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Civil Justice Memo
No. 14 May 1989


The Risk Debate

The American Sense of Peril: A Stifling Cost of Modern Life

By PETER PASSELL

Is the slight risk of contracting cancer from Alar too high a price to pay for crisper apples? Is the dramatic increase in milk production available through genetically engineered growth hormones worth the unknown risk to children's health? If a few aging aircraft suffer explosive decompressions, should all old airliners be grounded?

Risks to health and safety and the complex questions of public policy they create are seemingly everywhere these days. And while there is little statistical evidence that the hazards of daily life are on the rise, a wide range of academic and business experts believe that Americans' perception of increased peril is stifling technology, wasting billions of dollars and, ironically, making it more difficult to contain the most serious risks.

Risk vs. Reward

One way to restore a sense of balance between risk and reward, psychologists say, is to package information about risk in ways that people can more easily grasp. But economists and legal scholars argue that equilibrium will not be possible until there is wider understanding that unfamiliar and often unmeasurable risk is the price of prosperity and societal achievement.

Not every newly discovered peril is trivial. Without the selfless and often unappreciated efforts of health and safety activists, serious hazards ranging from asbestos to radon to lead would have gone unnoticed and underregulated for years longer. Any change in government institutions or public attitudes that tended to silence such gadflies would hardly serve the public interest.

But by broad statistical measures, Americans have never been safer. Life expectancy at birth in 1986 was 74.8 years, up a full four years since 1970, largely because of a dramatic drop in deaths from heart disease and strokes.

Cancer deaths, adjusted for age, are up slightly in the last two decades, but not, apparently, due to manmade hazards in the air, water, workplace and food supply.

A landmark study, published in the Journal of the National Cancer Institute in 1981, linked just 2 percent of all deaths from malignancies to such environmental exposure. Michael Gough, a senior fellow at Resources for the Future, confirmed this striking conclusion last year by extrapolating deaths from Environmental Protection Agency estimates of the number of cancer cases that are due to involuntary exposure to manmade hazards.

Statistically Safer to Fly

Even the highprofile threats have not changed the risks of untimely death or injury. The skies may be crowded, the planes aging and the pilots inexperienced, but the trend in aircraft fatalities is downward. From 1982 through 1986, Americans were 70 times as likely to die in an automobile trip as they were traveling the same route on a scheduled airline.

Indeed, in a technological catastrophe of singularly grand scale, the Chernobyl accident, the toll in human life and suffering is barely visible against the canvas of natural hazards. An assessment published last December in the journal Science said 237 people received massive doses of radiation from the explosion and fire at the Soviet nuclear reactor and 31 people died soon thereafter. Another 4,000, exposed to relatively high doses in an 18mile radius of the plant, are about two and a half times more likely to die from leukemia than is the general population, raising the ultimate death toll by fewer than 20.

But outside the immediate area, the report argues, the longterm impact will be widely diffused and barely discernible. Of the people in the Northern Hemisphere who lived in the path of Chernobyl fallout, 513 million will eventually die of cancer. At most, the report estimates, 17,400 of those cancer deaths—one in 29,000—w ill be linked to the reactor disaster.

Major Risks Are the Same

The primary environmental causes of premature death and disease, say most scientists, are the same as they were decades ago: smoking, diets rich in fat and lean in fiber, lack of exercise, alcohol abuse. Many Americans, however, apparently do not understand the relative risks, or do not find the numbers reassuring.

The clearest examples are in health care. Bendectin, a drug still recognized by the Food and Drug Administration as safe and effective for the treatment of nausea in pregnancy, was taken off the market by the Dow Chemical Company's Merrell Dow Pharmaceuticals Inc. because some juries decided it caused birth defects. All intrauterine birth control devices were permanently withdrawn by their manufacturers after one defective brand, the Dalkon Shield, was found to cause pelvic inflammatory disease. And according to George Zeidenstein, the president of the Population Council, private industry's development of contraceptives has been retarded because the "ratio of potential profit to risk is way down."

Lifesaving medicines have been less dramatically affected, but even here, the measures to compensate for risk can radically change the economics of distribution. The cost of a common childhood vaccination, for diphtheria, pertussis and tetanus, rose from 50 cents in 1982 to $11.40 in 1986, as its manufacturer, the Lederle Laboratories, now a division of American Cyanamid Company, amassed cash to pay legal claims for rare but predictable side effects.

