cost analysis is more appropriately used in conjunction with other factors as a set of information-gathering and organizing tools that may be used to support both decision making and the presentation of information to the public. Therefore, we believe there is a need to develop commonsense criteria for applying current methods to problems encountered in health and safety regulation, by defining in terms helpful to both analysts and critics alike the limits to analysis and by developing systematic application of analytic approaches and techniques to appropriately matched policy issues. Of

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CONCLUSIONS 191 great interest to analysts and decision makers is the practical impact of these issues on their work. In particular, conference participants returned repeatedly to the implications of considering benefit-cost analysis as a set of approaches intended to clarify and simplify certain parts of difficult prob- lems raised in the course of environmental, health, and safeW regulation. Much discussion focused on the current and potential roles for agency staff analysts in increasing understanding among decision makers and the public of the costs and benefits of regulation, including dilemmas and trade-oRs inherent in real decisions. Expression of these concerns, as well as suggestions for dealing with them, fall largely into five categories reflecting the most important aspects of the analytical process for environmental and other regulatory decisions: the administrative and legal context in which analysis is done, including its purpose; the overall approach that is or should be taken in benefit-cost analysis; issues related to the specific analytic procedures and techniques; the adequacy of underlying scientific information on risk (e.g., dose response or exposure); and the way in which decision makers incorporate risk assessments and analyses intended to clarify or support policy making. Conference participants were asked to identify opportunities for im- proving risk-control analyses by practical suggestions for analysts and deci- sion makers at EPA and other regulatory agencies charged with integrating the full range of intangible factors bearing on health and safety regulation. In considering this question, they were asked to define the limits of formal risk-control approaches and techniques. Participants were not expected to nor did they reach consensus on any recommendation for a single set of analytical procedures or on a single appropriate role for analysis and analysts in the regulatory policy process. The cross-cutting concern for most participants remains the improvement of benefit-cost analysis as a practical set of tools for policy making. We believe that improving analysis involves careful consideration of underlying assumptions, concepts, and methods. It also involves assignment of ap- propriate types and levels of responsibilities to analysts (and to decision makers) in light of the analytical capabilities available at present. THE CONTEXT OF DECISION MAKING No actions within organizations take place in a vacuum the context limits the possibilities or even favors the opportunities available to the

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lg2 CONCLU3~0NS analyst or the decision maker. These forces originate both outside the or- ganization (e.g., in statutory pre- or proscriptions) and inside (e.g., in policy priorities). In terms of environmental decisions by the federal government, the interplay between the departments or agencies and the Congress con- stitutes one important set of external constraints. Statutes and legislative history, which vary considerably between agencies (and sometimes between programs within agencies) in terms of their approach to benefit-cost anal- ysis and other valuation techniques, constitute another set of constraints. The reaction of the courts to the uses of valuation approaches in support of environmental regulation decisions is another, the activities of environ- mental interest groups and other organizations represent still another, and the particular policy goals of agency leaders are another. In his paper on the contextual setting for benefit-cost analysis, Melnick details the sources of several significant constraints and their major effects on the conduct and use of benefit-cost analysis for environmental decisions. In particular, the adversarial tone associated with policy making for much of health and safety regulation has the effect of providing extremely strong, but rarely singular, messages to benefit-cost analysts regarding how analysis should be done and used. Statutes, court decisions, congressional intentions, and executive branch directives provide multiple, sometimes conflicting, guidance to agency decision makers and analysts on whether or how to include benefit- cost considerations in risk-management activities. Many key environmental health statutes operate with admonishments to "protect health" or "use best available control technology (BACT)," rather than offering a calculus that, where appropriate, includes trade-offs and cost-based alternatives. Ken as a whole, judicial rulings and opinions have likewise exhibited inconsistency across agencies, statutes, and even specific policy arenas. Congressional attitudes are often negative toward valuation approaches, while OMB has pressured decision makers and analysts to more fully integrate such ap- proaches into risk management. Regulatory analysis reflects these characteristics, in that many of its underlying assumptions are constrained by these legal, administrative, and political features. For example, an analysis of fugitive arsenic emissions from copper smelting would vary considerably depending on whether it is deemed important to preserve the industry in question (see the ap- pendix, which takes up this question). It is clear that few expect federal health, safety, and environmental regulation to become more consistent and consensual, either legally, bureaucratically, or politically, without major leg- islative intervention. The most compelling questions concern prospects for major intervention and how environmental analysis might be done in light of these characteristics. For example:

