One of the great intellectual and political scandals of the past generation is the wholesale integration of cost-benefit analysis into federal regulation. It’s not a tale with high drama or sexual titillation, just a sordid little story of compliant academics and policy wonks working hard to shore up corporate America’s balance sheets by thwarting government regulation.
Houdini would be envious at the sleight-of-hand that businesses have achieved with this unassuming little tool, cost-benefit analysis. It sounds so reasonable to balance costs against benefits before making a decision. What most people don’t realize is that the whole process — though cloaked in high-minded objectivity and complicated technical jargon — is riddled with bogus numbers, slipshod methodologies and an staunch ideological aversion to regulation. Some colleagues and I once called cost-benefit analysis and its related dark arts “ sophisticated sabotage.”
The chief purpose of cost-benefit analysis has always been to redefine preventable tragedies and intangible values as commodities with price tags. By assigning numbers to these values and plugging them into complex formulas, American business can effectively neutralize the sense of horror and injustice that defective cars, poisoned rivers and preventable birth defects inspire. The goal of cost-benefit analysis is not to make a balanced evaluation about whether to regulate. It is a charade to exonerate corporations from having to take responsibility.
Fortunately, Professors Frank Ackerman and Lisa Heinzerling have done a terrific job in exposing the fundamental intellectual flaws and moral bad faith of cost-benefit analysis, in their new book, Priceless: On Knowing the Price of Everything and the Value of Nothing (New Press, 2004). Check out a wonderful interview with them by Carrie McLaren of Stay Free! Here are a few excerpts:
Stay Free!: You’ve argued that putting prices on things that have no market value decreases rather than increases the information available to decision makers.
Ackerman: If you have a long list of the health effects of arsenic in drinking water, that’s much more informative than reducing everything to a made-up dollar amount.
Heinzerling: Every major rule now coming through the agencies is evaluated according to cost-benefit analysis. Let me offer one qualification, though: the Bush administration has in some cases avoided cost-benefit analysis, and troublingly, those are cases in which I think the cost-benefit analysis would have shown that regulation is a good thing. For example, air pollution kills so many people and the effects are so well-documented that virtually any regulation that reduces common air pollutants is going to turn out to be good in cost-benefit terms. Yet the Bush Administration weakened the rules for power plants and factories without doing a cost-benefit analysis.
Ackerman: I’m involved in a case now where the United Farm Workers are suing the EPA over its decision to allow very toxic pesticides to be used on crops. In effect, the EPA just said, “It’s so beneficial to the growers to use these pesticides that we don’t have to worry about evaluating the damage it does to farm workers.”
Heinzerling: One of the subtle things that’s also lost when you decide things according to this formula is any sense of loss or tragedy. Martha Nussbaum, a philosopher at the University of Chicago, has pointed out that if you reduce everything to numbers you can easily think nobody was hurt by a regulation. Sometimes in human situations when you realize that people are being hurt you can actually come up with a solution that you wouldn’t have thought of if you were pretending that you were just trading money around.
It is perhaps symptomatic of our times that the corruptions of the political process do not just involve mendacious, bullying politicians. The corruption has become systematized into our very ways of thought. Cost-benefit analysis represents a kind of moral insanity that is not even recognized as insane; it has become normative. This compounds the moral offense to the actual human tragedies because the official government reckoning does not even recognize them as tragic, preventable or unfair. They are simply abstract cash sums for which no one pays. The real challenge, if and when we can seize the opportunity, is to re-humanize the decision-making process of federal regulation and so recover its original mission, to prevent harm, not to justify and disguise it.