Priceless, by Frank Ackerman and Lisa Heinzerling

Posted: August 14, 2005 at 9:07 pm in nonfiction

Amazon link

Tstop recommended this to me in a comment on one of my posts.

Here’s the summary:

  • Using cost-benefit analysis is misleading because costs are easily quantifiable in terms of dollars, and benefits (in the case of human life, health, the environment or the future) are difficult, if not impossible, to put in those terms (they are without price, price-less).
  • Conservative think tanks and the Bush administration use cost-benefit analysis because it appears non-partisan and scientific. However, with the hand-waving necessary to put a price on benefits (like life, health, etc.), they can massage those numbers to justify any result that they please; in particular, by systematically distorting the value of benefits, they can always demonstrate that a given set of regulations is unjustifiable, given the benefits, and therefore the businesses in question should still be permitted to pollute and/or put their workers at risk.
  • Oh, and such think tanks only use this analysis on things they don’t want to do: when it comes to the military or national security, they say that it is far too important to be subject to such analysis. They only apply it to things like the environment and workers’ health.

You’ve now gotten the gist of the entire book. Except in three paragraphs, rather than 250 pages. I’m being a little bit harsh because I was disappointed with the relentlessly partisan tone of the book. I highly dislike evangelizing in my writing, and it was unnecessary for the authors to drop in a comment like “Most systems of ethical and religious belief maintain that every life is sacred” every few pages. I felt that, between comments like that, and continual digs towards big business and conservative think tanks, the book was less convincing, because it showed that the authors had an agenda for which they were then constructing their own numbers. When both sides have agendas, it becomes more difficult to resolve them.

The authors do make some good recommendations. They suggest that rather than trying to put everything into the same dollar basis in an artificial manner, the government should frame the question in a more accessible way: e.g. rather than try to put a dollar value on the value of a fish’s life and do a cost-benefit analysis, they could ask the voters whether they’d be willing to pay an extra penny a day on their power bills for the sake of saving the lives of millions of fish (p. 173).

They also point out the dangers inherent in numbers:

When risks are reduced to numbers alone, funny things happen. Uncertainty collapses into a precise – which is not to say accurate – estimate of future hazards. Inequity is covered up by a market framework that is silent about the distribution of costs and benefits, and silently makes that distribution less equitable. (p. 151)

The thing that drives me nuts about the book, though, is that they provide no alternative framework for making such decisions of tradeoffs. They point out problems with the method of cost-benefit analysis, but don’t suggest a solution. There are times when it is not worth it to save every possible life, and sometimes society has to acknowledge that. They say, “As a matter of practical politics, why would anyone allow employers to let twenty of their workers die each year, once the opportunity to save them has been identified? The assumed indifference about saving lives now is utterly unfeasible in political terms.” Except that it is. All the time.

To take an obvious example (and one used by Latour), we have thousands of deaths each year on the highway. If we lowered speed limits and enforced them, we would undoubtedly save a significant fraction of those lives. But we don’t. We have decided, as a society, that our convenience of being able to drive quickly from one place to another is more important than the people that die because of that speed. This example demonstrates that it is completely feasible in political terms to let some people die for the convenience of others, and the Priceless authors’ bias doesn’t let them acknowledge that.

I would have loved to have seen an alternative tradeoff resolution scenario proposed. That is what I was hoping to get from this book. I love Latour’s approach, but it’s awfully generic and hand-wavey. And, yes, cost-benefit analysis has serious problems. So how can we as a society better decide which tradeoffs to make?

It’s admittedly an extremely difficult question, but I wanted something more than “The development of a sound alternative approach begins with the recognition that there is no formula.” and “The natural solution to this problem is a system with most decisions made by elected representatives, or agencies responsible to those representatives.” (p. 210) Yeah, because elected representatives are never biased by their campaign contributions or the pressures of staying in office. In fact, given the short-term horizon of most elected representatives until the next election, they would seem to be the least qualified to make decisions about long term tradeoffs, no matter how much public participation is brought to bear.

All in all, a thought-provoking, but ultimately disappointing, book.

P.S. This concludes Book Review Sunday, despite the fact that I didn’t get to my review of The Death and Life of Great American Cities. Hopefully I’ll write that up later this week.

3 Responses to “Priceless, by Frank Ackerman and Lisa Heinzerling”

  1. Beemer Says:

    It seems to me that the authors don’t understand that zero risk is unattainable. You can’t assign infinite value to human life and expect to have a functioning system, if for not other reason than that risk mitigation can introduce its own new and different risks.

    I certainly wouldn’t argue that the kind of analysis they’re talking about undervalues all kinds of important benefits, but the world is messy, and I think it’s impossible to avoid needing to sometimes make those tradeoff analyses. Using dollars seems to bias it in an unhealthy way — “hedons’ would probably be better — but I have to say I think they’re wrong to argue that you can’t and shouldn’t make the comparison at all. I think it’s really unavoidable. We just need, as you say, a better system for it.

    Okay, I could probably condense this whole comment to, “yeah, I totally agree with you”. I think I’ll post it anyway.

  2. Eric Says:

    I should note that the authors are not, in fact, assigning infinite value to human life. I was simplifying for the sake of making them easier straw men. They advocate taking a holistic approach, rather than an atomistic one, that we should “adopt a precautionary approach to uncertain, potentially dangerous risks”, and that we need to “learn from the military: moral imperatives are more powerful than cost comparisons”. And I tend to agree with them that we should use a framework of fairness and life and synergy to make our decisions, rather than using the framework of a zero-sum game. They use the example of the Clean Air Act, which was a win-win scenario in the sense that the companies learned to produce things more efficiently under the new regulations, and the health of citizens was much improved as pollution decreased.

    So they have some good points. But I’m still interested in this process of how to make decisions where several different contradictory criteria are in play. I’m not sure there’s a good answer – sometimes decisions are just hard.

  3. tstop Says:

    While I agree with the general “stop preaching and keep to the facts” comments about the book (which is why I recommended Why we recycle? above this one), I think that you are missing a number of the interesting points in the book. Tstop’s summaries of the interesting ones:
    – market theory isn’t efficient across generations, i.e. if the people that receive the costs are not the same people that get the benefits. They gave many examples that show this. Environmental effects are cross-generational and therefor standards and processes that are not dependent on market efficiency for success should be used.
    – The gov’t is “cheating” when doing cost benefit analysis through use of various discounting formulas to reduce the value of human life by orders of magnitude, not mention fudging the initial number (which I think everyone agrees is going to have to happen). Basically, they are lying with statistics to reduce the “value of life” benefits as much as possible, preventing a potentially useful system of judgement from being useful.

    I agree that they didn’t lay down a great counter-method, though there is something to be said by having a number of politicians run a “reasonableness” test on policy. C/B analysis is almost always just a way to slow down and make more expensive (through delay and administation costs) a program. Which is why we don’t use it all that often for biz decisions. C/B only works for short term, well understandable and solidly monetizable problems. Anything beyond that you’re just pulling it out of your ass anyways, so why hide behind made up numbers?

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