1 To what extent are benefit cost analyses required by law? To what extent do they actually influence regulatory decision making? What is �good benefit cost study�?
Since 1981 the EPA has required to conduct benefit-cost analyses of any new regulation expected to cost more than $100 million. They are known as RIAs, regulatory impact analyses. It provides assumptions and points out uncertainties. Good benefit-cost study will follow accepted procedures for estimating benefits and costs, provide a clear statement of all assumptions, point out uncertainties where they exist and suggest realistic margins of error.
2 The EPA�s B-C analysis for lead in drinking water can be criticized for its coverage of health conditions. Why?
EPA placed a value on deaths and avoided $2.5 million. The true benefit measure could be as much as 2 times as high, or 70% below. This two times upper bound does not include all of the benefit categories identified in the discussion above that the EPA could not quantify.
3 What is the proper rule of thumb for determining the best option in the lead analysis?
Why? What did the EPA actually use for its decision? Why? (Include PUZZLE�)
The best option is to maximize the size of the economic pie or the net monetary benefits to society (total benefits minus total costs). The EPA chose the less costly option B. They felt that the best alternative, A, was not meaningfully different than alternate B. PUZZLE is the way to find the most efficient way (P194)?
4 What issues were under study in the EPA�s B-C analysis for landfill regulations? What were the main options studied? What was concluded?
1st issue was pollute and cleanup approach that required only groundwater monitoring and corrective action for any pollutant above levels defined in the Safe Drinking Water Act. 2nd required landfills to prevent any groundwater contamination. This might require soil compaction, clay or synthetic liners, leachate collection systems and covers.
5 Goodstein says that a B-C study�s assumptions are critical to that study�s results. Explain this point for the landfill analysis regarding the assumptions on the current practice baseline, the cancer baseline, and other, non-cancer benefits.
6 What is an environmental bond? How could the landfill B-C study be assessed in this light?
Environmental bond is to set aside money so that the EPA would have enough money to provide alternatives for those relying on water or a resource that may be contaminated in the future. A prevention strategy first avoids imposing high cleanup costs on future generations and reduces the potential that a landfill will become a federal taxpayers burden. (P200-201)
7 What are the �hard numbers problem� and �paralysis by analysis�, as they relate to B-C analysis and regulations?