"People no longer believe that more government regulation will necessarily cure society's ills. And they are right," AEI resident scholar Robert Hahn writes in Risks, Costs, and Lives Saved: Getting Better Results from Regulation. The new book, edited by Mr. Hahn and copublished by the AEI Press and Oxford University Press, is a collection of essays that demonstrate the need for a serious reexamination of how risks are assessed and managed in government regulation. It has been lauded by the New York Times for its "sobering research" and cited by numerous national and international publications, including the Economist.
The book illustrates the government's decidedly mixed record on regulating risks. In some cases, such as removing lead from gasoline and requiring the use of seat belts, the economic benefits of the regulations appear to have substantially outweighed the costs imposed on consumers. But other recent laws and regulations would not pass an economic cost-benefit test, even after including health benefits.
A growing body of evidence shows that many recent expenditures on risk reduction have barely reduced risk. Indeed, some investments are likely to have increased risks to human health. Single-minded efforts to eliminate particular hazards such as asbestos--for which the various regulations impose a cost exceeding $100 million per life saved--may adversely affect society by precluding investments in less expensive but more efficacious measures to reduce risk.
The amount of money spent on managing health, safety, and environmental risks is quite large. EPA estimates for environmental protection exceed $160 billion in 1996. Other regulation of health and safety risks could add another $50 billion annually. Two obvious questions arise in the management of health, safety, and environmental risks. Have we chosen the right goals? Are we achieving those goals at the lowest possible cost? Until recently, the policy debate did not focus on these questions. The presumption in most legislation was that goals should be set without attention to cost. Moreover, the means for achieving specific goals were rarely scrutinized. Instead, policy makers generally made decisions on the basis of political pragmatism. If the costs of a regulation were not readily visible to the consumer, and if it did not result in plant closures, then the agency could promulgate the regulation, even if it achieved few benefits.
The discussion of goals and means for risk management is now changing. Indeed, we are in the midst of two profound revolutions in the management of health, safety, and environmental regulation. The first involves a serious discussion of the means by which goals are achieved. The 1990 Clean Air Act Amendments, for example, used a market-based approach to achieve an ambitious 10-million-ton reduction in sulfur dioxide emissions by the year 2000. That approach, in which regulators set the total target but allow individuals and businesses maximum flexibility in achieving those goals, replaced a more traditional command-and-control approach, in which regulators prescribed specific technologies for achieving environmental goals. The market-based approach has the potential to reduce the cost of regulation by more than $10 billion.
The second revolution concerns appropriate policy goals. The ever-growing reach of regulation has, in large part, precipitated that debate. As constituencies affected by regulation become more vocal, Washington has begun to respond, most notably with a wave of proposed legislation aimed at streamlining regulation. Bills that promote cost-benefit analysis, limit unfunded mandates, and restrict the government's ability to take property without compensation have all received serious consideration in the current debates over regulation. New constituencies are being created that will serve as a counterbalance to existing public-interest groups, such as environmental and consumer organizations. The new political alignment will help shape the next revolution. So, too, will the ideas set forth in Risks, Costs, and Lives Saved.
