3 Yet their record of estimating the price-tag of proposed regulation has not In the early 1970s, chemical manufacturers announced that a proposed OSHA standard on vinyl chloride, a proven carcinogen, could cost two million jobs and $65-$90 billion. "The standard is simply beyond the compliance capability OSHA implemented the standard of the industry," said their trade association. and the industry complied, without job losses and at a cost one-two hundredth its original estimate. Recently, Secretary James Schlesinger wrote Secretary Ray Marshall to urge that he stop the proposed federal exposure standard for beryllium, another known carcinogen, because of its $150 million cost. DOE officials later conceded that their estimate derived from "a gross estimate based on rule of thumb" that was provided them by some berrylium manufacturers. - The SEC has a case pending against U.S. Steel because the company has allegedly established two estimates of the cost of some pollution standards a higher estimate that it has publicly released and a lower estimate it has sent to the SEC. And finally, the Outdoor Power Equipment Institute contracted with the Stanford Research Institute to come up with cost estimates for the Consumer Product Safety Commission's proposed lawnmower standard. After studying SRI's very high estimates, the Environmental Protection Agency concluded that "its major findings were subject to great error and not substantiated by the analysis presented.... Unfortunately, SRI was unable to present any information which would have helped us to understand the bases for their reported findings, for they had apparently been ordered by OPEI to destroy all background information and supporting documentation.... Or as the House Oversight and Investigations Subcommittee concluded, "the most significant factor in evaluating a cost-benefit study is the name of the sponsor." Agreeing, a Library of Congress analysis of regulatory cost studies said that "they tend to support the vested interest of the sponsor of the estimate or to fit the hypothesis of the individual making the estimate." To base policy on business' cost-benefit studies is like allowing one party to a lawsuit to also be its judge. The benefits of regulation are often ignored, immeasurable, substantial. Not only are the costs in cost-benefit studies routinely werstated, but the benefits are routinely downplayed, and for some similar reasons. Regulatees often possess any benefit data that exists, and they are not prone to overstate their value. 4 Worse, it is often impossible to put a dollar value on the obvious benefits of regulation. be saved by avoiding long-gestating diseases -- e.g., ingestion of DES today can cause cancer in 30 years? What is the value of avoiding pain and suffering to an auto crash victim, or the loss of consortium to the victim's spouse? Can a dollar figure be put on the benefit of a six`year old not disfigured from flammable sleepwear? How do we calculate the environmental benefits of seeing across the Grand Canyon, of utilizing recreational areas, of avoiding property depreciation due to pollution? What is the dollar value of investor confidence in a sound securities market and of consumer confidence in safe food and drugs? Better benefit data is of course desirable. But even then cost benefit analysis would still be an inherently limited tool. Regulation can involve moral values as well as economic goals. For example, society might desire regulation where the calculable costs exceeded the calculable benefits because of the regulation's redistributive impact --i.e., costs are transferred from workers to relatively well-off shareholders. Or there may be a strong presumption that a basic precondition to all life is a clean environment despite a nearly balanced cost-benefit analysis. on our one planet - Or suppose that the cost of saving a worker's arm approximated the "benefit" to him: the cost of avoiding injury should be assumed since prevention beforehand is morally preferable to compensation later.. There are aspects of American life that can never be, and shouldn't be, subject to this economic yardstick. One wonders whether the abolition of slavery, the end of child-labor laws, or the existence of jury trials would pass a strict economic cost-benefit test. Finally, proven benefits from consumer and environmental regulation have somehow not made it into all those denunciatory editorials and annual reports. An estimated 200,000 Americans are alive today who would be dead if the federal government wasn't regulating car and highway safety. By 1985 federal fuel economy standards will be saving 15 billion gallons of gasoline generally (one-sixth of our current petroleum imports), and saving consumers a lot of money annually. Between 1970 and 1976, air emissions of particulates declined by 41%. Also the two traditional measures of water pollution -biological oxygen demand and total suspended solids -- fell by two-thirds due ples wetor pollutina control prov.a 5 Unlike cartel regulation, health/safety regulation can stimulate, not retard, innovation. When the FDA announced a ban on spray cans utilizing fluorocarbons, the industry said there was no alternative. The day after the ban went into effect a new pump spray can was introduced -- which was cheaper than aerosal cans and didn't use fluorocarbons. When NHTSA imposed strict standards for bumpers, new bumpers were simply bigger and heavier. Today, auto engineers have developed bumpers that are far stronger and lighter, and are estimated to save consumers a hundred dollars in repair costs over the life of their car. A 1975 study of five industries