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The Deadly Efficiency of Health and Safety Regulation

By Timothy D. Terrell
August 13, 2002

Most Americans, it seems, are of the opinion that a free market system would inflict extensive health and safety risks on society, and therefore regulation is an obvious necessity. Yet one of the few things that regulation has helped us with is the understanding that government is not very good at reducing risk. Rarely can any person but the individual decision-maker improve upon the trade-offs he makes each day among such goods as safety, convenience, health, and leisure. Some of us, for example, accept an infinitesimally higher risk of cancer by drinking tap water instead of filtered water, trading off the benefit of longer, healthier life against the costs of paying for and lugging home plastic containers of water. Most people, by not wearing a crash helmet and fire-resistant suit while driving, accept an additional risk of injury or death in exchange for comfort or convenience. We make these decisions hundreds or thousands of times a day, almost automatically.

Yet government regulators, unable to measure "comfort or convenience," do not take these trade-offs into account. Furthermore, they seem blind to the costs of their decisions. Considering only a tiny set of hazards, and accepting any cost to eliminate these, regulators engage in what seems like dreadfully inefficient behavior. The EPA authorizes expensive cleanups of Superfund sites if they pose as little as a 1-in-a-million chance of causing an additional cancer death. Some regulations are staggering in their expense. A regulation controlling chloroform emissions at 48 pulp mills costs $99.3 billion per year per life saved.

A Lack of Balance

Whether regulators admit it or not, they face a world of limited resources and limited knowledge. Therefore, they must face costs as they choose one activity over another. Devoting resources to reducing the risk from chloroform emissions, for example, means that those resources will not be used somewhere else where the benefit might be greater.

Ideally, we would spend dollars where they have the greatest effect. Though it may sound callous to put it in these terms, why save a one life for $1 million when the same million could be used in a different way to save five lives? Or, in a household with a two-year-old, why spend $2,000 repainting with lead-free paint when the same $2,000 could eliminate a larger hazard, perhaps by fencing in the back yard from a busy street? With limited resources, these choices must be made frequently. Individual decision making, while by no means perfect, tends to equalize benefit per dollar across thousands of possibly beneficial projects.

Regulation does not produce this result. The costs of saving or extending lives through regulation vary enormously. One study estimates that 60,000 lives could be saved each year simply by redirecting regulation to other risks.1 Of course, it may very well be that lowering taxes would be better. Then private firms and households could use tax savings to reduce risks at an even lower cost than the most "efficient" government agency.

If we look at the cost per premature death averted (from Office of Management and Budget data), we can see the enormous imbalance in costs, under regulation:

  • Aircraft cabin fire protection - $100,000
  • Auto fuel-system integrity standard - $400,000
  • Trenching and excavating standard - $1,500,000
  • Asbestos ban - $110,700,000
  • Hazardous waste disposal ban - $4,190,400,000
  • Formaldehyde occupational exposure limit - $86,201,800,000
  • Atrazine drinking water standard - $92,069,700,000
    (The maximum allowable amount of atrazine in drinking water is 3 parts per billion-equivalent to half an aspirin dissolved in a 16,000-gallon railroad tank car.)2
  • Hazardous waste listing for wood-preserving chemicals - $5,700,000,000,000
    The extremely high figures for the atrazine and wood-preservative standards mean that probably no one's life will ever be saved by the presence of these regulations. Of course, there could be other benefits apart from averting death, but with health and safety regulation this is a reasonable summary statistic.

Also, to the extent that regulation reduces disposable income, it damages health. Disposable income is used partially to increase personal health and safety. In developing nations, higher incomes may be used to purchase adequate food and clean water, obtain medical care, and perhaps provide for an education that allows the individual to avoid dangerous employment. In industrialized nations, higher incomes mean that people can buy safer cars, choose more healthful foods, move away from crime-ridden neighborhoods, and install smoke detectors in their homes. Taxing $7.6 million (on average) away from citizens so an EPA regulation can extend one human life by one year means there is less money available for individuals to take any one of thousands of steps to extend and better their lives.

Stupidity or Intelligence in Political Decisions

Why are regulators willing to go to such expense, particularly when using those dollars in some other way would save far more lives? Are these regulators simply ignorant? If so, then education alone should bring a reversal of the trend toward more regulation. On the other hand, perhaps we have missed something that might explain their behavior.

