Part 6 in continuing series on CBA -- The Crowning Error: Atrazine

I will now start my own comments on the CBO study that I've been quoting.
There are so many problematic areas that it's difficult to know where to
start.  But let's start with one of the study's showpiece factoids, the
high cost per cancer of treating atrazine:

Summary:
>For both existing and proposed regulations for carcinogens in drinking water,
>CBO examined available data in the cost per cancer case avoided -- that is,
>the cost to prevent a single case of cancer.  Those data indicate that the 
>cost per cancer case avoided varies greatly among contaminants.  For
>example, the average cost per cancer case avoided (averaged for all system
>sizes) is estimated at $500,000 for regulating the pesticide ethylene
>dibromide and its co-contaminants compared with more than $4 billion for
>regulating the pesticides atrazine and alachlor.  In addition, the cost per
>[...]
>     Conclusions about the merits of drinking water standards are limited
>by a great deal of uncertaincy underlying estimates of both costs and 
>benefits.  However, in some cases the cost per cancer case avoided would
>need to be decreased by a factor of 10 or more to fall within the range 
>that is generally considered reasonable.

Sounds scary, huh?  But of course, that $4 billion per case turns out to
be only $10 million in actual dollars:

pg. 28:
>      Extremely large costs per cancer case avoided, however, would not
>necessarily result in extremely large cost savings if the standard was
>eliminated.  For example, although the cost per cancer case avoided for
>the standard for atrazine and alachlor is estimated at more than $4 billion,
>the total cost of meeting that standard (for all systems) is estimated at
>$10.2 million.  The high cost per cancer case avoided in this case is the
>result of the extremely small number of cases avoided (0.0024 per year)
>rather than a very high level of expenditures.

So regulating atrazine only costs a total of $10 million per year (actually
less, we'll get to that later).  So is it worth it?  Anyone reading this
study would think not, given CBO's repeated and singular estimate of costs
vs benefits: $4 billion per cancer case prevented.

Now, buried later on in the study was an admission that CBO didn't look at
most non-cancer risks because EPA couldn't give them a dose-response
relationship.  So, was atrazine regulated at its MCL level due to cancer 
effects in the first place?

No!  The January 30, 1991, Federal Register, pg 3543, sets out EPA's
reasons for regulating atrazine:

"     The proposed MCLG was based upon non-carcinogenic effects in a one-year
dog feeding study (Ciba-Geigy, 1987, No. 852008 and Pathology Report No.
7048, MRID 40313-01).  A NOAEL of 0.5 mg/kg/day was identified based upon
the finding of discrete myocardial degeneration at the highest dose level
(43 mg/kg/day) and findings at the 5.0 mg/kg/day dose level that suggested
a trend toward the development of the cardiac pathology seen at the higher
dose."

The Federal Register notice goes on: later rat studies were done, later
dog studies were done, the compound was regulated due to noncarcinogenic
effects.  EPA judged these effects to be more important for regulating this
chemical than some possible evidence of carcinogenicity.

So what did CBO do?  In typical economist style, it calculated the benefits
of regulation based on its only numeric formula for doing so, rather than
trying to estimate what the real benefits would be, or simply stating that
the exact amount of benefits was unknown and not providing any cost/benefit
number.  This is similar to looking for your car keys under a streetlight, 
rather than in the place where you dropped them, because the light is better 
under the streetlight.  The $4 billion per cancer case avoided is a truly 
meaningless number, since EPA didn't regulate atrazine for cancer effects 
in the first place.

That doesn't keep it from being a politically powerful number.  Any 
policymaker seeing CBO's official $4 billion per case number for atrazine
might reasonably decide that this money is not well spent.  By the time
that someone gets around to telling the public that only $10 million is
being spent to avoid an unknown, but potentially dangerous number of cases 
of cardiac, kidney, and liver damage, the anecdote has already taken on 
a life of its own.  

How did CBO get itself into this position?  Well, economists don't appear to
know how to deal with scientific uncertaincy very well, and they have
a distressing habit of setting any sufficiently uncertain number to zero.
I'll comment on this further in future posts.