Benefit/cost analysis applied to environmental regulations.

            The estimated current annual cost of environmental regulations is $200 billion. More difficult to estimate are the number of lives saved by compliance with the regulations. Some may say that millions of lives have been saved, but the formula by which that statistics is arrived at is questionable. It is too easy to say that something is so; it is entirely another thing to prove it. Without question every environmental regulation increases the costs of production, which regulations result in either higher commodity prices, or lower wages. There are experts in the field who are advocating a benefit/cost analysis:

It seems almost irresponsible to not conduct such analyses, [cost/benefit or risk/benefit] because they can inform decisions about how scarce resources can be put to the greatest social good. Benefit-cost analysis can also help answer the question of how much regulation is enough.[1]

            The Environmental Protection Agency [EPA] has as late as April of 2009 incorporated the benefit/cost analysis. In 2005 the EPA claimed that coal-burning power plant regulations cost that industry $750 million a year.[2] In that instance a group of Harvard experts claimed that their study showed that somehow the benefit to the public would be nearly $5 billion per year.  The EPA estimate of benefit was valued at a mere $50 million per year. However one explains this discrepancy the undisputable fact is that EPA regulations either contribute to or are the direct cause of industries leaving jurisdictions where regulations are onerous and costly. Sociologists call this phenomenon “mobile capital”. The simple fact is that industry exists to make a profit and will seek the most welcoming jurisdiction. The welfare of workers is important to industry because workers are an integral part of the mechanism for earning a profit. All to often government views industry as its cash cow for their social welfare programs. As a result high taxes, together with concessions to special interest groups who are opposed to industry noise, or what they view as pollution, result in the deindustrialization of communities.

            The domestic landscape is dotted with cities that once were thriving industrial communities that provided high paying jobs, but now consist of vacant buildings, boarded up houses, rotting public utilities, and streets that once were lined with small businesses are now lined with drug dealers and prostitutes. For most ghost towns that exists, government incompetency is the root cause.

            The Office of Information and Regulatory Affairs (OIRA) is responsible for determine if regulations serve the public interest and do not overburden economic development. When President Bush appointed John B. Graham of Harvard University to direct the OIRA, the cost/benefit analysis was replaced by the risk/benefit analysis. While the cost/benefit analysis uses monetary quantities, the risk/benefit analysis uses a physical unit of measurement. To be expected opposition to the Bush appointment from environmental groups was intense. “Angela Logomasini, director of risk and environmental policy at the Competitive Enterprise Institute, notes Graham has ‘demonstrated how misguided government regulations can have the perverse effect of increasing risk."[3] As an example of Logomasini’s criticism of the EPA is the zero standard for chloroform in drinking water, an impossible standard to achieve. The obvious conclusion is that such regulators are reacting emotionally and not rationally to the issues. This type of government interference discourages entrepreneurs from assuming risk and providing jobs.

            President Obama appointed a new Regulatory Czar, Cass Sunstein, a Harvard professor, who is expected to move away from the deregulatory policies of the Bush administration that favor the free-market system, into a new era of central government control though EPA[4]. Regulatory blunders such as these are responsible for  creating the ghost towns Yonkers, New York; Lansing, Michigan; Atlantic City, and Camden, New Jersey; Youngstown, Ohio; Gary Indiana; Oakland, California, and the disaster known as  Love’s Canal.