On Wednesday, April 1, the Supreme Court issued its ruling in Entergy vs. EPA, holding that it was permissible for EPA to use cost-benefit analysis as its method of regulatory analysis in devising a regulation on power plant water intake structures. Member Scholar Amy Sinden blogged on the decision that day, here. Member Scholar Thomas McGarity adds a thought:
One of the most significant problems with cost-benefit analysis is its tendency to "dwarf soft variables." These "soft variables" are things that have value to all of us but are not typically traded in markets and are therefore difficult to quantify in any rigorous way. A good example of a soft variable is the value of the aquatic organisms that are not directly consumed by humans but will, along with those that are consumed by humans, be destroyed under the technology that EPA approved under the cost-benefit test that it employed.
Professor Sinden makes it clear that EPA did not have a clue as to the value of the environmental benefit of preserving these organisms. In fact, its cost-benefit analysis simply "punted" and concluded that they were of "indeterminate value." Does that mean that they should be ignored? Of course not.
Justice Scalia's opinion contains a classic example of the tendency of decisionmakers to dwarf soft variables. In describing EPA's cost-benefit analysis, he refers to "the relatively meager financial benefits of" the regulations, which included "reduced impingement and entrainment of 1.4 billion aquatic organisms with annualized use-benefits of $83 million and non-use benefits of indeterminate value" as compared to "annual costs of $389 million."
How can Justice Scalia conclude that the benefits are "relatively meager" when a large aspect of the benefit calculus was "indeterminate"? Only by essentially ignoring those "non-use" benefits. The implicit message here is that if you can't put a number on it, it doesn't count.
That's what cost-benefit skeptics mean when we worry about "dwarfing soft variables."
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Thomas McGarity | April 3, 2009
On Wednesday, April 1, the Supreme Court issued its ruling in Entergy vs. EPA, holding that it was permissible for EPA to use cost-benefit analysis as its method of regulatory analysis in devising a regulation on power plant water intake structures. Member Scholar Amy Sinden blogged on the decision that day, here. Member Scholar Thomas […]
Matthew Freeman | April 3, 2009
The Bush Administration earned its reputation for being contemptuous of science. From suppressing an EPA global warming report so as not to put the federal government’s imprimatur on the scientific consensus that climate change was real and human-caused, to simply refusing to open an email containing formal scientific findings inconvenient to its policy objectives, the […]
Nina Mendelson | April 2, 2009
On Tuesday, March 31, House Energy and Commerce Committee Chairman Henry Waxman (D-CA) and Rep. Edward Markey (D-MA) released a “discussion draft” of the American Clean Energy and Security Act of 2009 – a climate change bill that will serve as the starting point for long-delayed congressional action on the world’s most pressing environmental program. […]
Kirsten Engel | April 2, 2009
On Tuesday, March 31, House Energy and Commerce Committee Chairman Henry Waxman (D-CA) and Rep. Edward Markey (D-MA) released a “discussion draft” of the American Clean Energy and Security Act of 2009 – a climate change bill that will serve as the starting point for long-delayed congressional action on the world’s most pressing environmental program. […]
Matthew Freeman | April 2, 2009
On Tuesday, March 31, House Energy and Commerce Committee Chairman Henry Waxman (D-CA) and Rep. Edward Markey (D-MA) released a “discussion draft” of the American Clean Energy and Security Act of 2009 – a climate change bill that will serve as the starting point for long-delayed congressional action on the world’s most pressing environmental program. […]
Victor Flatt | April 2, 2009
On Tuesday, March 31, House Energy and Commerce Committee Chairman Henry Waxman (D-CA) and Rep. Edward Markey (D-MA) released a “discussion draft” of the American Clean Energy and Security Act of 2009 – a climate change bill that will serve as the starting point for long-delayed congressional action on the world’s most pressing environmental program. […]
Alice Kaswan | April 2, 2009
On Tuesday, March 31, House Energy and Commerce Committee Chairman Henry Waxman (D-CA) and Rep. Edward Markey (D-MA) released a “discussion draft” of the American Clean Energy and Security Act of 2009 – a climate change bill that will serve as the starting point for long-delayed congressional action on the world’s most pressing environmental program. […]
Alice Kaswan | April 2, 2009
On Tuesday, March 31, House Energy and Commerce Committee Chairman Henry Waxman (D-CA) and Rep. Edward Markey (D-MA) released a “discussion draft” of the American Clean Energy and Security Act of 2009 – a climate change bill that will serve as the starting point for long-delayed congressional action on the world’s most pressing environmental program. CPRBlog […]
Margaret Clune Giblin | April 1, 2009
CPR Member Scholar Holly Doremus, joined by Member Scholars Rob Glicksman (also a CPR Board Member), Alex Camacho, and Dan Rohlf, along with myself, today sent the Secretaries of the Departments of Commerce and Interior a letter urging them to utilize the time-limited authority that Congress gave them to withdraw one of the more controversial […]