Controlling Risk; R. Stroup

THEFREEMAN IDEASON L1BERiY ControllingRisk: Regulation or Rights? by Richard L. Stroup F or many decades, Louisiana's Gulf Coast has been a center of oil and chemical plants. The region has higher-than average rates of death from cancer, and has even been dubbed "Cancer Alley." Many people assume that the chemical plants are causing cancer along the Gulf Coast. But there is evidence that this assumption is wrong. In 1992,the Louisiana Cancer and Lung Trust Fund Board reported that the incidence rate of virtually all cancers was "at or below the national average," in the words of Joel L. Nitzkin, Director of Special Projects for the Louisiana Office of Public Health. 1 (The exception was lung cancer in males, but Nitzkin, like other experts, at tributes more than 90 percent of these can cers to cigarette smoking.) Yes, death rates from cancer were high. But the reason, Nitzkin explained, was not that chemical plants were inducing more cancer. If they were, cancer incidence rates would be higher, and they are not. Instead, people in the area with cancer have not been getting adequate medical care.

This incident illustrates how easy it is for the public (and even experts) to misread information about risk. When you couple that with a political system that caters to Dr. Stroup is a Senior Associate of PERC, a research center in Bozeman, Montana, that provides market solutions to environmental problems. demands for government intervention (as ours does), the result is a series of major government programs that are totally mis directed. Much of the environmental policy in the United States is driven by the fact that voters see potential gains from reducing risk through the political process. They believe that they benefit and they think that giant, faceless corporations pay for those benefits. While they may act quite differently on an individual level (for example, they may be quite willing to bear small risks), as voters they tend to support heavy expenditures to reduce risks, however small. As in the case of "Cancer Alley," these programs may be based on mistaken perceptions.

Voter ideology affects public policy as well. Those on the left, mistrusting capital ism, tend to worry a lot about the risk from industrial chemicals. The ideological ele ment of their worry can be seen by noting that at the same time they fear chemical pollution, they tend to minimize risks from HIV-positive individuals in the food service or healthcare industries. People on the ideologicalright tend to have the opposite emphasis. The view from the left dominated envi ronmental policy in the 1970s and 1980s, so it's not surprising that policy focused on industrial chemicals and on regulation as the way to deal with them. But it's important to 149 150 THE FREEMAN • MARCH 1995 realize that this is not the only way to deal with pollution such as industrial chemical emissions or waste. While everyone agrees that it is wrong to impose risk unilaterally on others without their consent, beyond mini mal levels, regulation is not necessarily-or even traditionally-the way to get people to stop polluting.

Superfund as an Example The Supetfund program, created by Con gress in 1980, illustrates the radical shift toward tight regulation that has taken place in dealing with pollution. Prior to the cre ation of Supetfund, people exercising their rights could sue in court to force the owners of leaking chemical dumps to clean up any site posing unacceptable risks. But suspicion and accusations were not enough. The burden of proof lay with the plaintiff. The level of proof required was not the stringent "beyond a reasonable doubt" standard of criminal cases, but the "more likely than not" standard, which is more easily met. Nevertheless, meeting this stan dard could be difficult. Perhaps the harm would only appear years later as a birth defect or an illness such as cancer. If the damage, or unacceptable risk, could not be detected at the time of the lawsuit, common law would not force action. Another prob lem with these common-law suits was that even ifthe risk was known, the creator of the site might not be located or might be insol vent.

In 1980, Congress confronted what seemed to be an emergency, although ulti mately the "crisis" turned out to be as inaccurate a perception as Louisiana's "Cancer Alley." In Niagara Falls, New York, chemicals from a former industrial waste site known as Love Canal seeped into people's basements after the canal walls had been punctured by the local school board, the city government, and the state depart ment of transportation. Fearing the worst, people reading headlines all over the coun try worried about thousands of "ticking time bombs" -abandoned dumps-that were threatening the nation's health. In fact, however, studies since then have not con firmed any unusual long-term dangers to residents in the area of Love Canal. Congress abandoned the traditional way of dealing with health threats from hazard ous waste, which required evidence that the pollution complait~t was more likely than not to be correct. Congressmen wanted action, and the rights of those who ultimately would be required to pay were treated as insignif icant. (Another boost came from the EPA, which saw Supetfund as a way of expanding its power.) Supetfund is largely immune from the budget process because it is financed by a special tax on chemicals, oil, and a broad based corporate income tax. Furthermore, the EPA can potentially recapture all the costs of the cleanups it incurs from the companies that contributed waste to the site (even if they followed the law at the time).

