The Benefits and Costs of Sound Economics: The "CLear Skies" Dilemma

October 1, 2003

Jeffrey Ladik

In early 2003, officials from the U.S. Environmental Protection Agency (EPA) embarked on a “listening tour” through various cities in order to learn from senior citizens about the environmental health issues that most concerned them. During several of the meetings between EPA officials and senior citizen groups, the seniors, their advocates, and various environmental groups, expressed great dismay about an analytic method used by the agency to calculate the benefits of certain regulations. In the Bush Administration’s proposed “Clear Skies” legislation, limits would be set on specific emissions from power plants which would reduce the amount of fine soot particles in the air, thereby decreasing respiratory-related illnesses. EPA monetized the health benefits of the “Clear Skies” proposal using, in part, analysis that valued the lives of those over 70 years at $2.3 million and the lives of younger people at $3.7 million. In addition to this methodology, EPA also estimated the benefits by using a value of $6.1 million for every statistical life saved regardless of age. Because of the former methodology, seniors were angered by the notion that their lives do not have the same economic worth as younger people. The discontent of this powerful voting block was the impetus for the elimination of the “senior discount.” Indeed, the “clear skies” dilemma is an ever-present issue in regulatory policymaking: the willingness of non-economists to conflate social/moral value with economic value.

The Benefits and Costs of Sound Economics: The "CLear Skies" Dilemma