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CONCLUSIONS 193 How can benefit-cost analysis be integrated into statute-based reg- ulatory management practices that present a wide range of stances toward analysis (e.g., BACT versus health-based standards)? Can we expect benefit-cost analysis to become more politically feasible or acceptable? In response to these questions, there were two types of action-oriented approaches expressed at the conference, one focusing on changing the environment for benefit-cost analysis and the other focusing on improving analysis in response to key criticisms of its assumptions and techniques. In particular, participants discussed the need and prospects for (1) creat- ing a more consistent and conducive context for valuation approaches by amending the key environmental health statutes and (2) modifying analyti- cal techniques and/or including additional variables in valuation approaches in order to generate support for the results of benefit-cost analysis among the public agencies, the courts, and Congress. Achieving improved statutory and judicial consistency and encourage- ment for the use of valuation approaches in health and safety decisions would most likely rest on three things. First, general agreement among policy makers would be needed that there is a compelling need to com- pare gains in environmental health with the cost of achieving those gains. Second, agreement would be needed that previous improvements in the techniques of benefit-cost analysis now enable sophisticated assessments of variables, such as human life extension, temporal effects, and other important issues. Third, acknowledgment would be needed that benefit- cost analysis is or can be decoupled from political motivations, such as the perception that valuation approaches may support or justify policies favoring industry or other special groups to the detriment of the wider public. However, agreement on the need for cost reduction and/or greater efficiency in protective regulation clashes with concerns that efficiency can be used inappropriately as a rhetorical device justifying efforts to remove or reduce needed regulations regardless of their allocative implications. While benefit-cost analysis cannot now be considered to be a single set of valuation approaches, techniques, and procedures, there is a core of common understanding among many analysts based on shared assumptions regarding expected utility, the implications of scarce resources, and other concepts. Indeed, explicit techniques for valuing risks, costs, and benefits have existed for several decades. However, one effect of multiple, conflict- ing guidance from the regulatory context- even for a single agency is that regulatory requirements and practices for the use of valuation approaches are accompanied by political and policy forces favoring or opposing their application. Consequently, the burden to develop criteria matching appro- priate approaches and valuation techniques to specific types of problems

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194 CONCLUSIONS may be too large. For example, many believe that the use of benefit-cost analysis is not consistent with the Clean Air Act (benefits can be examined but not costs) and the Clean Water Act (analysis of costs but not bene- fits is allowed), and yet benefit-risk analyses are required by the Federal Insecticide, Fungicide and Rodenticide Act. There are at least two different sets of perspectives on these questions. One view is that the crux of the battle over acceptability of benefit-cost analysis is a debate about how much power should be given to those who favor and perform such analyses. According to this view, the battle rages between Congress and the regulatory agencies, as well as between groups residing within the regulatory agencies. Another view reflecting genuine puzzlement in the case of environmental trade-offs sees polarization and controversy emerging from institutions (e.g., Congress, the bureaucracy) that are considered on most subjects to be moderating and consensus building. For both views, it may be that the use of benefit-cost analysis for environmental health touches on basic unresolved differences regarding the appropriateness of applying cost considerations to certain classes of public goods, such as those described in the papers by Railton and MacLean. If so, these issues must be addressed at the level of institutions (i.e., Congress, the President, and the courts), and possibly through the conduct of further research, before specific guidance can be supplied to regulatory decision makers and analysts. Such a resolution might emerge over the long term or as the result of a major environmental or economic crisis. But, in the absence of a crisis, public opinion and institutions might continue to have difficulty integrating fully the protection of human health and safety and the consideration of costs and benefits in allocating scarce economic and other resources. Signals from the legal and administrative context, furthermore, suggest that agencies may continue to find both strong supporters and strong critics of attempts to enunciate agency-specific or government-wide approaches to risk-control analysis for regulation. On the second question- whether future improvements in analytic techniques, approaches, and theories could prove compelling to the policy- making system and therefore generate additional support for the consistent use of valuation approaches support for (or opposition to) benefit-cost analysis may not always be based on assessments of technical features. Therefore the contextual forces for regulatory benefit-cost analysis may not respond to technical improvements with greater support for its use in regulatory decision making. Nevertheless, it was clear to many participants that any advances in the application of evaluation approaches must be grounded solidly in the quality of the analysis and its ability to speak to values considered important by citizens and policy makers, regardless of whether they are easily discussed