To prevent delays, Congress made the ac tions of the EPA at any site largely immune from judicial review until after the money is spent to clean up the site. Often, very large amounts of money are involved. The EPA makes people pay, on average, an estimated $30 million per site cleanup. This unlimited access to the purses of others gives EPA professionals an incen tive to pursue their mission with much zeal and little restraint. While their goal may be high-minded-cleaning up sites to protect the public-they have an incentive to clean up just about any site just about anywhere, as long as it might pose even a small poten tial danger. And they do. (That doesn't mean that cleanups are fast or effective. Traditional bureaucratic inertia sets in, and critics from across the political spectrum assail the Supetfund program as wasteful and ineffective.) EPA professionals force cleanups at many sites where the existence of high risk is dubious, and where risk could be mini mized without cleanup by isolating contam inants or by restricting site use. EPA risk assessments pile conservative (that is, ultra safe) assumption on conservative assump tion to exaggerate estimated risk. Outside experts indicate that the resulting risk estiCONTROLLING RISK: REGULATION OR RIGHTS? 151 mates may easily overstate the expected value ofa given risk by a factor ofa thousand or 10,000.

Imaginary Health Risks Most of the health risks claimed in the site assessments are purely imaginary. They are based on future scenarios that hypothesize "reasonable maximum exposures." EPA claims that the risks could "plausibly" oc cur, but that claim is often doubtful. For example, the EPA frequently assumes that an industrial hazardous waste site will be come a residential area. And, despite official EPA guidance to the contrary, important information revealing the uncertainty of the estimates is routinely omitted from material provided to the public and to officials. This process has led to opposition around the country as citizens of communities with Superfund sites (or potential Superfund sites) try to keep the EPA out. They contend that their towns are safe; the EPA says they are not. Even the General Accounting Office has criticized the EPA for failing to compare the benefits of cleanup with the benefits of using those funds to deal with other envi ronmental problems.

In sum, Superfund is not an effective way to reduce health risks. It reduced the tradi tional protections that people and compa nies can expect from legal due process, and it hasn't clearly helped anybody, except lawyers, consultants, and the EPA. Much the same has been shown to be true of many other regulatory programs. Rights, Prosperity, and the Environment Is there another way? Yes. The traditional way of dealing with pollutants is by protect ing rights. This approach is based on the recognition that people have a right not to be invaded by others, and this includes inva sion by excessive pollutants emitted by others. This approach to controlling pollution was not perfect, but now that we see the ills of regulatory programs, it looks better than it did in the 1970s. Enforcing rights would not completely end emissions of potentially harmful pollu tion. Nor should it. For example, a polluter might offer to purchase the rights of those downwind. Those affected could choose between moving, for compensation, or stay ing where they are, insisting on their rights, but losing compensation.

If we can return to a rights approach, much money will be saved-not just tax payers' funds, but some of the $150 billion spent each year by industry to meet envi ronmental regulations that often accomplish little. One important result will be greater prosperity. Prosperity, or rising levels of wealth and income, are a key to environmental im provement. Prosperity makes possible tech nological advances that reduce stress on resources and emit fewer pollutants; data from around the world show that techno logically advanced nations generally have cleaner, healthier environments. Further more, the demand for environmental im provements-the willingness and ability to sacrifice to achieve more environmental quality-grows more than proportionally as income grows. Economist Donald Coursey estimates that when incomes grow 2 per cent, willingness to sacrifice for added en vironmental quality grows 5 percent. 2 Around the world, greater prosperity also leads to reductions in birth rates over time and an easing of population pressures.

And prosperity is the way to help the people in "Cancer Alley." With more in come and greater prosperity, they can ob tain the timely medical care that will save their lives. 0 1. Joel L. Nitzkin, "Cancer in Louisiana: A Public Health Perspective,"Journalo/the LouisianaMedicalSociety,April 1992, p. 162. 2. Donald Coursey discussed this topic in "The Demand for Environmental Quality, " a paper presented January 1993at the annual meeting of the American Economic Association in Anaheim, California.