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Society For Risk Analysis Annual Meeting 2008

Risk Analysis: the Science and the Art

Session Schedule & Abstracts

* Disclaimer: All presentations represent the views of the authors, and not the organizations that support their research. Please apply the standard disclaimer that any opinions, findings, and conclusions or recommendations in abstracts, posters, and presentations at the meeting are those of the authors and do not necessarily reflect the views of any other organization or agency. Meeting attendees and authors should be aware that this disclaimer is intended to apply to all abstracts contained in this document. Authors who wish to emphasize this disclaimer should do so in their presentation or poster. In an effort to make the abstracts as concise as possible and easy for meeting participants to read, the abstracts have been formatted such that they exclude references to papers, affiliations, and/or funding sources. Authors who wish to provide attendees with this information should do so in their presentation or poster.

Common abbreviations

New Perspectives on Cost-Benefit Analysis: Meet the Authors

Room: Commonwealth C   2:00-3:30 PM

Chair(s): Adam Finkel

W3-F.1  14:00  Retaking Rationality. Livermore MA*, Revesz RA; New York University School of Law

Abstract: Since in 1981, the federal Office of Management and Budget and the federal courts have used cost-benefit analysis extensively to determine which environmental, health, and safety regulations are approved and which are sent back to the drawing board. However, cost-benefit analysis is ill-understood both by the public affected by these regulatory decisions and many of the interests groups - such as environmentalists, consumer groups, and labor organizations - that tend to advocate for stronger regulations. Industry and other antiregulatory interests, however, have embraced cost-benefit analysis as a tool to justify deregulation and weak regulation. The result is that cost-benefit analysis has come to have an antiregulatory bias, tending to over-count costs and under-count benefits. Retaking Rationality: How Cost-Benefit Analysis Can Better Protect the Environment and Our Health argues that cost-benefit analysis can be a neutral tool of policy analysis, but only if proregulatory interests - and the broader public - join the debate over how cost-benefit is conducted and how it is used. The book sets out the historical origins of antipathy toward cost-benefit analysis, discusses eight "fallacies" that tend to bias cost-benefit analysis against strong regulation and shows how the institutional arrangements of regulatory review lead to antiregulatory bias. For each of the problems that are identified, concrete solutions are offered, giving those interested in joining the debate over cost-benefit analysis a clear agenda for reform. Authors Richard L. Revesz and Michael A. Livermore offer an optimistic vision for a more balanced approach to cost-benefit analysis, as well as a clear roadmap for how to get there.

W3-F.2  14:20  New Foundations of Cost-Benefit Analysis. Adler MD*; University of Pennsylvania Law School

Abstract: New Foundations of Cost-Benefit Analysis (Adler and Posner, 2006) challenges traditional economic wisdom about the justification for cost-benefit analysis, but also defends the technique against those who would abandon it entirely. Cost-benefit analysis is traditionally tied to Kaldor-HIcks efficiency and to a preference-satisfaction account of well-being. But Kaldor-Hicks efficiency is a misguided criterion, and satisfying an individual's preferences need not enhance her well-being (for example, when the preferences are poorly informed or disinterested). New Foundations of Cost-Benefit Analysis argues that well-being is a matter of well-informed, self-interested preferences; that interpersonal welfare comparisons are indeed possible; that overall well-being is one of a plurality of normative criteria that are relevant to policy choice; and that cost-benefit analysis is a rough, administrable proxy for overall well-being. This new account has numerous implications for the actual practice of cost-benefit analysis. For example, it calls into question the widespread use of existence values; suggests that agencies might use distributive weights to compensate for the diminishing marginal utility of money; and argues for separate procedures to sensitize governmental decisions to considerations other than overall well-being, such as equity and rights. New Foundations of Cost-Benefit Analysis also provides a strong basis for defending cost-benefit analysis against standard criticisms, such as those grounded in incommensurability or the pricelessness of certain goods.

W3-F.3  14:40  Environmental law, policy, and economics: Reclaiming the environmental agenda. Ashford N A*; Massachusetts Institue of Technology

Abstract: This presentation will introduce a new book of the same title and a new paradigm for reclaiming the environmental agenda. Rather than relying on even sophistocated improvements of the so-called rationalist school of public policy centered on cost-benefit analysis, the needed environmental and public health progress depends on design, and use of the law to stimulate significant technological change and dynamic industrial transformation, rather than to merely control pollution or stimulate incremental changes. The law can be used to implement an ‘‘industrial policy for the environment,’’ and beyond changes in industrial inputs, products, and processes, there is a need to address the broader issues of sustainable development, which will involve a shift from products to product services, and further to larger system changes. The focus departs from those environmental law, environmental policy, and environmental economics perspectives that argue for a reduced role for government, or at least a more rational approach. The environmental record of the past 35 years suggests there is much to be gained when government provides clear, stringent legal requirements for environmental improvements and for technological transformations, although these requirements must be coupled both with flexible means to achieve environmental targets and with meaningful stakeholder participation. Rather than using cost-benefit analysis as a decision-tool, it is argued that trade-off analysis that promotes accountability, technological innovation, and precaution, rather than simplistic static accounting is what is needed and more closely represents democratic political processes focused on dynamic change.

W3-F.4  15:00  Comments on Revesz/Livermore and Adler/Posner. Kysar DA*; Yale University

Abstract: This presentation offers comments on two significant contributions to the literature on the philosophical justification and practical impact of cost-benefit analysis of environmental, health, and safety regulations: “Retaking Rationality: How Cost Benefit Analysis Can Better Protect the Environment and Our Health,” by Richard Revesz and Michael Livermore, and “New Foundations of Cost-Benefit Analysis,” by Matthew Adler and Eric Posner. It will argue that both books should be widely read and, indeed, applauded, as they offer valuable correctives to prevalent misunderstandings and excesses concerning the use of cost-benefit analysis as a method of social planning. The presentation will then raise a series of moral and political questions that, although vital to the achievement of a just and sustainable global polity, cannot be subsumed within cost-benefit analysis, and thus should become the central focus of environmental, health, and safety policy discussion, now that cost-benefit analysis has been put in its proper place.

W3-F.5  15:20  Incorporating equity issues into benefit-cost analysis. Levy JI*; Harvard School of Public Health

Abstract: When developing regulations to address environmental or safety risks, decision makers often attempt to take into account both cost-benefit considerations and environmental justice or equity issues. While methods to quantify population health benefits and other measures of efficiency have been well defined and extensively applied, there have been many fewer attempts to develop meaningful and interpretable methods to address the distribution of benefits. The two books presented within this session emphasize some of the ways in which cost-benefit analysis could be refocused or modified in order to embrace a broader set of issues and explicitly consider issues of equity. I present some empirical case examples to reinforce some of the key arguments within these books and to raise analytical and data collection challenges that these frameworks raise. Specifically, I describe the application of quantitative measures of inequality, originally constructed to describe economic inequality, to the domain of health benefits analysis. I consider the ways in which these indicators should be applied and interpreted to adhere to cost-benefit analysis principles, and I discuss findings for a case example across the United States addressing power plant emissions and a local-scale case example within Boston addressing diesel bus emissions. These analyses suggest that, in settings with a sufficiently expansive set of risk management alternatives, more efficient risk management strategies may often correspond with more equitable strategies, reinforcing the argument that cost-benefit analyses can both incorporate equity considerations and help to determine strategies that are optimal across both efficiency and equity measures.

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