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CONCLUSIONS 195 analytically. Consequently, much of the conference focused on ways to account for these additional variables and questions in valuation approaches used in benefit-cost analysis. APPROACH The term approach refers here to the way issues are conceptualized in terms of a general framework for analysis. Benefit-cost analysts, as Melnick notes, typically see policy issues in terms of opportunity costs, incentives, and the expense associated with eliminating risks. He characterizes lawyers, in contrast, as more likely to give preference to concepts of "command and control," of establishing standards and penalties to be imposed if those standards are not met. At least some environmentalists and politicians, he says, are more likely to see the issues in terms of an absolutist, health-only stance for which no level of effort is too great. 1b the extent that these characterizations are accurate, they influence the way analytic studies of valuation are viewed. In order to agree on an approach to valuing health effects, we would want it to pass three tests: (1) accuracy, (2) verifiability, and (3) accept- ability or feasibility. Much of the technical work to advance health-effect valuations has focused on improving the accuracy and verifiability of the scientific data and benefit-cost techniques. MacLean, however, describes some of the reasons why this third test presents special difficulties. He points out that there are substantial differences in the positions favored by different groups, differences that are difficult to resolve through appeals to either basic moral principles or empirical preferences. MacLean describes what for many makes the issue absolutely unique: human life is sacred, a fact with many ramifications. For example, although few disagree that it makes sense to discount expenditures or the opportunity costs of health effects, MacLean claims that there are moral and logical difficulties when the value of life per se is discounted. He argues that the existence of eco- nomic consequences of health and safety decisions does not justify treating human life as if it were exchangeable. There remain unavoidable comparisons, however, of how many re- sources should be devoted to improved physical well-being compared with energy conservation, greater economic growth, or other outcomes. One view is that such comparisons can be made more efficiently by relying on a common metric to characterize all important possibilities rather than examining the relative value of risk reduction in each case. Yet even within the community of professional analysts, there is disagreement about the best way of doing so. For example: Where are improvements most needed in valuation approaches?

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196 CONCLUSIONS . Are there viable alternatives to formal valuation approaches to support environmental decisions? As the above discussion of contextual issues indicates, a major chal- lenge for analysts is to develop and employ appropriate approaches to analysis when there is disagreement regarding basic policy problems and goals. For example, some have proposed that air and water pollution could be reduced more rapidly by making standards less stringent. The reasoning is that, in some cases, current standards so far exceed current attainment levels that there is little chance additional efforts will lead to complete compliance. Therefore, the argument goes, fewer such efforts are under- taken than would be if standards were set at a lower level. This reasoning is rejected by those who believe that high standards should be met. Still others would acknowledge the difficulty of meeting some current standards, but hold that they act as a necessary spur to obtaining even the most modest pollution reduction results. In this context, how does the analyst choose between methods of analysis appropriate to obtaining relative reductions or to meeting the more absolute goals? In addition, some analysts and observers are concerned about the ac- cessibility of analytic approaches. Many accept that an important attribute of an ideal approach should be that it generate results people can un- derstand and can analyze and argue about. In this sense, Railton refers to benefit-cost analysis as an information-yielding device rather than a decision-making tool. There remains, of course, the question of accessibil- ity and training. Results easily understood by another benefit-cost analyst may not be fathomable by an interested, educated, but untrained person or even by environmental scientists trained in other disciplines. Machina presents what might be considered by some to be an unusual position with respect to the various parts of the analytical process that need adjustment. He argues, for example, that recent theoretical and em- pirical findings pertaining to how people actually evaluate risks and assign probabilities ought to be reflected in the way preferences are analyzed, but not in the analysis of probable outcomes. As he states it, observed "departures from the strictures of probability theory should be corrected but . . . (systematic) departures from the strictures of expected utility theory should not". This is because the former involve the determination of the risks associated with alternative actions or policies, which are in fact mat- ters of accurate representation, while the latter involve the willingness of individuals, organizations, and society to bear these risks, which is a matter of preference. He concludes that analysis must be designed to account for actual preferences, even those that depart from the strictures of expected utility theory.

