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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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