Applying Cost-Benefit to Past Decisions: Was Environmental Protection Ever a Good Idea?

In this article, we examine an argument that proponents of cost-benefit analysis have offered as a linchpin of the case for cost-benefit: that this technique is neither anti- nor pro-regulatory, but is a neutral tool for evaluating public policy. In making this argument, these observers have often invoked the use of cost-benefit analysis to support previous regulatory decisions as a sign that this technique can be used to support as well as to undermine protective regulation. As we demonstrate, however, the fact is that cost-benefit analysis would have stood as an obstacle to early regulatory successes. We have compiled three case studies in coming to this conclusion: the removal of lead from gasoline in the 1970s and 1980s, the decision not to dam the Grand Canyon for hydroelectric power in the 1960s, and the strict regulation of workplace exposure to vinyl chloride in 1974. The technique would have gotten the answer wrong in all three cases. Each case study illustrates, in a different manner, the damage that cost-benefit analysis could have done in the past, had it played the central role that is proposed for it today. The problems with cost-benefit analysis of regulations lie deep within the methodology; it would have done no better a generation ago than it does now.