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CONCLUSIONS 197 Considerable support for this view is emerging among economists and other risk-control analysts. However, there appears to be little or no consensus at present regarding specific valuation approaches that need reforming in light of this new evidence on preference formation and little consensus as to how such approaches, once identified, might be modified to systematically account for observed departures from expected utility theory. Furthermore, there is little agreement as to alternatives to formal valuation approaches in support of environmental decisions. Although many decry weaknesses in current analytic approaches, few alternatives are proposed. MacLean discusses several reasons that a single analytic method for making environmental decisions should not be applied universally. This is principally because the necessity to involve symbolic elements in comparisons and trade-offs makes such decisions very dependent on their context. He concludes that it may be necessary to treat different values differently and that situational specificity, not measurement difficulty, is the fundamental problem in such comparisons. As Railton points out, an approach that yields more information can increase accuracy yet at the same time be less decisive. Regardless of the valuation approach used, most participants seemed to favor greater provision of information, even at the cost of decreased decisiveness. Still, there is also a recognition of the need to systematically differentiate analytical-approaches in light of the problems or values they are meant to address. PROCEDURE Procedure, as used here, refers to the way the benefit-cost analyst actually goes about systematically examining values. The choice of specific methods, metrics, and measures will play an important role in provid- ing understandable, believable information for decision makers and other interested parties in protective regulation. For example, the concept of willingness to pay (i.e., setting the value of a good or service according to what people are willing to forgo in order to have that good or service) has gained adherents and wider use in health and safety regulation in recent years. When used in hypothetical markets (e.g., environmental decision making), it is nevertheless a troublesome procedure to those who would prefer to incorporate the notion of experience in some way, and who would attempt to discover what people, with enough experience, would want. An- other possibility would be to balance willingness to pay with a measure of willingness to sell (how much people would have to receive in order to give up the good or service), but such a concept also runs into measurement problems in hypothetical markets.

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198 CONCLUSIONS Questions are raised also about the advisability of relying on tort law to determine the value of intangibles, especially because jury awards appear to be highly skewed in liability cases. Another possibility is to search for valuation methods and/or procedures that account for distributional effects, for example, assigning premiums to consequences based on income. Other questions include: Can balanced procedures, possibly including a combination of val- uation techniques and nonquantitative factors, be found that would meet the approval of Congress, OMB, and the courts? Is the use of a simple or single metric appropriate when there is variation among individuals, not just in terms of how much of a value is wanted or can be tolerated, but in terms of whether they want that particular value at all? Are there ways to capture certain difficult conceptual problems, such as intergenerational equity, in analytic terms? In his keynote address in this volume, Russell describes the necessity of making what he calls "cruel choices." In terms of the accommodation sometimes needed to reach agreement about such choices, it may seem as though valuation techniques make trade-offs too explicit. Fuzziness some- times appears to have a positive function in that it allows the participants to believe in the myth of successful joint accommodation. Russell argues, however, that better information needs to be presented to the public, and that our system is predicated on the legitimacy flowing from the support of an informed citizenry. Presenting these trade-offs is a critical part of that process. One procedure for simplifying, analyzing, and presenting trade-offs is the transformation of a range of value observations into a single set of common metrics. In analytic practice, this most often means the use of monetary value as the common numerator or denominator, or both. Railton discusses the difficulty of relying on an expert-determined metric when issues of welfare are involved. Scientists, he says, have more knowledge about natural phenomena and thus would be more reliable than the rest of us in describing events. But the most reliable source for describing people's welfare outcomes may be those individuals themselves. It may be quite difficult to develop a metric that adequately captures individuals' perceptions of their well-being. Nevertheless, in practice the regulatory process does implicitly differentiate certain factors. Some have observed that regulators are willing for society to expend more to protect individuals who are involuntarily at risk than to reduce those risks borne by people who are easily able to make choices regarding their own exposure. This corresponds, by the way, to many people's preferences concerning a variepr of risks.

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CONCLUSIONS 199 Similarly, the problem of comparing well-being across a significant span of time (e.g., intergenerational comparisons of health) has provoked considerable controversy about the acceptability of analytic procedures. There are regulatory actions involving human health and life for which there is a need to consider costs and benefits that might accrue in the future. The traditional method- for comparing costs and benefits over time-discounting" is predicated on the belief that costs borne by and benefits accruing to individuals and society in the future should be adjusted, or discounted, to make comparison with current expenditures or costs valid. In the area of human health and safety, the sacredness of human life, as MacLean and others characterize it, can make it difficult for policy makers to agree with methods that seem to say that a life saved today should be worth more than a life saved 50 years from now. On the other side of the coin, if resources are limited, then some allocation must occur. Under those circumstances, the hard question is: What is the best way to deal with policy problems for which actions taken or not taken today will have human health effects in the distant future? In answer to these difficulties and questions, there is at present no broad consensus among those interested in health and safetr regulation. Some oppose discounting altogether, others would apply discounting to costs but not benefits, and many would support the use of a very small discount rate far below that often used in analyzing costs and benefits of other government and private programs. It is important to note that although (as previously discussed) benefit- cost analysis may be only a small component of the entire regulatory process, analytic procedures must be constructed to account for the major characteristics of decision making. Harris raises the point that, whereas the usual way of thinking about analysis is as an input to decision making, decision making often effectively provides input for subsequent analysis, and that the best strategy may be to treat the whole process as dynamic. The factors that ought to be considered may be too complex to model adequately using current analytic methods, and the only way of developing appropriate information about outcomes may be to take action that can be reversed if necessary. SCIENTIFIC INFORMATION The potential conflict between risk assessment and risk-control analysis is often realized. In the schema of key components of regulatory agency policy making presented in the introduction to this volume (see Figure 1), risk assessments depend on assessments of data from epidemiologic, bio- logical, and engineering studies. In turn, benefit-cost analysis depends on