Peter W. Huber, an engineer, lawyer and author of "The Legal Revolution and its Consequences" notes that similar "safety taxes" are added to the price of thousands of other goods and services, distorting production and reducing living standards. By Mr. Huber's reckoning, the safety tax represents 30 percent of the cost of a step ladder, onethird the cost of a ride on a Long Island tour bus and $300 of the cost of giving birth in New York City.

Sometimes the implicit safety tax is so high that it even inhibits the introduction of substitutes for dangerous products. Richard J. Mahoney, the chief executive of the Monsanto Company, said the company developed a safer alternative to cancercausing asbestos in brake linings. But the company chose not to take the chance of marketing the new product because juries might decide it was not safe enough.

Environmental Threats

A parallel cost is the distortion in priorities created by coping with environmental threats. Frank Young, Commissioner of the Food and Drug Administration, notes that while the risks from pesticides in food are "low and decreasing," there has been an "explosion" of diseases caused by contamination from microbes. A result, the agency says, are some 33 million cases of gastrointestinal illness, which can have serious consequences for the very young and very old. But there is little public pressure to toughen sanitation standards for the major offenders: meat, eggs, fish and poultry.

The Environmental Protection Agency also regards itself as handicapped by Congressional and public misperception of relative risks.

In 1987, the agency published "Unfinished Business," a ranking by its staff of 31 environmental problems, Items high on the scientists' list included indoor radon exposure, global warming from the greenhouse effect and chemical discharges into estuaries and coastal waters. But much of the agency's money and effort is devoted to managing lowerlevel risks like toxic waste dumps, underground storage tanks and nonhazardous municipal waste sites.

"E.P.A.'s priorities," the report dryly concluded, "appear more closely aligned with public opinion than with our estimated risks."

Another area where perceived risks may have distorted environmental and economic priorities is in energy production Reports issued last month, one by Salomon Brothers and one by Arthur Anderson and Cambridge Energy Research Associates, warn of impending shortages in electricity generating capacity, notably in the Northeast. But under pressure from local and state governments, responding to public fears about nuclear energy, the Long Island Lighting Company is giving up the battle to operate its completed, 800-megawatt nuclear plant at Shoreham.

Costs Will Spread Widely

The $5.5 billion loss on the plant will be apportioned among customers and stockholders, as well as the United States Treasury in the form of $850 million in lost corporate income taxes. Lost power will in part be replaced with fossil fuel plants that will inevitably produce local air pollution and add greenhouse effect gases to the atmosphere.

What explains the public's decreasing tolerance of some risks and apparent indifference to others? Paul Slovic of the Decision Research Corporation in Eugene, Ore., and Baruch Fischhoff of Carnegie Mellon University point out that perceived risk is not always related to the probability of injury.

Easily tolerated risks include ones that people can choose to avoid (chain saws, skiing), that are familiar to those exposed (smoking), or that have been around a longtime (fireworks). Poorly tolerated risks are involuntary (exposure to nuclear waste), have long delayed effects (pesticides) or unknown effects (genetic engineering).

As Dr. Slovic notes, nuclear and chemical technologies fare especially badly in such subjective rankings. Indeed, the general acceleration of technical change and integration of new technology in products helps to explain the increase in public anxiety about risk.

Paul R. Portney, an economist at Resources for the Future, believes there is another reason Americans worry more and trust government less: the casual approach toward regulation flaunted by the Reagan Administration.

Legacy of Watt, Gorsuch

Senior Reagan appointees, including James G. Watt, the first Reaganera Secretary of the Interior, and Anne Gorsuch, the E.P.A. Administrator, reduced public confidence in the Government's will to put the broad social interests in the environment ahead of parochial business concerns. That, in turn, invited tighter oversight by Congress, leaving the current generation of regulators with far less discretion to balance economic and environmental needs.

Yet another ingredient in the anti-risk brew, Peter Huber asserts, is the legal doctrine of strict liability, which has made producers far more vulnerable to lawsuits. By effectively prohibiting buyers from bearing personal responsibility for injuries, the courts have inadvertently lowered society's tolerance for risk.

