Horseshoe theory meets cost-benefit analysis. Horseshoe wins.

Here’s the news:

For decades, the Environmental Protection Agency has calculated the health benefits of reducing air pollution, using the cost estimates of avoided asthma attacks and premature deaths to justify clean-air rules.

Not anymore.

Under President Trump, the E.P.A. plans to stop tallying gains from the health benefits caused by curbing two of the most widespread deadly air pollutants, fine particulate matter and ozone . . .

It’s a seismic shift that runs counter to the E.P.A.’s mission statement, which says the agency’s core responsibility is to protect human health and the environment, environmental law experts said. . .

Now to the specifics:

Under the Biden administration, the E.P.A. tightened the amount of PM2.5 that could be emitted by industrial facilities. It estimated that the rule would prevent up to 4,500 premature deaths and 290,000 lost workdays in 2032 alone. For every $1 spent on reducing PM2.5, the agency said, there could be as much as $77 in health benefits.

But the Trump administration contends that these estimates are doubtful and said the E.P.A. would no longer take health effects into account in the cost-benefit analyses necessary for clean-air regulations, according to the documents. Instead, the agency would estimate only the costs to businesses of complying with the rules.

And some background:

Over the past four decades, different administrations have used different estimates of the monetary value of a human life in cost-benefit analyses. But until now, no administration has counted it as zero.

But they’re not ignoring health outcomes; they’re just not including them in the cost-benefit calculation:

Carolyn Holran, an E.P.A. spokeswoman, said in an email that the agency was still weighing the health effects of PM2.5 and ozone, but wouldn’t be assigning them a dollar value in cost-benefit analyses. “E.P.A., like the agency always has, is still considering the impacts that PM2.5 and ozone emissions have on human health,” Ms. Holran said. “Not monetizing does not equal not considering or not valuing the human health impact.”

In a Dec. 11 email reviewed by The Times, an E.P.A. supervisor wrote to his employees that political appointees in the Office of Air and Radiation planned to insert language about the “uncertain” benefits of reducing PM2.5 and ozone in all new clean-air rules.

The language states that “historically, the E.P.A.’s analytical practices often provided the public with false precision and confidence regarding the monetized impacts of fine particulate matter (PM2.5) and ozone.” It says that “to rectify this error, the E.P.A. is no longer monetizing benefits from PM2.5 and ozone.”

It’s possible that this won’t make it through the courts, though:

James Goodwin, the interim co-executive director and policy director at the Center for Progressive Reform, an advocacy group, said the move appeared to ignore the 2015 Supreme Court case Michigan v. E.P.A. In the majority opinion, Justice Antonin Scalia wrote that if an agency considers the benefits of a regulation, it must also consider the costs, and vice versa.

“Scalia was making the point that you can’t judge a regulation’s reasonableness just by looking at one side of the ledger,” Mr. Goodwin said.

Cost-benefit analysis, putting dollars and lives on a common scale

As a political scientist, what’s most interesting to me about this to me is the government’s objection to putting dollars and lives on a common scale.

This sort of cost-benefit analysis is something I’ve read a lot about and thought a lot about (as in this paper with Phil on decision making for home radon risks and remediation), and I associate criticisms of cost-benefit analysis as coming from the left.

The usual argument, as I’ve seen it, goes as follows. An environmental regulation is being considered. From the right or the technocratic center, the position is that the potential benefits of the regulation (typically health improvements, although in some settings there can be economic benefits as well relating to tourism or property values or whatever) should be weight against the costs of compliance. On the left, the position is sometimes taken that exposure thresholds should be set at zero and that no dollar value can be placed on a human life. In this setting, cost-benefit analysis is being used to calibrate, and possibly reject, environmental regulations.

For reasons discussed amply in the literature on decision analysis and in our own above-linked paper, I think it does make sense to put dollars and lives on a common scale, not because dollars and lives are equivalent but because this is a way to formalize the tradeoffs that must always be made when considering risks. I won’t get into all that here except to say that I think our position in that paper is, roughly speaking, the center-right position, as compared to the position on the left that such a tradeoff is inherently problematic.

This is not to say that I disagree with all leftist critiques of cost-benefit analyses. Indeed, one of the earliest posts on this blog, back in 2004, discussed the research of left-leaning economist Peter Dorman explaining what was wrong with the work on compensating wage differentials for workplace risk. I found Dorman’s arguments entirely convincing. To link this to my paragraph immediately above, my objection in that setting is not to putting dollars and lives on the same scale; rather, it’s an objection to the statistical method (regression without adjusting for enough pre-treatment variables), to the workflow involved (fitting lots of regressions and stopping when the resulting estimate has the right sign and seems to have a reasonable magnitude), and to the disconnect between the model of decision making and evidence from real-world decision making, as Dorman explains in detail in his book.

I’m not claiming that linear dollars-per-life analysis is how people think or how they make decisions; rather, I think it’s a useful normative baseline for resource allocation, which is why we applied it in our radon analysis. The workplace risk scenario is different because people were using empirical data on wages and risk to estimate, or attempting to estimate, or claiming to estimate, the dollar value of risks–and that won’t work because that’s not how people are making their decisions. So it’s complicated. It’s not that cost-benefit analysis is always correct or always incorrect; it’s that it’s a good idea to set up decisions in that way, while recognizing that all the numbers involved are open to question.

The horseshoe rears its ugly head

So, to continue, there’s nothing exactly wrong with the government’s refusal to perform a cost-benefit analysis that puts dollars and lives on a common scale. I think such analyses are useful, but it’s just one possible technique. It’s also legitimate cost-benefit analysis if you estimate the “dollars” ledger and the “lives” ledger separately. As they said, “Not monetizing does not equal not considering or not valuing the human health impact.”

That said, there does seem to be a legitimate concern with the new government policy. It depends how it’s implemented. On one hand, “the E.P.A. would no longer take health effects into account in the cost-benefit analyses necessary for clean-air regulations, according to the documents. Instead, the agency would estimate only the costs to businesses of complying with the rules”; on the other hand, the financial cost-benefit analysis is only part of the decision, so it depends how the health risks are entered into the decision making. One thing I like about formal inclusion of dollars and lives (and qalys) into the decision process is that it requires a paper trail, a set of justifications for the necessary tradeoffs. If they say they’re gonna consider health impacts but they don’t say how, I get concerned.

Anyway, it’s interesting to see the political horseshoe here. On the far left, don’t equate dollars and lives because it’s too capitalist and you can’t put a value on human life. On the far right, don’t equate dollars and lives because then you might have to put a dent in some corporate profits.

I hate that horseshoe shit.

That said, sometimes people label something as a horseshoe and it’s not. And, even here, the right-wing rationale against cost-benefit analysis is nothing like the left-wing rationale. They’re both problematic but for different reasons.

P.S. And this horseshoe is just fine.