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Regulatory Analysis: Discounting the Value of Life

Regulatory Method Undervalues Protecting Seniors from Hazards

As part of its effort to weaken regulatory safeguards in the areas of health, safety and the environment, President Bush’s Office of Management used a variety of techniques, some bold and hard to obscure – overt efforts to defang protective regulation of specific toxic pollutants, for example – and some that proved the adage that “the devil is in the details.

One example of the latter was a Bush Administration effort to tinker with cost-benefit analysis formulas to diminish the value of the lives of senior citizens killed by the effects of pollution. As part of its already controversial method of cost-benefit analysis, OMB routinely places a dollar value on both the benefits and costs of a proposed regulation. One common benefit of protective regulations is that they save lives, and for that reason OMB developed a dollar value for a human life – depending on circumstances, somewhere in the vicinity of $6 million. That value is, of course, a matter of considerable controversy in and of itself, in part because it fails one of the standard tests of price-fixing for such risks: namely, would a rational person, offered $6 million in exchange for their life, accept the deal?

That controversy aside, in 2003, OMB concluded that the figure was too generous. Not everyone’s life is worth the same, according to OMB. In particular, senior citizens’ lives are worth less, OMB argued, because seniors have fewer future years to live than their children and grandchildren. With that, OMB attempted to impose a senior discount very different than the one offered in movie theaters. OMB’s applied to the cost-benefit analysis for health and safety regulations, administration-wide. So, for example, in proposed 2003 regulations for polluting emissions from off-road diesel vehicles – construction cranes, dump trucks, and the like – the Administration asserted that the harm of killing someone over 70 was just 65 percent of the harm of killing someone younger.

More broadly, the off-road proposal also demonstrated how inexact the process calculating the benefits of a protective regulation can be. One serious problem from diesel pollution is that it triggers asthma episodes in children. So to calculate the benefits from cleaning up diesel emissions, EPA’s number crunchers assigned a dollar value for sparing children those episodes. But what to count, given that so much of the valuation process for an adult life hinges on wages? Emergency room trips not made? Pain and suffering? The chance of grossly premature death? Lost school time? Their “solution” was to calculate the cost of a mother (the regulations actually specified the mother, not the father) taking a day off from work to care for her asthmatic child staying home from school. But because not all asthma attacks require a missed school day, the Administration concluded that some asthma incidents should be calculated as having no cost. So, to sum up, a company pollutes the air with diesel emissions, causing a child minding his or her own business to go into respiratory distress, raising the specter of suffocation. And the Administration’s formula placed no value at all on preventing that incident.

CPR Member Scholar Lisa Heinzerling was an outspoken critic of the “senior discount” proposal, doing much to bring its devilish details to public attention. With the light of public scrutiny upon it, the Administration eventually backed down. First then-EPA Administrator Christine Todd Whitman announced that her agency would not apply the discount, and later, OMB retreated from its plan.

Read a sample of Heinzerling’s work on the “Senior Discount”:

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