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InsiderOnline Blog: July 2013

Do Regulators Know the Benefits of Scotch?

It should surprise no one that the cost-benefit analyses produced by federal agencies always show their proposed regulations yield benefits that exceed costs. Writing in the latest issue of Cato’s Regulation magazine, Susan Dudley observes that, in the hands of regulators, cost-benefit analysis is a process of quantifying “every conceivable good thing that they can attribute to a decision to issue new regulations,” while counting only “the most obvious direct and intended costs of complying with the regulation.”

Dudley should know a few things about regulation from her days running the Office of Information and Regulatory Affairs for President George W. Bush. From her article, here are a few facts about federal regulations that may surprise you:

• More than half of the calculated benefits of federal regulations counted in the Office of Management and Budget’s annual report on the costs and benefits of economically significant regulations come from reductions in a single pollutant: fine particulate matter.

• For many regulations, much of the calculated benefits come from reductions in fine particulate matter—even though reducing fine particulate matter was not the purpose of those regulations. For four such regulations in 2010, 100 percent of the claimed benefits came from reducing fine particular matter.

• Estimates of the benefits of reducing fine particulate matter rest on six key assumptions—including that there actually is a causal relationship between mortality and levels of fine particulate matter and that the relationship exists even at low levels. If any of those assumptions are false “the benefits of reducing [fine particulate matter] would be less than estimated and perhaps even zero.”

• The method of assigning a value to mortality risk reduction assumes every beneficiary is a healthy, working-age person with a long life ahead of him.

• Beyond reducing fine particulate matter, the source of most of the rest of the calculated benefits of economically significant federal regulations is saving consumers money. Those savings are achieved by regulations that force consumer products to be more energy efficient than they would otherwise be. That is to say, regulators are actually counting restrictions on consumer choice as a benefit. But nowhere do they count as a cost the loss to consumers of product features for which they are willing to pay. [“OMB’s Reported Benefits of Regulation: Too Good to Be True?” by Susan Dudley, Regulation, Summer 2013.]

And that brings us to this bit of news: Environmental organizations such as the Scottish Wildlife Trust, the Royal Society for the Protection of Birds, and the John Muir Trust have started a campaign to put Scotland’s peat off limits to commercial extraction by 2020. Peat, of course, isn’t just another fuel for heating your home. It’s what gives Scotch whisky its distinctive smoky character. [Brisbane Times, July 12]

Scottish literary historian David Daiches tells us: “The proper drinking of Scotch whisky is more than indulgence: it is a toast to civilization, a tribute to the continuity of culture, a manifesto of man’s determination to use the resources of nature to refresh mind and body and enjoy to the full the senses with which he has been endowed.”

Continuity of culture or biodiversity? Toasting civilization or keeping a little more carbon in the ground? If you whisky drinkers aren’t sure about switching your habit for the sake of habitat, just wait till the regulators give you their numbers.

Posted on 07/12/13 01:47 PM by Alex Adrianson

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