in five countries by MIT's Center for Policy Alternatives concluded that, in the area of health/safety regulation, "forcing firms to implement product or process changes often times incidentally shocks them out of a rather inflexible production system and thereby provides the catalyst which is necessary for innovation to occur." denounced - - Although industrialists invariably oppose new regulatory impositions, they at times grudgingly concede that earlier regulations which they had also now work. At a recent conference Fletcher Byrom, chairman of the Koppers Company, told a business audience that "you and I know that the market system would not give us environmental protection, worker safety and health. These are not economic things .... they add value, not wealth; the only way to improve the quality of life is through intervention." Even Henry Ford, still vigorously opposing standards for passive restraint systems, told Meet the Press a year ago that "we wouldn't have had the kinds of safety built into automobiles that we had unless there had been a federal law. We wouldn't have had the fuel economy unless there had been a federal law." ⭑ Many of the most cited studies of the costs of regulation are seriously flawed. One of the major props of the anti-regulation edifice is a study by Murray Weidenbaum. Weidenbaum, an economist and former Treasury official in the Nixon Administration, did a study of the administrative and compliance costs of 55 major regulatory agencies. By 1979, he estimated the former at $4.8 billion; then using a multiplier of 20, he arrived at the compliance figure of $97.3 billion --for a total cost of over $102 billion. "While these estimates of regulatory costs must be regarded as tentative," he demurs, "I submit that any error is in the direction of understatement." In his study are numerous and "ross: The flaws 6 * Most fundamentally, his emphasis on costs and neglect of benefits makes as much economic sense as denouncing Mobil for $32 billion in costs a year and failing to say it also produces $34 billion in revenues. What is obviously meaningful is net costs, which Weidenbaum neither provides nor adequately acknowledges as he scores polemical points with his $100 billion scare number. • In testimony and speeches he mostly attacks health/safety regulation, which comprises only about one third of his aggregate total. The other twothirds are the costs of classic cartel regulation -- ICC, CAB -- and federal paperwork. And most of federal paperwork costs relates to IRS forms, not OSHA. • His conclusion that federal environmental and safety standards add $666 to the price of a new car is based on a recalculation of BLS data that BLS officials have said is invalid. He wrongly assumes that the initial cost of a safety standard never goes down. But there is a learning curve for auto engineers, who over time can meet standards at lower cost. A NHTSA study in 1976 asked car companies how much lower their retail prices would be if there were no safety standards. The answer: an average of $30 per car. Recently the Business Roundtable released its study, conducted by Arthur Anderson & Co., of the incremental costs of six federal programs (EPA, EEO, OSHA, DOE, ERISA, FTC) to 48 giant companies. The total pretax cost of $2.6 billion was reportedly described as the "tip of the iceberg" by Frank Cary, chairman of IBM and of the Roundtable's "Task Force on Regulation." But there is just no way that the Roundtable's conclusion of $2.6 billion in regulatory costs can be reconciled with Mr. Weidenbaum's $102.7 billion estimate. Since the 48 companies involved are the largest in the country and the six agencies among those most attacked by business, the Roundtable study is more the body of the iceberg than its tip. * For example, the Roundtable estimates the incremental cost of OSHA regulations at $184 million a year to its subjects. Mr. Weidenbaum concludes that OSHA costs $3.5 billion a year. Yet as several studies have demonstrated, American business was spending nearly this amount before the creation of OSHA. Weidenbaum confuses ordinary business expenses for regulatory costs. и A Library of Congress analysis also criticizes Weidenbaum because many of the studies he depends on are old and no longer applicable, because "there are unresolved problems of double counting and inaccurate addition, because his paperwork costs to corporations include filling out forms for federal contracts, subsidies and loans, and because his 1:20 multiplier -- which is how he gets up to $100 plus billion -- is largely conjectural. This September, 1978 analysis concludes that his study has "enough questionable components to make the totals arrived at suspect and of doubtful validity." place. We should not forget why we have health/safety requlation in the first A few years ago the Cuyahoga River in Ohio caught fire. Today, 92 billion pounds of hazardous, toxic wastes are generated annually, according to EPA, and only seven percent is disposed of properly; women around the Love Canal area in upstate New York, one of 638 known sites of hazardous wastes, have experienced unusually high miscarriage and birth defect rates. One thousand Americans a day die of cancer, 20% of us will eventually die of this disease -- most of which is environmentally caused, according to recent studies. Auto crashes took over 50,000 lives in 1978; if all these people should have died in one day rather than over 365, new stories would no doubt refer to it as the greatest single calamity in our national history. In 1937 an inadequately tested drug, elizor sulfanamide, took 107 lives. In 1968 the National Commission on |