John Locke Update / Research Brief

Economic analysis is essential to sound public health policy

posted on in COVID-19 Series, Economics, Economics & Environment, Fiscal Insight, Spending & Taxes
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As we struggle through the COVID-19 pandemic, our government has responded by imposing economically severe restrictions on our lives. In doing so, elected officials must remember that imposing costly public health restrictions may do more harm than good. Ultimately, decisions on the stringency of public health requirements must be balanced with the costs of doing so.

The thousands of rules that have been passed by lawmakers and regulators to protect public health and the environment have been restrained by cost-benefit analyses. A well-functioning economy is critical to improving health care and environmental quality, and the risk of destroying that economy has (and should) place real limits on the measures taken in the name of protecting people and the environment.

In the field of environmental management, the messy exercise of cost-benefit analysis is an essential component of evaluating new regulations. Faced with removing a man-made compound in our water like GenX, for example, we learn that the costs are much higher as the concentrations of the substance in the water supply decrease. The result is a consideration of costs to be weighed against the benefit received from the restriction. One could argue that the United States managed to put a man on the moon, so surely we have the capability of removing all harmful compounds from our water, and anything short of that is an unacceptable compromise. On the other hand, committing a sizable share of resources to solve one or a handful of problems will leave no resources to tackle the many other threats to public health, a concept that economists call “opportunity costs.”

The environmental laws are filled with compromises. The Clean Water Act, for example, explicitly includes cost considerations when setting standards. Cost-benefit analysis often places a dollar amount on a “statistical” lifetime. Benefit calculations include the number of trips to the emergency room, lost workdays, lost school days, and deaths. Our regulatory state is filled with such compromises because we recognize that environmental management would suffer irreparable harm if the economy is severely impaired. Similarly, crippling our economy would leave us ill-prepared to sustain our enviable health care system.

In addition to the cost-benefit analysis required for rulemaking, the crippled state of the economy should compel elected officials to pause the implementation of public health protections.  There is precedent for such measures.

Not long ago, the U.S. Environmental Protection Agency (EPA) had proposed a new and more stringent ozone standard. During the rulemaking process, the 2008 recession hit.  Rather than initiate the costly implementation of the new ozone standard, former North Carolina governor Bev Perdue’s administration was among several that complained of the costs of the new standard, citing the weak economy at the time. In 2010, Sheila Holman, currently an assistant secretary at the N.C. Department of Environmental Quality under Gov. Cooper, asked the EPA to delay the standard that may have saved thousands from premature death and tens of thousands from other maladies.

Holman’s reason for the request was simple. North Carolina was facing a serious economic recession. She referenced an unemployment rate of 11.1%. Almost a year later, President Obama actually withdrew the standard entirely, which was contrary to the law, so that the national economy could continue to recover. According to some estimates, North Carolina may face an unemployment rate as high as 20% later this year.  Will Gov. Cooper follow the lead of his Democratic predecessor?

There are limits to what a government can spend to save lives. We could force everyone to drive 10 miles per hour and save many lives, but the resultant economy would not generate the resources needed to support health care to uninsured or provide a robust environmental protection program. Does this mean some will suffer simply for want of spending more of the nation’s treasure? Absolutely. And it has done so for years.

Dr. Donald van der Vaart is a Senior Fellow for the John Locke Foundation. Dr. van der Vaart earned a B.S. in Chemistry from UNC Chapel Hill, an M.S. in Chemical Engineering from N. C. State University, a Ph.D. in Chemical… ...

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