Academic journal article The Yale Law Journal

Regulatory Costs of Mythic Proportions

Academic journal article The Yale Law Journal

Regulatory Costs of Mythic Proportions

Article excerpt

Any close observer of the regulatory process has learned by now that the government often requires the expenditure of a huge sum of money--sometimes billions of dollars--to save a single human life. She has also learned that there are many regulatory options available that would produce the same benefits at a far lower cost. She has learned these things largely from a table prepared during the 1980s by an economist at the Office of Management and Budget named John Morrall. This table shows the cost per life saved of various risk-reducing federal regulations. According to the table, this cost varies dramatically from regulation to regulation, from a low of $100,000 per life saved to a high of $72 billion. One-third of the regulations on the list reportedly cost over $100 million for every life they save.(1)

These numbers are ubiquitous in the literature on risk regulation. Numerous scholars have relied on Morrall's table, as well as earlier and later versions of it, in arguing that the costs of regulation often exceed its benefits, that many more cost-effective strategies exist for reducing risk, that regulation sometimes increases overall risk, and that regulatory priorities are not set in a rational manner.(2) Morrall's calculations, in short, have been used to support every one of the most prominent current critiques of the regulatory system. They have also played a significant role in political debates over regulatory reform, including most recently the debates surrounding the Republican proposed Contract with America.(3)

Despite the pervasive reliance on Morrall's table in scholarly and political discussion of risk regulation, no one has determined--or even asked--whether the fantastic costs reported by Morrall are open to question. In this Article, I fill this gap. I argue that John Morrall's table is in the nature of a modern urban legend, a vivid, plausible, "false-true tale," circulated broadly, embellished with local detail, and believed implicitly.(4) Like other modern legends, such as stories about rats served as hamburger and alligators living in the sewers, John Morrall's story is strange and believable. It reflects the "hopes, fears, and anxieties" of modern life.(5) And it is false-true.

Indeed, as I explain, there is ample room for disagreement with the picture of the regulatory system drawn by Morrall. For starters, a large percentage of the regulations appearing at the bottom of Morrall's list--the allegedly costliest regulations--have never taken effect. Many of these rules were rejected precisely because the agencies in question determined that their benefits did not justify their costs; at least by the regulatory reformers' lights, then, these regulatory decisions should be counted as successes. By topsy-turvy logic, however, they have become known as regulation's greatest failures.

Equally striking is the disparity between the agencies' (often implicit) estimates of costs per life saved and Morrall's estimates of such costs. Morrall's estimates are inevitably higher than the agencies' implicit estimates, sometimes as much as 1000 times higher. These huge disparities appear to arise mostly from two adjustments Morrall made to the agencies' estimates of regulatory benefits. First, in some cases, Morrall. rejected the agencies' estimates of risk and relied instead upon what he regarded as more reliable--and inevitably lower--estimates.(6) Use of lower estimates of risk led to lower estimates of lives saved, which led to higher costs per life saved. Second, in all cases, Morrall applied a technique that has come to be known as "discounting lives": He reduced the estimates of the number of lives that would actually be saved by a regulation in the future by ten percent for every year expected to pass before the lives were saved.(7) For example, whereas Morrall estimated that the Occupational Safety and Health Administration (OSHA) rule limiting arsenic exposures in the workplace(8) would actually save 11. …

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