The Safety Standard
Introduction
 The
safety standard: fairness rather
than efficiency
 Rejects a benefit-cost approach to
decisions about the “correct” amount
of pollution
 People
have a right to protection
from unsolicited, significant harm to
their immediate environment
An Efficiency Argument for a Safety
Standard?
Many important benefits of protection from
pollution are often left out of benefit-cost
analyses because they cannot be
measured
 If material growth in our society feeds
conspicuous consumption, fueling a rat
race, then no one is better off
 If the costs of protection are overstated by
this rat race, while the benefits are
understated, then safe regulation may in
reality meet a benefit-cost test

Defining “Safety”
In practice, The U.S. EPA considers risk
below 1 in 1 million for large populations
to be “safe”
 Risks greater than 1 in 10,000 are
considered “unsafe”
 Risks that fall in between are regulated
based on an informal benefit-cost analysis
and statutory requirements

Defining Safety

Determining the exact risk amount for
things such as cancer can only be done
with substantial margins of error, and
“safety” is thus often determined through
the give and take of politics
Policy and the
Safety Standard
A safety standard remains the stated goal
of much environmental policy: laws
covering air, water, and land pollution
require cleanup to “safe” levels, period
 There is no mention of a benefit-cost test in
the legislation
 Ultimately, however, clean-up costs often
play a role in the political determination of
“safe” pollution levels

Is Accepting Some Risk the same as an
Efficiency Approach?

Declaring a safety standard and then
adopting it to economic feasibility in
certain cases is different from, and will
generally result in less pollution than, an
efficiency standard
Can safety be sold?
One study asked residents of a Nevada community
about their willingness to accept annual tax credits of
$1,000, $3,000, and $5,000 per person in exchange
for the siting of a potentially dangerous hazardous
waste facility nearby
 The numbers of people considering accepting the
compensation did not increase as the level of
compensation increased
 Instead, respondents who perceived the risk to be
too high viewed the rebates not as inadequate, but
as inappropriate

The Safety Standard
Social Welfare Function

Recall Tyler and Brittany wrangling over smoking
in the office:

SW = UTyler(#CigsT, $T) = UBrit(w * #CigsT, $B)
Smoking is a bad to Brittany and a good to
Tyler.
 If the weight given to w were large enough, it
might justify banning smoking altogether

Smoking in Public Places
Should smoking be banned in public places?
 This is an issue for voters and courts to
decide
 What the safety standard maintains is that in
the absence of a “compelling” argument to
the contrary, damage to human health from
pollution ought to be minimal

The Safety Standard:
Objections
 Inefficient?
 Not
Cost-Effective?
 Regressive?
Often
Often
Maybe
The Safety Standard:
Inefficient
The safety standard is, by definition,
inefficient
 Efficiency advocates claim that enshrining
environmental health as a “right” involves
committing “too many” of our overall social
resources to environmental protection

Air toxics regulation
The 1990 amendments to the Clean Air Act
were designed to control the emissions of
hazardous air pollutants
 The law required firms to impose control
technology that would reduce risks to below
the 1 in 10,000 level
 Total costs were estimated at $6 to $10
billion per year, with benefits less than $4
billion per year

Air toxics regulation

Polls indicated that 80% of Americans
supported the act despite this benefit-cost
disparity
 Does this indicates that American voters view
environmental health as a “rights” issue?
Landfill Policy


The EPA’s regulation for landfills to protect people
who depend on contaminated groundwater were
only predicted to reduce cancer cases by only two
or three over the next 300 years
Potential benefits not quantified include





Increased ease of siting landfills
Reduced damage to surface water
Fairness to future generations
Overall reduction in waste generation and related
“upstream” pollution
The regulations would cost about $5.8 billion or
nearly $2 billion per cancer case reduced
Inefficient Regulations
Regulations that protect small groups of
people from risk will almost always be
inefficient, since even relatively high risks
will not generate many casualties
 Air toxics and the EPA’s landfill regulations
are classic situations in which efficiency
and fairness conflict

The Safety Standard:
Not Cost Effective?
The second criticism leveled at the
safety standard is its lack of costeffectiveness--achieving a goal at the
lowest possible cost
 If “safety” is the goal, then extreme
measures may be taken to attack
“minimal” risk situations instead of high
risk situations

Superfund and Asbestos

Tens of millions of dollars have been spent
trying to purify seldom used groundwater at
toxic spill sites under the Superfund legislation
 Critics have argued that redirecting the funds
would be a better use of resources, for example:
 Children have about a 5 in 1 million chance of
contracting lung cancer from attending a school built
with asbestos
 Redirecting funds from superfund clean-up to
asbestos removal could save more lives
A Safety Proponent’s Response
The limits to dealing with these problems
are not limited resources, but a lack of
political will
 Funds freed up from “overcontrol” in the
pollution arena are more likely to be
devoted to affluent consumption than to
environmental protection

Risk-Benefit Analysis
Authorities use risk-benefit studies to
compare the cost-effectiveness of different
regulatory options
 The common measure used in this approach
is lives saved per dollar spent
 This helps avoid devoting resources to an
intractable problem, but it does not mean
backing away from safety as a goal

The Safety Standard: Regressive?