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200 CONCLUSIONS the application of valuation analyses to scientific assessments of risks associ- ated with health and safety problems. Both risk assessment and risk-control analyses inevitably involve simplification of processes and outcomes in or- der to achieve clarity, meet regulatory deadlines, or because the underlying data are insufficient. For example, scientists frequently complain that risk- control analyses fail to capture adequately the factors they judge important in scientific determinations, whereas analysts express disappointment at be- ing prevented from achieving the ideal in risk assessment, accurately and precisely portraying the risks of concern to policy makers and the public. This, both claim, is because some factors can be quantified with confidence while others remain matters of judgment. Scientists, if generalization may be permitted, tend to distrust the policy analysts as oversimplifiers, and the analysts are frustrated because the scientists cannot provide clear-cut answers. Several practical questions are embedded in this caricature: Is it possible to adequately reflect scientific judgment in analytic valuation studies? Can uncertainties or gaps in data be adequately incorporated? Can conflicting models or interpretations be integrated into analytic valuation studies? How can values or policy judgments be integrated into analytic valuation studies? The ways different disciplines treat data, uncertainty, and judgment may underlie these issues. For example; some natural scientists point out that their colleagues are currently unable to come up with a method for quantifying,- for example, the carcinogenicity of arsenic that would satisfy analysts interested in determining the costs and benefits of policy options for dealing with fugitive emissions associated with copper smelting. These scientists were greatly disturbed that an enormous body of information, mechanistic as well as epidemiologic, about the neurotoxicologic effects of arsenic was ignored in the analysis of the substance as a human carcinogen because it is judgmental and therefore difficult to express in quantitative terms. In his paper on information and regulation, Harris raises a related issue having to do with the timing and sequence of new scientific information as it becomes available for benefit-cost analysis. The question is knowing when to act and when to wait for additional information that might lead to a different action (including no action). The challenge shared by the scientist, the analyst, and the decision maker is to construct procedures for knowing when to recommend action, further information gathering, or both.

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CONCLUSIONS 201 Scientists, analysts, and decision makers, however, point out a number of other issues that follow from an expansion of the concept of risk assess- ment to include other factors. For example, some emphasize the distinction between narrow technical uncertainty associated with any scientist's esti- mate of risk and the broader structural uncertainty associated with differing estimates of risk by various scientists. Most important, others argue that a major reason why better scientific estimates of health and safety risks are not available for example, estimates of the risks of noncarcinogens is that decision makers and the public have not demanded them. Estimates of the risks of carcinogens are relatively more available largely because Congress, the courts, and the public have demanded that resources be committed to producing those estimates. Finally, there is a significant argument that risk information is often inadequate because scientists are reluctant to make estimates in light of limited data. This may be a major contributing factor in the conflict between analysis and scientific risk assessment. Benefit-cost analysis is often driven by the need to make a decision, while those who perform scientific risk assessments are reluctant to guess when information is deemed inadequate. It may be that scientists will always be distrustful of benefit-cost anal- yses, which, in order to reduce, simplify, and meet tight schedules, rely on summary characterizations rather than detailed information and accept increased level of uncertainty and a reduced level of subtlety in under- standing any single piece of the whole picture. There is a conflict, however, between presenting complete information that is so detailed and complex that only the experts can understand it, and simplifying presentations so that those without the technical training can understand but lose the detail and subtlety of the data. There does not appear to be a quick technical or procedural fix that satisfies both scientific sophistication and simplicity. But many would insist on making evidence, and especially the assumptions underlying conclusions, regarding both risks and the valuation of risks as open and explicit as possible. This would both encourage careful question- ing of those assumptions and contribute to trust among scientists, analysts, decision makers, and the public. DECISION MAKING A widely shared expectation is that an individual or small group, usually at the apex of the regulatory agency, holds responsibility for the decisions and actions of that agency. Another shared expectation is that a policy decision should be based on the relevant evidence. As indicated previously in this discussion, the role of the agency analyst, as well as that of the agency decision makers at the apex, is often limited by a context in which myriad other voices, both outside and inside the agency, speak strongly. Moreover,