Thirty years ago most people who fell off ladders assumed it was their own fault. Today, Mr. Huber suggests, they would be inclined to question the design of the rungs or—more insidiously—assume that manufacturers have an obligation to make ladders accidentfree, no matter what the cost.

 

Making a Risky Life Bearable: Better Data, Clearer Choices

By PETER PASSELL

Aflatoxin in corn, alar in apples, bovine growth hormone in milk, cynanide in grapes, faulty wiring in jet aircraft: what Science magazine has labeled "the scare of the week" is taking a psychological toll.

Of course, some hazards, like botulism in canned foods or explosives in tunnels, present intolerable threats that must be contained. From, Upton Sinclair to Rachel Carson to Ralph Nader, America has an honorable history of muckraking and whistleblowing that has deterred corporate greed and saved lives. And while the lessons from Three Mile Island and Love Canal may be ambiguous, such traumatic events certainly explain why most people are suspicious of safety Pollyannas.

Some Will Bear More Risk

But safety is hardly ever free. To produce more of it, the output of some other valued good or service must be reduced. To make sensible choices between greater safety and the alternatives, scientists argue, Americans need more and better information, presented in ways that stimulate a sense of perspective.

Even a wellinformed public, however, cannot be expected to call balls and strikes on complicated technical issues on its own; informed choices can only come from expert regulators.

Moreover, some people will always bear exceptional risks for the benefit of the rest of the society: somebody must live down wind from the garbage incinerator or within fallout range of the nuclear reactor. To reduce their resistance to such necessary evils, greater care must be taken to compensate them.

A modest first step would be to improve the quality of the statistics generated by the Government, particularly on issues affecting the environment. Paul Portney, a senior fellow at Resources for the Future, a Washington research institute, suggests the creation of an independent bureau of environmental statistics that would operate within the Environmental Protection Agency, the way the Bureau of Labor Statistics operates within the Labor Department.

Importance of Packaging

Taking the job away from a dozen different agencies with their own axes to grind would increase the credibility of Government data, Mr. Portney argues. And centralizing the collection in a single office with its own ties to Congress would improve the prospects for adequate financing.

But a vast body of research on the perception of risk suggests that the ' way the information is packaged is as important as the content.

For example, a study in The New England Journal of Medicine showed that 44 percent of people questioned were prepared to accept a risky treatment for lung cancer if told it would give them a 68 percent chance of surviving. But when the risks of the same treatment were presented as a 32 percent chance of dying, only 18 percent said they would undergo the treatment.

Comparing Soda and Cigarettes

No responsible official advocates the outright manipulation of numbers to minimize fears on issues like genetic engineering and nuclear waste disposal. But regulators who must reconcile scientific interpretation with public perception, like Richard D. Morgenstern of the E.P.A.'s Office of Policy Analysis, emphasize the value of presenting risks in comparative form.

For example, knowing that the consumption of one can of diet soda with saccharin each day will on average kill one person in 100,000 each year may not be much help in deciding whether saccharin should be banned. Knowing that the average cigarette habit is 120 times as dangerous as a can of diet cola a day might help more.

Some psychologists favor comparisons based on the number of days a specific hazard reduces life expectancy for those exposed. Others suggest comparisons in which the probability of death is equalized. For example, flying 1,000 miles on a scheduled airline is about as likely to cause death as one chest Xray or living within five miles of a nuclear reactor for 50 years.

Trades Between Safety and Cost

If the public needs perspective on chemical and technological hazards, so too, argues Mr. Portney, does the Government. Some Federal statutes allow a balancing of costs against benefits, and in some cases agencies are using their authority to make explicit trades between safety and cost.

Last year, for example, the Environmental Protection Agency revised the way it regulated cancercausing pesticide residues on foods. It changed the zerotolerance rule on newly developed pesticides, which allowed no exposure to dangerous chemicals, to a "negligible risk" standard, defined as less than one extra chance in a million of getting cancer over 70 years of exposure.

But at the same time the E.P.A. applied the rules to a wider variety of foods and chemicals. The result, the agency said, would be to make the food supply safer without adding significantly to food costs.