Safety standards will generally be more restrictive
than efficiency standards; as a result, they lead to
greater sacrifice of other goods and services
Some are concerned that a people will fall below a
decent standard of living as a result of overregulation
Suppose we switched from a safety standard to an
efficiency-based standard. Would the poor be made
better off?
The Safety Standard: Regressive?
Because much pollution is generated in the
production of necessities, the cost of
environmental regulation is borne unevenly
 Pollution control generally has a regressive
impact on income distribution, meaning
that the higher prices of consumer goods
induced by regulation take a bigger
percentage bite of the incomes of poor
people than of wealthier individuals

Costs of Pollution Control

Global warming (CO2) tax of $70 per ton:
control:
 Energy expenses up $215 per year, or 11%
for the poorest 10% of US households
 Energy expenses up $1,475, or 5% for the
richest 10% of US households.
Environmental Racism
The racial inequity in siting of hazardous
facilities is called environmental racism
 Environmental racism has sparked a
political movement called the
environmental justice movement

The Effect of Pollution Control on Low
Income Communities
Poor, working-class, and minority people
pay more, relative to their income, for
pollution control. They also receive more
benefits
 Hard to determine whether pollution control
results in net benefits or net costs on the
lower half of the income distribution
 For important issues such as a carbon tax
to slow global warming, distributional
issues need to be weighed carefully

Safety versus Efficiency:
The Summers Memo

In an internal memorandum to his staff,
then chief economist at the World Bank,
Lawrence Summers wrote:
 “Just between you and me, shouldn’t the World
Bank be encouraging more migration of the dirty
industries to the [less-developed countries]?…I
think the economic logic behind dumping a load
of waste in the lowest-wage country is
impeccable and we should face up to that.”
Yikes!!
We have defined this “narrow” view as
the efficiency view. Is it is morally
defensible?
 Possibly, if toxic trade in fact makes all
parties better off…

Siting Hazardous Waste Facilities: Safety
Versus Efficiency
“Locally unwanted land uses” or LULUs refer
to sites for the disposal of waste--hazardous,
radioactive, or just non-hazardous municipal
waste
 LULUs impose negative externalities on their
neighbors from potential hazards of exposure
to decreased land values
 By definition, communities do not want
LULUs, and the wealthier the community, the
higher the level of safety the community will
demand

Compensation for LULUs





Society as a whole benefits greatly from
having toxic facilities
One solution to the problem of LULUs
would then be to monetarily compensate
communities with LULUs
This compensation could then pay for
schools, hospitals, libraries, etc.
Poorer communities would accept lower
compensation levels than wealthier
communities
This could lead to a “trade” in LULUs
Efficiency and Toxic Trade
Efficiency and Toxic Trade




Due to lower incomes, a poor country has a marginal
benefit of cleanup schedule lying below that of a rich
country
Because current pollution levels are relatively low in
the poor country, the marginal benefits of cleanup
are also low relative to a rich country
Transferring 10% of the waste from a rich country to
a poor country reduces monetary damages in the
rich country more than it increases damages in the
poor country
The poor country would then be compensated for its
damages and overall monetary damages from the
pollution will have been reduced by trade
Winners and Losers
Winners: Those in wealthy countries no
longer exposed to waste, those around the
world who can buy cheaper products, firm
managers and stock holders, those in poor
countries working at dump sites
 Losers: poor country individuals, alive and
yet unborn, who contract cancer and other
diseases, and those who rely on natural
resources that may be damaged in the
transport and disposal process

Everybody Wins?
Because dumping toxics is indeed efficient,
the total monetary gains to the winners
outweigh the total monetary loss to the
losers
 In theory, the winners could compensate
the losers, and everyone would be made
better off
 In practice, complete compensation is
unlikely

Problems With Toxic Trade




The majority of benefits from the dumping will flow
to the relatively wealthy while the poor will bear
the burden of costs
The political structure in many developing
countries is far from democratic, and highly
susceptible to corruption.
Few poor countries have the resources for
effective regulation.
Stiff regulation or high taxes will increase the rate
of illegal dumping; unrestricted trade in waste may
thus lower the welfare of the recipient country
Safety Standard and the Siting of
LULUs
A politically acceptable definition of “safety”
cannot be worked out, since a small group
bears the burden of any risk: Nobody wants a
LULU in his or her backyard
 Compensation thus plays role in the siting of
hazardous facilities
 Firms and governments will seek out poorer
communities with lower compensation
packages

For the Benefit of a Majority

To ensure a majority of people benefit
from the siting of LULUs:
 Government must be capable of providing
effective regulation
 An open political process combined with
well-informed, democratic decision making is
needed in the siting process
Safety Versus Efficiency
The safety standard relies on a liberty
argument, putting heavy weights on the
welfare reduction from pollution
 As a result, a stricter pollution standard is
called for than is implied by the efficiency
standard
 Efficiency advocates attack the “fairness”
argument of safety advocates by arguing
that the safety standard is regressive-although this is difficult to prove or refute in
general

Costs, Benefits, Efficiency, and Safety