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202 CONCLUSIONS these two expectations can conflict, particularly when it is difficult to gain general agreement on the type and quality of evidence needed to support a decision or when some important evidence is qualitative, implicit rather than explicit, or missing altogether. In this type of setting, agency political appointees, rather than analysts, are responsible for factoring in a full range of considerations bearing on a problem in effect, to act on behalf of the agency and the public by applying an informal metric trading off the economic, political, ethical, and etiological concerns raised in the foregoing papers and then to produce a decision reflecting the results. Within this framework, benefit-cost analysis can be used to provide more explicit information about some (e.g., economic) priorities and trade- offs as input to a decision, or it can be used to justify decisions already reached. It is not intended, however, nor can it give equal emphasis to all possible considerations bearing on a regulatory decision. Rather, analysis traditionally focuses on a few factors the decision maker would like to make explicit or those few for which quantitative values are available. What are the prerequisites for analysis that informs rather than appears to supplant the prerogative of the decision maker? There is some ambiguity regarding how much authority we wish to grant to the process of providing information and the experts who provide it. Both analysts and policy makers have experienced pressure to use benefit-cost analysis to treat explicitly a broader range of relevant factors. This includes direct statutory and administrative pressures for agencies to broaden or to restrict their analytical coverage of values, including economic, Biological, ethical, and administrative concerns. In addition, strong criticisms and attacks on risk-control analysis by those mistrustful of the assumptions, approaches, and results of valuation approaches may play a role in stimulating theorists and practitioners to increasingly incorporate and analyze as many issues and aspects bearing on a decision as possible. The analyst, consequently, faces incentives to include a wider range of considerations within the analytical framework, considerations that may be difficult to treat formally (e.g., ethical and political variables). How- ever, as the number of variables to be addressed increases and as their character changes (e.g., inclusion of variables that are intangible or those that raise questions of interpersonal comparisons), the analyst's challenge is to prevent the problem under consideration, as well as the set of al- ternative decisions, from becoming fuzzier and less well defined. Some worry that, as the analyst incorporates an increasing number of factors, in- cluding those factors not often treated quantitatively, a formal but limited

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CONCLUSIONS 203 set of approaches and techniques is being substituted for the more infor- mal approach provided by the politically and legally accountable decision maker. Three principal prerequisites are often cited as expectations for analytic studies: knowledge, candor, and clarity. With regard to the first prereq- uisite, most studies need three kinds of knowledge: technical knowledge, economic knowledge, and legal knowledge. There is a lot of uncertainty in all three areas, and whatever is presented to the decision maker must reflect the degree of confidence in the knowledge in those three areas. Second is candor. If the people doing the studies know that there are some weaknesses or driving assumptions embedded within them, they should frankly state that to the decision maker. At issue is the generation of trust among those who experience the effects of regulation, among the decision makers, and among valuation analysts. Much has been written in recent years about the decline in trust in government and other institutions. We need not repeat that discussion here, other than to point out that many factors affect trust and that it is important for analysts to demonstrate substantive competence, lack of bias, and openness in their work. Finally, whatever is presented to the decision maker should be clear. Studies may be clear to the leading workers in the field and their peers, but not to decision makers. The peer review system represents one possible way to promote ac- curate knowledge, candor, and clarity in the use of benefit-cost analysis in regulation. Review by h~owledgable experts can help reveal inaccuracies, weaknesses, driving assumptions, and so on. But it may not be capable of ferreting out the technical and other jargon that confuses nonexperts. Con- ference participants pointed out that, although peer review is commonly used to examine the methods, data, and results of risk assessment, formal peer reviews of benefit-cost analysis are rarely undertaken within regulatory agencies. Few would support applying a mechanical, strict benefit-cost rule to en- vironmental regulation that is not tempered by judgment and consideration of other factors. The major role of benefit-cost analysis in environmental regulation should be as an organizing concept and as a way of helping the decision maker think about the factors that need to be looked at. A process involving peer review of benefit-cost analysis could assist decision makers by malting assumptions clear and by noting the strengths and weaknesses of results. Railton's suggestion that benefit-cost approaches be treated as informa- tion-yielding rather than decision-making devices has several implications for the way scientific data and judgment could be integrated into decision processes. Most important, it would suggest disaggregated information and error bands or ranges rather than point estimates. It also suggests the

