Cost-benefit analysis is a comparison of the estimated costs of an action with the estimated benefits it is likely or intended to produce. It is controversial when applied to policies intended to address potentially harmful or fatal risks, particularly environmental risks. Many critics argue that one cannot place a dollar value on human life. But that is not the intent. Rather, cost-benefit analysis permits comparison of various options, all of which may be beneficial but not all of which can be undertaken simultaneously.

Researchers who study risks refer to "life-years saved," based on statistical probabilities.

Some regulations return high benefits at little or no cost. For example:

• Primarily because the medical costs that are avoided more than offset the costs resulting from the flammability standard for children's sleepwear or the requirement that auto windshields be installed with adhesive binding instead of rubber gaskets, there is no net cost for each year of life added.

• The cost per life-year saved by chlorination of water supplies is $4,000.

But many governmental decisions are taken without adequate consideration of either costs or benefits. The health and safety regulations of some major government agencies, particularly the Environmental Protection Agency, impose astronomical costs relative to the benefits they produce. Overall, the median cost per life-year saved by EPA regulations is $7.629 million. This compares with a cost of $23,000 for the Federal Aviation Administration and $78,000 for the National Highway Traffic Safety Administration.

The EPA imposes a host of high-cost, low-benefit regulations. For example:

• The standard set for chloroform at 48 specific pulp mills costs over $99 billion for each life-year saved.

• This means if this regulation resulted in one person's living another 20 years, the implicit "value" of the regulation would be almost $2 trillion per life saved!

Such regulations deal with minuscule risks. There is very little reason to believe they save any lives.

Source: Kent Jeffreys, "Guide to Regulatory Reform: The Cost-Benefit Rule," Brief Analysis No. 150, January 31, 1995, National Center for Policy Analysis, 12770 Coit Rd., Suite 800, Dallas, TX 75251, (972) 386-6272