Winston Harrington

Valuing the benefits of health and safety regulation

A goal of many public regulatory programs is the protection or enhancement of human health. If such programs are to be subjected to close analytical scrutiny, if not full-blown cost-benefit analysis, it is important to have correct measures of their benefits. This is no simple task. Not only is it often difficult to map regulatory policy into physical improvements in health or safety (less sickness, fewer accidents, etc.), but also it is difficult to translate changes in health status into dollar valuations. This is perhaps most difficult when the policy outputs are “lives saved,” or-more correctly -lives prolonged, but dithculties arise even when health benefits take the form of reductions in acute or chronic illness unrelated to premature mortality. Perhaps the most common means of valuing reduced morbidity is the cost of illness (COI) approach, whereby benefits are valued by savings in direct, out-of-pocket expenses arising from illness or injury (e.g., medicines and doctor and hospital charges), as well as opportunity costs incurred, foregone earnings being the most obvious example (Cooper and Rice [2]; Lave and Sei Fisher and Zeckhauser [5]; and, more recently, Courant and Porter [3]; Shibata and Wimich [12]; Harford [6]). This omission can be critical. If defensive or averting measures fully protect

Ambient ozone and acute health effects: Evidence from daily data

Abstract This paper reports on the results of a detailed epidemiological investigation of daily acute health effects in adults and children associated with daily exposure to ozone and other air pollutants. Using a Markov process model of health effects, we find statistically significant and robust effects of ambient ozone concentrations on daily reported respiratory symptoms among healthy nonsmoking adults but not among smokers or children. We also estimate a model in which ozone is allowed to affect individuals who are already ill differently from individuals who are not, and find that ozone is negatively correlated with additional illness. This result is consistent with avoidance behavior. Assuming a 10% ozone reduction, the health improvements predicted using out study are of the same order of magnitude as those predicted using two other, more problematic epidemiological studies.

Overcoming Public Aversion to Congestion Pricing

We have completed a survey of Southern California residents designed to examine whether the details of policy design can make congestion pricing more attractive to the motoring public. A congestion fee proposal is often regarded as simply a tax increase; also, especially in the US, motorists apparently regard the use of congestion fees as coercive, in that they often have few if any practical alternatives to paying the fee. Unlike most opinion surveys on congestion pricing, our survey was quite explicit about the fate of the collected revenues. For example, we presented respondents with policies that returned a substantial portion of the revenues to the public, either in the form of cash (through reductions in sales taxes and vehicle registration fees or through income tax credits) or in the form of coupons to be used for vehicle emissions equipment repair, transit, and the like. In addition, we examined whether the typically intense opposition to congestion pricing if applied only to a part of a roadway, leaving the motorist free to choose between free lanes and toll lanes. We find that a promise to offset the imposition of congestion fees by other taxes can result in a 7% point increase in support for congestion pricing policies, and the restriction of congestion pricing to a single lane on a freeway attracts from 9% to 17% points of additional support.

The Use of Economic Incentives in Developing Countries: Lessons from International Experience with Industrial Air Pollution:

To what extent should developing countries eschew conventional command and control regulation that is increasingly seen as inefficient and rely instead on economic incentives to control industrial air pollution? The article discusses the advantages and disadvantages of various economic incentive instruments; presents in-depth case studies of their application in Sweden, the United States, China, and Poland; and proposes policy guidelines. The authors argue that both design deficiencies and pervasive constraints on monitoring and enforcement impede the effectiveness of economic instruments in developing countries. The latter are difficult to rectify, at least in the medium term. Therefore, tradable permits are generally not practical. Suitably modified, however, emissions fee policies probably are appropriate. They can provide a foundation for a transition to an effective economic incentive system and can raise revenue for environmental projects and programs. If political opposition can be overcome, taxes on goods associated with pollution constitute a second-best regulatory instrument.