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204 CONCLUSIONS importance of presenting information about several alternatives. Harris, moreover, points out that the best strategy may be to undertake actions that are reversible before complete information is available, because imple- menting regulatory or other control actions may be the only way to obtain relevant information. Information generation may be an excellent role for benefit-cost analysis in such a dynamic process. CONCLUSIONS The conference was intended to explore a set of philosophical, political, informational, and administrative issues in the use of benefit-cost analysis for environmental decision making. This broad scope yielded an equally broad mix of ideas, approaches, and conclusions in both the papers and the conference discussions. The ideas discussed at the conference and presented in these papers may contain a few seeds that could bear fruit if they are nurtured and developed. Certainly they include several concepts and comments that speak directly to the practice of benefit-cost analysis. Emerging from conference discussions is a strong sense that, at present, the challenge in improving the application of benefit-cost analysis is to design practical procedures and techniques that accommodate (1) consid- erable situational variation; (2) the fairly limited role played by formal risk-control analysis in the full process of identifying, regulating, and en- forcing solutions to health and safety problems; and (3) the tendency for both critics and supporters of analysis to-overemphasize its influence in the regulatory process. The problems of health and safety regulation are far from standardized. Similarly, benefit-cost analysis is really a family of related techniques and approaches, only a few of which have been systematically evaluated for their application to specific topical and conceptual issues in health and safety regulation. Consequently, the application of benefit-cost analysis must be sup- ported by better systematic distinctions or situational conditions that reflect accurately key variations among regulatory responsibilities and problems facing health and safety decision makers. For example, can we systemat- ically distinguish among situations involving potential loss of life, sickness and injury only, or both? Once a set of systematic distinctions has been drawn, it would then be important to identify attributes of benefit-cost analysis techniques appro- priate to those situational conditions. At the simplest level, for example, are there some problems for which the use of formal analytical techniques are not currently appropriate? At another level, is it appropriate to use discounting of future costs and benefits when human life is not at stake?

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CONCLUSIONS 205 Finally, it is important to formulate processes for encouraging the development, within the various federal regulatory arenas, of agreement on systematic scientific distinctions, techniques, and approaches to valuation of risks, costs, and benefits. Taking account of the fact that some conference participants generally support the use of formal analysis whereas others generally oppose its use, the committee was nevertheless able to reach the following conclusions. 1. Among both those who would general) support the use of benept-cost analysis and those who would oppose its current use, there is a common recognition of genuine moral and ethical dilemmas underwing evahtaiion of the costs and benefits of programs to regulate health and safer nsks. a. Current approaches to characterizing and valuing risks cannot accom- modate with validity the ~11 range of factors that decision makers are asked to take into account, particularly those drawing comparisons across time. Statutes and administrative orders requiring major regulatory decisions to be based on least cost/most benefit analyses have, according to one view, stimulated a new emphasis on cost reductions in regulatory decision mak- ing. According to another view, such requirements fail to acknowledge that the general approach to benefit-cost analysis is not developed well enough to fully account for important factors, such as public opinion, quality of life, and other social, psychological, and institutional issues important in any program of regulation. Similarly, considerable disagreement exists about the ability of risk-control approaches to adequately consider future gener- ations with current techniques for discounting. Supporters have proposed careful analysis of long-term impacts of regulatory policies and the use of nonmonetary measures, such as lives saved/deaths prevented, in calculating impacts. Critics are concerned that equity cannot be discerned and com- pared across time in ways that can be formally measured. This suggests a need for further development in the areas of temporal and nonquantitative factors as a contribution to improvement in benefit-cost analysis. b. Serious concerns enlist regarding the appropriateness of formalizing approaches to issues such as intertemporal equip. At the heart of this recognition is the belief that there is an irreducible tension between a desire to reduce value considerations in regulation to a single metric and a desire for symbolic action. This conflict emerges most clearly with respect to issues involving human life (preventing deaths/saving lives) in regulatory decision making. There is a concern that, even if benefit-cost analysis approaches and techniques could be developed to account systematically for a broader range of issues on a broader range of regulatory topics, it may be morally or ethically incorrect to place values such as human life next to other economic factors.

