Viscusi Interviewed

The Federal Reserve Bank of Richmond’s Region Focus interviews Kip Viscusi.  Here is one good bit:

…in the case of Superfund cleanups of hazardous
wastes, the people who benefit from the cleanups are
not paying the costs directly and thus demand the most
stringent standards possible. The result is that the median
cost per cancer case averted is about $7 billion. It’s off the
charts because you are using the responsible parties’ money
to clean up the site. In contrast, if you look at the amount of
money people are willing to pay for houses that are not
exposed to hazardous waste risks, you don’t observe that
kind of large trade-off at all. It’s more like $5 million rather
than $7 billion. Similarly, the premium that workers require
to work in relatively dangerous jobs is a lot less than what
government agencies spend on regulations.

Comments

It would be nice to see a citation to this:
"The result is that the median cost per cancer case averted is about $7 billion."

I think there is general agreement that people tend to be more risk averse than was previously believed. It is also well understood that people have difficulty judging the degree of risk for extremely rare events. The chances of these happening are over estimated while more common ones are under estimated.

The current example is the risk of "terrorist" attacks in the US. It is estimated that all the steps taken to reduce risk (internal and external) now exceed $1 trillion. Any politician that is foolish enough to use Kip Viscusi's economic analysis in this case will quickly be selling apples on a street corner.

So if risk is evaluated in a non-economically rational manner then perhaps there needs to be a new model which acknowledges this. Perhaps peace of mind needs to be given a monetary value.

Floccina:
Each year over 40,000 people are killed in auto accidents, yet the amount of money spent on making auto transport safer is negligible.

Gun deaths in the US are 14.24 per 100,000 while in Canada the number is 4.31. Obviously there are forces at work which determine how societies approach problems which are not based upon economic or cost-benefit considerations.

What these factors are and how to deal with them is what separates the various schools of economists.

You might want to note EPA's draft response, found here.

As someone working on a site that could have been listed on the NPL but was not (due to the actions of my client -- the city overlying the contamination plume), I have the following points to make:

1. Cancer averted is only one measure of the health benefits of a cleanup. Perchlorate, for example, inhibits thyroid function, especially in neo-nates.

2. More generally, Superfund and its state law equivalents are now being used to transfer back to the discharger the costs of impacts to potable water. Since communities near old polluted sites tend to be poorer and since water service providers tend to be small local entities, if dischargers weren't forced to bear this cost, small poor communities would have to.

3. Whatever happened to common law ideas of nuisance and trespass? For a group of libertarians, you are pretty quick to tell innocent downstream landowners that their use of property is limited in perpetuity because it's cheaper to society as a whole to allow the pollution plume to remain in the ground.

4. I'm not persuaded that median costs are the best measure.

ah: CERCLA (aka the Superfund law) provides for a private right of action. Many cleanup lawsuits are instituted by private parties. Looking only at litigation where EPA was the plaintiff misses the point.

In California, where I practice, virtually every major pollution plume affects a usable groundwater resource. This includes the LA Basin, the Sacramento area and the Inland Empire (Riverside and San Bernardino). What's happening is that polluters who had successfully externalized the impacts of their illegal discharges are now being forced to properly internalize those costs.

So before we talk about billions of dollars per avoided cancer, let's look a lot more closely at the costs necessary to remediate a source of drinking water.

Suppose I am an uninsured driver and I cause an automobile accident that totals another person's car. Should I be responsible for paying that person the fair market value of that car, or would I be justified in paying some lesser amount? After all, a 30-year-old station wagon will get one around town just as well as a Lexus SUV.

Mdemon
Yes, according to Calabressi.The cost of accidents

Bernard, I don't know. I was providing the answer to robert's query about a citation for the figure at the top.

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