The economic losses of a waterborne disease outbreak

A safe, reliable, and inexpensive drinking water supply is one of the easiest aspects of modem life to take for granted. Yet, water supplies can and occasionally do become contaminated, in which case an exposed household is confronted with a dilemma: Either continued consumption of the contaminated water, risking illness thereby, or securing an alternative source, perhaps at great cost and inconvenience. Preventing contamination is costly as well, and may involve tradeoffs with other social objectives. Thus, decisions on water treatment require economic analyses similar to those that arise with other water resource investments: a comparison of a stream of present and future costs with a stream of future benefits that are uncertain and difficult to quantify. Nonetheless, drinking water benefit estimation is underdeveloped methodologically. Previous studies of the economic losses or damages of a disease outbreak (such as Schwab [14], Levy and McIntire [ll], Baker et al. [l]) have been ad hoc in their approach and were also forced to rely on data gathered for other purposes.’ An outbreak of a waterborne disease gives rise to two categories of damages for which methods are particularly underdeveloped. The first category consists of morbidity losses. Until recently, most health-related benefit estimates have been concerned with mortality. However, it is clear that morbidity losses can also be important, even in cases where mortality is the major interest. As we shall see, valuation of morbidity raises difficult issues regarding the valuation of time and the direct disutility of illness, issues that are irrelevant for mortality valuation.

Policy Watch: The Economics of Fuel Economy Standards

One of the most hotly contested of all energy policy issues involves Corporate Average Fuel Economy (or CAFE) standards for new cars and light-duty trucks. Tighter standards would reduce gasoline consumption, and hence both greenhouse gas emissions as well as this countrys vulnerability to oil price shocks. But they would also increase the price of new vehicles, worsen traffic congestion and--depending on how they are phased in--possibly even reduce occupant safety. These effects are amenable to economic analysis, and we review the evidence to date bearing on this interesting and important question.

Estimating an Emissions Supply Function from Accelerated Vehicle Retirement Programs

Local authorities and industries seeking to reduce emissions and improve air quality have shown interest in programs that offer to purchase and retire old, high-polluting vehicles. We analyze the results from an experimental vehicle retirement program in Delaware, during which selected pre-1980 vehicle owners were offered

Are vehicle emission inspection programs living up to expectations

500 for their vehicles and surveyed about vehicle characteristics, value and use. With this unique data set we estimate the relationship between the owners reservation price and the expected remaining life of the vehicle to derive a supply curve for emissions reductions, which predicts the emissions reductions as a function of the offer made to eligible vehicles in a scrappage program. Copyright 1996 by MIT Press.

Welfare and Distributional Effects of Road Pricing Schemes for Metropolitan Washington, DC

Abstract To ensure that the advanced emission control systems installed on modern motor vehicles continue to work properly, motor vehicle inspection and maintenance (I/M) programs are now found in the major cities of many countries around the world. These programs are widely regarded as valuable and even essential to the achievement of air quality objectives, but there have been few ex post audits of these programs. In this paper, we examine the performance of one of the most sophisticated I/M programs, the USEPA’s Enhanced I/M Program. This program has now been implemented in five states. Using data from 1995 and 1996, we estimate the cost of the Arizona Enhanced I/M Program and the emission reductions achieved. We begin by enumerating briefly the components of I/M costs and discuss their size and incidence. Then we describe the empirical information from Arizona and how we use it to construct cost estimates for both vehicle inspection and repair of failing vehicles. Inspection costs include the costs of operating the test stations and the costs motorists incur in time and money to get to the station and go through the testing process. We find that the inspection costs account for over two-thirds of the full costs of I/M, while costs associated with actual vehicle repair account for only one-third. We conclude by comparing the empirical estimates of costs and program effectiveness in the Arizona program with the ex ante estimated Enhanced I/M program costs made by the EPA in the 1992 Regulatory Impact Analysis (RIA). The ex ante EPA analysis appears to have underestimated the costs of achieving the ambitious reductions in emissions hoped for under I/M.

The Effects of Environmental Liability on Industrial Real Estate Development

Economists have long advocated congestion pricing as an efficient way of allocating scarce roadway capacity. However, with a few exceptions, congestion tolls are rarely used in practice and strongly opposed by the public and elected officials. Although high implementation costs and privacy issues are alleviated as appropriate technologies are developed, the concerns that congestion pricing will adversely affect low-income travelers remain. In this paper, we use a strategic transportation planning model calibrated for the Washington, DC, metropolitan area to compare the welfare and distributional effects of three pricing schemes: value pricing (HOT lanes), limited congestion pricing, and comprehensive congestion pricing. We find that social welfare gains from HOT lanes amount to three-quarters of those from the comprehensive road pricing. At the same time, a HOT lanes policy turns out to be much more equitable than other road pricing schemes, with all income groups strictly benefiting even before the toll revenue is recycled.