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206 CONCLUSIONS 2. Formal benefit-cost amass of health and safety risk in regulation Is at present on) a limited and incomplete part of a large, complex anemic and dec~sion-making process. This process largely determines the weight to be given to benefit-cost analysis in policy making, and it sets limits on what can and cannot be accomplished with formal evaluation of risks, costs, and benefits. For example, the character of statutes, regulations, court decisions, and enforcement can all constrain the assumptions, methods, and data that can be used in a formal analysis. And, once completed, the scientific quality of the analysis is only one factor influencing reactions to the analytical results. 3. There are often misperceptions regarding the influence of benefi~- cost analysis in decision making. Critics often express the need to curb the power of benefit-cost analysis in decision making, while supporters would increase its influence. There are at least two general reasons why this polarization and possible overemphasis may occur. First, the current adversarial character of regulation for health and safety issues encourages some to seek ways to challenge (or defend) outcomes on whatever grounds may prove successful. Under these circumstances, analysis can become a target or a pawn of advocates. Second, there may be standards and/or goals set for analysis that it cannot in all instances meet. In a policy process in which analysis seems to offer ways of treating difficult issues, there is a tendency to transform political disputes into scientific or analytical ones and then to expect the analytical process to substitute for the political process. The consequence is to expect benefit-cost analysis to be able to accommodate a wide range of important factors bearing on a problem and then to be critical when it is more difficult to treat formally some factors than others. The result can be to politicize benefit-cost analysis and polarize positions (e.g., those who would increase the use of analysis and those who would eliminate it in favor of absolute standards, such as the Delaney Amendment and the Clean Air Act). 4. We believe that, among agency decision makers, the courts, Congress, and analysts, there is no consensus regarding the use of a specific set of analytical techniques for a specific purpose. At present there are a range of techniques available for use in benefit-cost analysis of morbidity, mortality, and other health and safety ejects. There is agreement among many practitioners and scholars regarding the importance of considering a wide range of costs and benefits of alternative policies; there are also, in many instances, a number of technical procedures and methods that analysts can use to estimate those costs and benefits. But there is little agreement on decision rules an agency might use in choosing one procedure or method over another in specific cases. In the analysis of programs to prevent deaths- the example is regulation to restrict fugitive arsenic emissions from copper ore smelting- an agency analyst might choose techniques based on

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CONCLUSIONS 207 willingness-to-pay. It is well known that this approach emphasizes different types of costs than would other approaches. For example, techniques based on willingness-to-pay will emphasize expressed preferences, while those based on human capital models emphasize forgone earnings. Although there is considerable debate within some agencies and among some analysts as to the appropriateness of specific techniques for valuing lives, there is a need to evaluate both the types of regulatory problems and the attributes and implications of techniques for benefit-cost analysis, in order to develop a more systematic basis for deciding when to apply which technique. Based on these conclusions, the steering committee makes three rec- ommendations for improving the use of benefit-cost analysis in health and safety regulation: 1. Benefit-cost analysis should be thought of as a set of information- gathering and organizing tools that can be used to support decision making rather than as a decision-making mechanism itself. Beating the approach in this way has several implications for the way it is applied. It empha- sizes disaggregated information and range rather than point estimates. It encourages development of information about several alternatives rather than a single policy. It also encourages viewing both analysis and decision making as dynamic rather than static processes. 2. There is a need to more systematically match analytic methods and techniques to Apes of health and safety problems encountered in the regulatory process. Researchers and analysts recognize that techniques associated with benefit-cost analysis emphasize quantifiable factors, especially those that can be characterized in monetary terms. In addition, benefit-cost analysis is most applicable to those health and safety problems or elements of problems in which externalities are relatively limited and opportunity costs are relatively clear. For example, the economic impacts of closing a plant may be easier to characterize succinctly than its effects on the quality of life in the surrounding community. This implies (a) the need to improve benefit-cost analysis so that a more complete range of impacts and factors can be considered systematically and (b) the need to identify systematically sets or types of problems according to their susceptibility to benefit~ost analysis. Therefore, blanket determination of whether a single analytic approach should be taken to all regulators decisions does not seem appropriate at this time. 3. Regulatory agencies should consider expanding the use offormal peer review mechanisms in the area of benefit-cost analysis for health and safer decisions. The steering committee believes that benefit-cost analysis should be subject to systematic, consistent, formal peer review, which can be used to assess appropriateness of assumptions, techniques, and approaches; limitations of data and methods; and the formal or informal treatment

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208 CONCLUSIONS of moral and ethical concerns. Traditionally, the Office of Management and Budget has been asked to assess major regulatory benefit-cost analyses as part of its mission to encourage greater use and improved quality in analysis, but it is not appropriate to ask OMB to devote its limited resources to accomplish a full range of review that is necessary for a complicated valuation. OMB could be asked to respond to plans for expanding peer review for valuation analyses.- Such an expansion would complement existing agency peer reviews for scientific risk assessment prior to agency decision making.