We should recognize that many of these regulations were never intended to save lives. Many economists believe that firms which press legislators for more restrictive rules are often seeking an advantage over their competition. Thus, an air quality rule severely limiting new coke oven emissions but "grandfathering" in, or exempting existing ovens, effectively shuts out would-be rivals in that industry.

My favorite example involves two competing methods of toxic waste disposal. In the early 1980s, a law was passed that required certain toxic waste to be disposed of by burning. In a few years, a whole industry emerged to incinerate toxic waste. Then the cement industry, which uses kilns that operate at a very high temperature, realized that they could burn liquid toxic waste in their kilns. They would save money on fuel and earn revenues by disposing of the toxic waste. It was really a better way to get rid of some toxic waste, and was not proven to be less safe than incinerators. Soon the cement kiln industry had captured much of the hazardous waste disposal business. So the incinerator industry, facing failure, got together and formed a pressure group to lobby Washington, DC to apply regulations to keep the cement kilns from burning toxic waste. Of course they didn't say, "We are getting outperformed by our competition — please stop them"; they said, "Burning hazardous waste in cement kilns is dangerous to public health — please stop them." This group was called the Association for Responsible Thermal Treatment. The American Lung Association and other, smaller groups of environmentalists were eager to help put a public-interest covering on the incinerator industry's arguments by complaining loudly about how unsafe the cement kilns were. So far they have not entirely succeeded, but it is easy to see how "health concerns" might mask an effort by a wasteful firm to use the government to attain an advantage over another, more efficient firm.

Bribery and Regulation

Many regulations seem to be written for the benefit of special interests, not human health. In fact, most economists in the United States today find it more appropriate to analyze government decision making with the assumption that politicians are not working in the public interest at all, but are working to promote their own private interests — and therefore the private interests of small, well-organized groups that support them. Special interest groups can effectively bribe politicians by contributing to campaign funds, offering them well-paying board positions after leaving office, granting sinecures to their children or other relatives, or offering their law firm lucrative retaining fees. (Ever wonder why so many politicians are lawyers?) Though not every gift to a politician constitutes a bribe, implicit bribery is certainly prevalent enough that it has resulted in vast quantities of regulatory favors for badly managed, wasteful firms. Clearly, there are practical costs to disobeying God's repeated admonitions against bribery (e.g., Exodus 23:8, Deuteronomy 16:19).

The production of regulation, then, could be seen as bribe solicitation or bribe offering. Viewed this way, government regulation may not be as inefficient as the first part of this article may have led one to believe. Efficiency cannot be assessed without knowing the goal of the process. Government health and safety regulation may be a markedly inefficient method of saving human lives, but a highly efficient tool for padding the incomes of politicians. It is a deadly efficiency.

If bribery is really at the root of regulation, then most of the efforts at educating politicians are wasted. At best, the effort itself would alert politicians to the presence and strength of the "educating" interest group. What we really need are politicians who are resistant to bribery, and a population that will resist the temptation to offer bribes. Ultimately, this can only occur if the hearts of the people are changed.

Other Institutions

A Biblical view of the state recognizes that there are two other major institutions in society, the family and the church, which have their own spheres of authority. They can fill this regulatory role with greater success than the state — and, furthermore, should take on some of these responsibilities. Finally, a Biblical view of the state recognizes that the individual retains a great deal of authority over his own life to do what he sees fit, within Biblical constraints. Businesses, as voluntary organizations of individuals, can perform regulatory services as part of a profitable enterprise. For example, firms like Underwriters' Laboratories are already quietly performing vital inspection and certification services that many people would trust only to the government.

It is time to recognize that, to reduce the risks from the hazards that people face, there are far better alternatives than government regulation. A return to a Biblical view of a limited state, and a hatred of bribery, would move society in the direction of virtue, freedom and prosperity.

Notes

1. John D. Graham, Comparing Opportunities to Reduce Health Risks, 1995.

2. Doctors for Disaster Preparedness Newsletter, vol. 10, no. 1 (Jan. 1993).


Topics: Family & Marriage, Government, Medicine / Healthcare, Statism

Timothy D. Terrell

Timothy Terrell is associate professor of economics at Wofford College in Spartanburg, South Carolina. He is assistant editor of the Quarterly Journal of Austrian Economics and is an Associated Scholar with the Mises Institute.

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