Regulatory Costs And Benefits
December 9, 1998
It is sometimes very difficult to arrive at an accurate cost of a government regulation, then determine the price of the benefit -- and compare the two.
But a new report for the AEI-Brookings Joint Center for Regulatory Studies attempts to do just that with regulations governing noise from airplanes and the benefits to homeowners living near airports.
- The researchers looked into the effects of the 1990 Airport Noise and Capacity Act -- which requires airlines to stop flights into U.S. airports of so-called Stage II aircraft, which are relatively noisy, by 2000.
- They estimate that the act will force airlines to replace or retrofit 44 percent of the Stage II aircraft they had in 1990 -- at a cost of $10 billion in 1995 dollars.
- Then they looked at how the presence of airplane noise affected the amount people are willing to pay for houses -- and found that the benefit of the noise reduction mandated by the act was equal to about 5 percent of the value of houses in the area.
- They found that the act affects the value of roughly $100 billion of the nation's housing stock and provides some 800,000 households with an average benefit of more than $6,000.
The upshot is that the value to the country is about $5 billion -- compared to the $10 billion cost of the regulation.
Source: Perspective, "Pricing Regulation," Investor's Business Daily, December 7, 1998.
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