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Tuesday, July 15, 2008

Bush Administration Says Americans Are Worth Less

A recent Associated Press investigation shows the Environmental Protection Agency has been using new statistics to assign monetary values to the lives potential regulations will save. "The 'value of a statistical life' is $6.9 million, the Environmental Protection Agency reckoned in May – a drop of nearly $1 million from just five years ago," according to AP.

The value of a statistical live, or VSL, is an estimate of how much a person would be willing to pay to reduce their risk of death by some set proportion. Technically, the VSL approach does not value a human life but rather a "statistical life." The benefit to society monetized in the approach represents a reduced risk of death for a population, not a certain avoidance of death for an individual.

Realistically, when it's time to study the potential effects of a regulation, federal agencies estimate the number of lives the regulation will save, then multiply that figure by the VSL. Essentially, the federal government is saying the value of a person's life is equivalent to whatever dollar figure statisticians and economists come up with.

AP provides a good description of the policymaking impact:

Though it may seem like a harmless bureaucratic recalculation, the devaluation has real consequences.

When drawing up regulations, government agencies put a value on human life and then weigh the costs versus the lifesaving benefits of a proposed rule. The less a life is worth to the government, the less the need for a regulation, such as tighter restrictions on pollution.

Consider, for example, a hypothetical regulation that costs $18 billion to enforce but will prevent 2,500 deaths. At $7.8 million per person (the old figure), the lifesaving benefits outweigh the costs. But at $6.9 million per person, the rule costs more than the lives it saves, so it may not be adopted.

Of course, the real travesty here is that federal officials actually allow the VSL to influence their decision when they're considering a new federal standard. If a regulation has the potential to save hundreds or thousands of lives, shouldn't that be enough to prod policymakers into action? Is it necessary to assign a dollar value to everything…and everyone?

For now, the answer is "yes." Officials at EPA and other agencies are forced into playing a game that only makes sense in Washington D.C.'s perverse political climate. The Bush White House, for example, is more than happy to reject proposed regulations if the monetized compliance costs exceed monetized benefits (as they did recently with an EPA recycling rule.)

Benefits such as quality of life, ecological preservation, or even a reduced number of deaths have no bearing on the Office of Management and Budget's decisions — unless they are translated into dollars and cents. Anyone advocating for newer or stronger public protections has a Catch 22 on their hands: Either refuse to place a value on the greatest benefits of a new regulation, saved lives, and see the policy rejected by the White House or attacked by industry lobbyists; or go through the ridiculous (and morally questionable) exercise of placing a dollar value on a human life.

On last night's Colbert Report, Stephen Colbert pokes fun at the ridiculousness of using VSL to make decisions about regulation. Watch it here:

For a description of how VSL undermines public protections, see the OMB Watch report, Polluted Logic: How EPA's ozone standard illustrates the flaws of cost-benefit analysis.