Monetizing the Benefits of Risk and Environmental Regulation
2006; Fordham University School of Law; Volume: 33; Issue: 4 Linguagem: Inglês
ISSN
0199-4646
Autores Tópico(s)Legal and Constitutional Studies
ResumoINTRODUCTION Should the benefits of risk and environmental regulations be monetized? For economists, this question is not controversial. Benefits of government policies have a value given by society's willingness to pay for these benefits, which by its very nature poses the valuation issue in monetary terms. (1) Government agencies have likewise not shied away from monetizing these benefits. (2) A contrary school of thought, however, has recently emerged, as reflected in the book by Frank Ackerman and Lisa Heinzerling, Priceless: On Knowing the Price of Everything and the Value of Nothing. (3) As the title of the book suggests, the authors oppose economists' attempts to monetize the value of environmental amenities and the value of risks to life and health. In this article, I will review the history of how monetization of benefits came to be the norm for government policy and explore some of the key economic debates that have arisen. My point of view is the opposite of that of adherents of the Priceless approach. Monetizing risk and environmental benefits does not devalue these outcomes, but rather gives them real economic value when the effects might otherwise be ignored. Through monetization, policymakers are able to count these policy consequences fully and in accordance with the values attached to these outcomes by the citizens affected by the policy. This is not to say that there are no controversies that remain once the monetization approach has been adopted. This Article will explore many of the most sensitive and problematic concerns, including how we should value risks to life, whether old people or rich people should be accorded different values of life, and the proper role of survey methods in benefit valuations. The existence of such controversies arises because the economic approach confronts these policy matters directly and incorporates recognition of how these concerns are valued by the citizenry. In contrast, the Priceless approach in effect disenfranchises the citizens by abandoning the societal willingness-to-pay approach to benefits. With no effort to quantify citizens' valuations, the policy process will be guided by the subjective preferences of policymakers. From an economic standpoint, the advantages of monetizing benefits are quite strong because establishing this kind of metric makes it much easier to compare benefits with costs and thus make choices across various policy alternatives. (4) For example, if we have $10 million to spend, is it more worthwhile to clean up a hazardous waste site on Long Island, or to reduce water pollution levels in Wisconsin rivers by ten percent, or to adopt safety measures that will lead to an average of three fewer schoolchildren being killed in school bus crashes? Because society's resources are limited, ultimately we must be making choices such as these across different policy domains. To assess which regulatory interventions make sense and which do not, it is essential to have a scorecard by which it is feasible to make such comparisons. Monetization also has an additional practical benefit in a world of regulatory impact analysis. Costs are quantifiable in dollar terms, as are many benefit components, so failing to place a monetary value on seemingly intangible benefits such as environmental amenities may lead to inadequate attention to intangible benefits in the policy choice process. Monetizing these benefits puts them on equal footing with benefits that are perceived to have real economic value because they can be quantified in dollar terms. It is useful at the outset to make clear the target of my discussion. From an economic standpoint, for something to be priceless means that it has an infinite value. Thus, if saving the snail darter is priceless, no amount of monetary cost should be spared in preserving these fish, even if it depletes the entire GDP. Because no risk or environmental benefit warrants an infinite expenditure, the practical policy issue is what level of monetary cost is justified to obtain the benefit. …
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