Commentary Magazine


Risk and Reason by Cass R. Sunstein

Risk and Reason: Safety, Law, and the Environment
by Cass R. Sunstein
Cambridge. 342 pp. $30.00

The modern environmental movement, which came of age in the 1960′s, has been dominated by activists and alarmists, and their basic method has never changed: overstate threats and downplay the costs and difficulties of dealing with them. Whatever the issue—air pollution, contaminated water, genetically altered food, asbestos, toxic waste, greenhouse gases, endangered species, you name it—they have tended to offer the same answer: heavy doses of regulation.

Cass R. Sunstein is at once sympathetic to these activists and critical of their naiveté. He believes that a more rational approach to managing environmental risks would give us many more benefits, mainly in the form of better health, at substantially lower cost. His mission in Risk and Reason is to tell us how this might be done.

Sunstein is obviously a smart guy. On the faculty at both the law school and the political-science department of the University of Chicago, he has testified before Congress on many different issues, consulted on constitution-making and legal reform in Russia, China, and South Africa, and written books on regulation, free speech, and how juries decide punitive damages. His books, it must be said, are not the sort one reads for pleasure. This one is no exception. Densely factual, prone to logic-chopping, and riddled with unlovely academic jargon, it is a plea, as Sunstein writes, “for a large role for technocrats in the process of reducing risks.” He believes that the technocrats’ main instrument must be cost-benefit analysis.

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The early chapters of Risk and Reason are in large measure a critique of environmental policy-making during the 1970′s, before the advent of cost-benefit analysis. The laws written in those years were repeatedly driven by public hysteria, especially discernible in the reaction to Rachel Carson’s Silent Spring (1962), a book that persuaded millions of Americans they were being poisoned by pesticides. Eager to exploit these passions, politicians raced to get out front in the environmentalist parade.

A striking example of this phenomenon was the competitive bidding between Democratic Senator Edmund Muskie and President Richard Nixon, each of them determined to put his name on clean-air legislation. The result was a 1970 law more stringent than what either of them wanted, one that—explicitly and absurdly—barred the Environmental Protection Agency (EPA) from considering the costs of its clean-air regulations. Sunstein notes that if the law had been enforced as written, the EPA would have had to shut down all automobile traffic in Los Angeles.

Sunstein also discusses the problems caused by the media’s obsessive interest in finding an environmental disaster-of-the-month. Here a prime example is Love Canal, an abandoned waterway in upstate New York that, during the 1940′s and 50′s, was used by the Hooker Chemical Company to dump chemical wastes. Later, the canal was filled in, and hundreds of houses, plus a school, were built on the site. By the mid-1970′s, residents of Love Canal began to fear that the chemicals were resurfacing and causing leukemia and other cancers, and the media obligingly described their plight in lurid detail. The New York State health commissioner declared a public emergency, and eventually President Carter declared Love Canal a national emergency, relocating hundreds of families. But, again, it was all hysteria. An exhaustive 1982 study by the EPA concluded that there was “no evidence of environmental contamination” at Love Canal.

Cost-benefit analysis in the federal regulatory arena owes its start mainly to the Reagan administration, but its use was expanded under the first President Bush and made a requirement under President Clinton. The courts have also weighed in, creating, as Sunstein shows, a number of regulatory “default principles” that give running room to federal agencies inclined to use cost-benefit analysis even when doing so is not required by legislation or presidential mandates. In deciding how to implement fuel-economy standards, for example, the National Highway Traffic Safety Administration would now be expected to consider whether higher standards would lead manufacturers to build more small cars, which might increase accidental deaths on highways.

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The case for weighing costs against benefits seems, in principle, irresistible. It is hard to think of alternative models for regulatory policymaking or, for that matter, for any decision involving a degree of complexity. Cost-benefit analysis in some guise or other—including the plain old yellow pad with a line down the center separating pros and cons—comes naturally to most educated Americans. Yet, in the political arena, it remains stubbornly controversial, in part because millions of Americans simply want a “safe” environment, no questions asked, and fiercely resist any talk implying that there are various degrees of safety, with some of them too expensive to buy.

But cost-benefit analysis, like technocracy in general, has a larger problem. An agency embracing technocratic principles would presumably be writing rules that follow logically and ineluctably from the peer-reviewed data demanded by Sunstein, and would reject rule-making based on political intuition. The new decision-makers would presumably be “experts,” not standard-issue political appointees.

Unfortunately or otherwise, this vision is a fantasy. It could not possibly work as advertised, for three intertwined reasons: (1) there remain massive uncertainties, acknowledged at length by Sunstein, about how costs and benefits should be weighed; (2) the uncertainties present boundless opportunities for regulators to rule in favor of the outcomes they deem socially and politically desirable; and (3) the regulators tend to be liberals, or—what is much the same thing—heavily biased in favor of increasing the budgets and expanding the authority of regulatory agencies. Sunstein looks closely at reason number 1 but essentially walks past numbers 2 and 3.

The massive uncertainties of cost-benefit analysis begin with assessing the economic value of the lives expected to be saved by a prospective regulation. Most of the studies on the subject are based on labor-market calculations. The core idea is that in order to attract people to high-risk jobs, you have to pay them more, and so we can infer from wage differentials just how much value people place on their lives. As Sunstein indicates in a fascinating table, estimates based on this method yield wildly divergent numbers, ranging from $700,000 to $16.3 million per life.

But that is just the beginning of the measurement problems. In a chapter on the regulation of arsenic in drinking water, Sunstein criticizes the EPA for using a life value of only $6.1 million. His objection is not that the figure is below the average in his table but rather that the agency failed to consider several other factors, particularly the higher value that he believes should be placed on lives when the risk involved is unavoidable. (We don’t all have to go skiing, but we do have to drink water.) But how large an adjustment is needed for unavoidability? Reasonable people will disagree.

Still other adjustments might—or might not—be called for. Arsenic is a potential cause of cancer, and cancer deaths, which can be lingering and painful, are viewed by some as peculiarly awful. Without taking a stance on the matter, Sunstein cites a study suggesting that the value of avoiding an involuntary carcinogenic death is four times that of an instantaneous workplace death. Still another source of contention among the experts is the discount rate applicable to future deaths. The costs of regulation are incurred here and now, but the deaths being avoided by cleaner air or water would occur years later. Since a death in 30 years is not as bad as a death now, future mortality needs to be discounted. But by how much? The jury is still out.

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It is hard to believe that what Sunstein calls the “cost-benefit state” would be any less politicized than the regulatory state to which we are accustomed. It would probably be more politicized. As we have learned from public-choice economics, government actors are no less self-interested than their private-sector counterparts, which would seem to imply that a technocratic regime, in which scientists and systems analysts were writing the rules, would be an engine of big government.

Indeed, there are passages in Risk and Reason that leave one thinking Sunstein himself wants a version of cost-benefit analysis that would demonstrate the need for a range of Great Society-style initiatives. As he argues at several points, we should be willing to bear higher costs when the groups being protected consist disproportionately of poor people and members of minority groups—not, one gathers, because their lives are more valuable in some strict calculus but because it is government’s task to minimize the burdens of the disadvantaged.

Sunstein is almost certainly correct in arguing that cost-benefit thinking would eliminate some of the follies of the environmentalism of the 1970′s. One might hope that we never again see another major statute that, like the Clean Air Act, forbids any consideration of cost. All the same, the sun will rise in the West before we see experts, wielding cost-benefit analysis or any other technocratic tool, who do not harbor political imperatives of their own.

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About the Author

Dan Seligman is a contributing editor of Forbes.




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