Environmental Regulation, Cost-Benefit Analysis, and the Discounting of Human Lives

Abstract

The loss of human life resulting from environmental contaminants generally does not occur contemporaneously with the exposure to those contaminants. Some environmental problems produce harms with a latency period whereas others affect future generations. One of the most vexing questions raised by the cost-benefit analysis of environmental regulation is whether discounting, to reflect the passage of time between the exposure and the harm, is appropriate in these two scenarios. The valuations of human life used in regulatory analyses are from threats of instantaneous death in workplace settings. Discounting, to reflect that in the case of latent harms the years lost occur later in a person's lifetime, is appropriate in these circumstances. Upward adjustments of the value of life need to be undertaken, however, to account for the dread and involuntary nature of environmental carcinogens as well as for higher income levels of the victims. By not performing these adjustments, the regulatory process may be undervaluing lives by as much as a factor of six. In contrast, in the case of harms to future generations, discounting is ethically unjustified. It is simply a means of privileging the interests of the current generation. Discounting raises analytically distinct issues in the cases of latent harms and harms to future generations. In the case of latent harms, one needs to make intra-personal, intertemporal comparisons of utility, whereas in the case of harms to future generations one needs to define a metric against which to compare the utilities of individuals living in different generations. Thus, the appropriateness of discounting should be resolved differently in the two contexts.