Pricing the Priceless: Cost-Benefit Analysis of Environmental Protection

Many analytical approaches to setting environmental standards require some consideration of costs and benefits. Even technologybased regulation, maligned by cost-benefit enthusiasts as the worst form of regulatory excess, typically entails consideration of economic costs. Cost-benefit analysis differs, however, from other analytical approaches in the following respect: it demands that the advantages and disadvantages of a regulatory policy be reduced, as far as possible, to numbers, and then further reduced to dollars and cents. In this feature of cost-benefit analysis lies its doom. Indeed, looking closely at the products of this pricing scheme makes it seem not only a little cold, but a little crazy as well. Consider the following examples, which we are not making up. They are not the work of a lunatic fringe, but, on the contrary, they reflect the work products of some of the most influential and reputable of today's cost-benefit practitioners. We are not sure whether to laugh or cry; we find it impossible to treat these studies as serious contributions to a rational discussion. Several years ago, states were in the middle of their litigation against tobacco companies, seeking to recoup the medical expenditures they had incurred as a result of smoking. At that time, W. Kip Viscusi-a professor of law and economics at Harvard and the primary source of the current $6.3 million estimate for the value of a statistical life'-undertook research concluding that states, in fact, saved money