But other Federal statutes are inflexible, specifying maximum exposure levels for certain chemicals. The Food and Drug Administration is bound by an even more rigid legal standard, three amendments that bar carcinogenic additives from cosmetics and processed foods. And in 1987 a Federal appeals court affirmed that any measurable risk was unacceptable under the amendments.

Mr. Portney would like to make sense of the welter of inconsistent legal tolerances for hazards. Indeed, he would like to go further, applying a concept that economists favor in dealing with air pollution, the emissions "bubble," to choices about risk.

The E.P.A. can now create conceptual bubbles around a factory or even a city, in which all sources of a pollutant within the bubble are treated as one. The agency can then require reductions in total emissions—say a 10 percent cut in volatile hydrocarbons—giving the polluter the flexibility to find the cheapest way to accomplish the task. That might, for example, involve closing down some sources altogether while allowing others to pollute unchecked.

Mr. Portney would extend the idea, giving regulators some discretion to tolerate, say, more exposure to toxic waste at one site in return for tighter standards at another, as long as the total risk at the two sites was reduced. Conceivably, risk bubbles might apply to the regulation of workplace safety or even to design standards for aircraft.

Implicit Insurance Premium

Government agencies account for only a part of the regulation of risk. Much is done by courts, where judges and juries assign liability and assess damages in injury suits. Peter W. Huber, a senior fellow at the Manhattan Institute and the author of Liability, the Legal Revolution and Its Consequences, (Basic Books, 1988) argues that the law is now systematically biased toward safety, excessively raising product and service costs and inhibiting the introduction of new technology.

Under the evolving legal doctrine of strict liability, he says, buyers cannot accept responsibility for injuries caused in the use of products. Thus the price of the product must include an implicit insurance premium, calculated by the seller to cover liability. Where the calculated premium is very large, as in the case of intrauterine birth control devices, the product may not be sold at all.

Mr. Huber would right the balance by allowing buyers and sellers to divide responsibility for injuries as they see fit.

Medical patients might, for example, formally agree to give up the right to punitive damages in malpractice cases in return for lower fees. Workers exposed to chemicals with known toxicity might voluntarily sign away rights to sue for punitive damages in return for higher wages. Mr. Huber would also reduce the discretion of the courts, putting a time limit on product liability and in some cases substituting the judgment of experts for that of juries.

All these suggested changes have determined opponents. Many consumer and environmental advocacy groups would like the Government to buy more safety, not less, arguing that very tight standards prevent regulators from giving in to the relentless pressure from industry. Ralph Nader's organization, Public Citizen, for example, sued to prevent the Food and Drug Administration from relaxing standards. Many lawyers oppose any legal changes that would reduce their capacity to pursue product liability cases.

Compensation for Hazards

But as A. Myrick Freeman, an economist at Bowdoin College points out, the burden of risk does not fall equally on all citizens. And in some cases, much of the resistance comes from people who must bear the brunt. They might be won over, he suggests, by recognizing their special interests and fully compensating them for exceptional exposure to hazards.

In France, where more than half of all electric power is generated by nuclear reactors, those who live near nuclear plants are entitled to free electricity. According to Mr. Morgenstern, France has also been successful trading public amenities for local tolerance in the placement of the new tunnel across the English Channel. Similar benefits—tax abatement, recreational facilities, jobcreating government research centers—might be used in America to compensate localities for the presence of waste sites, garbage incinerators, pipelines and prisons.

 


Center for Legal Policy.

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SUMMARY:
In case you haven't seen it, I've attached a copy of the two-part "idea piece" that The New York Times ran on the subject of American attitudes toward risk and safety. The author is Peter Passell, whose writing we've admired for years, and it's good stuff even aside from its many references to our own Senior Fellow Peter Huber, who continues to be at the forefront of the risk debate.

One of our constant themes here at the Institute is the way ideas percolate from more intellectual to more popular outlets. A couple of months ago, The New Republic ran a pungent article by Henry Fairfie pulling together many strands of the risk issue, and now the newspaper of record has done the same. Those two pieces will help set the (sensible) tone for literally hundreds of articles for years to come. The momentum of an idea builds on itself, and now there are signs that the networks are planning to join in with major stories that take a skeptical view of recent scare syndromes. Its a long way from the days when Ralph Nader's was the only voice heard on many of these issues.
--William M. H. Hammett

 


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