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Chemical Specialties Manufacturers Association

Environmental Policy Conference

Hotel Nikko, San Francisco, California

October 1, 1998

Becky Norton Dunlop


[Thanks, acknowledgments, Barry Ziman, etc.]

It is an honor to be invited here today. I am particularly pleased to have the opportunity to thank you – on behalf of the average person – for what your companies do every day to make our world a better place – for we humans. People are our most valuable – and precious – natural resource. We can meet daily challenges – just as you demonstrate – to prove that working together using science and technology, lives can be enriched, made healthier and longer, and our communities can be enhanced and improved in quality and condition. So, thank you for helping to prove out these principles.

I am also pleased to represent the Heritage Foundation – a public policy research institution that is unabashedly conservative – for limited government, maximizing human freedom and opportunity and a civil society.

Located in Washington, D.C. Heritage’s primary audience has been the Congress. Some years Congress is a more receptive audience than other years!

Policy analysts work on both foreign and domestic policy and we all look for innovative ways to market – if you will – the policy analyses that are produced. Speeches, papers, media appearances, op-eds, books and our website are a few of our tools.

We take the marketplace seriously – so we believe that marketing and communicating ideas is serious business if we want those ideas to have the desired consequences.

So, as I come to speak to you today, I approach the topic of the Economic Impact of Environmental Regulations on Business from a slightly different perspective than some. You see – the Heritage Foundation has an “attitude” – a conviction based upon thorough research and empirical evidence (sound science) that excessive government regulation is destructive to economic growth for all our citizens, harmful to the environment, and a threat to the liberties of people everywhere.

Let me share with you the story of an FBI agent who was hiking in rural Virginia. He happened upon a wooden fence with several targets painted on it. In each target was a bullet hole, dead-center in the bull’s eye. On a nearby barn he saw more targets – each of these also plugged in the bull’s-eye.

Just then a farmer ambled around the barn. The FBI agent asked the man if this was his marksmanship.

“Yep,” the farmer replied. “My shootin’.”
“That’s remarkable,” said the agent. “What distance were you shooting from?”
“I was back yonder on that ridge,” the farmer said, pointing. “It’s about 400 yards.”
“That’s amazing!” said the agent, envious of the man’s shooting ability. “How did you ever become such a fine marksman?”
“Wasn’t nuthin’ to it,” said the farmer. “I shot first, then came down and painted targets around the holes.”

This “shoot first, paint later” method is characteristic of the way federal regulatory agencies often inflict their bizarre, Byzantine rules on individuals and industries. You probably have your own favorite horror stories in this genre, but let me mention a few – because they help concentrate the mind and bring the blood pressure up to the mark.

You might have read about Judy Hooper, an Illinois woman who wanted little more than to make and sell doughnuts. And she was doing well at it. But then the agents of OSHA descended upon Judy’s little bakery. And after a good deal of prowling and snooping, they discovered that she had failed to give her employees adequate instruction on the hazards of dishwashing liquid. This and a few equally horrible violations resulted in fines that were the equivalent to the value of 260,000 doughnuts.

And then there was the case of Anita Cragg, who bought a subdivision in Florida in 1992. She planned to expand it and build new homes. Ms. Cragg had obtained all the correct permits, and she had sold lots to families who were ready to begin building their homes.

But along came agents of the U.S. Fish and Wildlife Service, who saw two “scrub jays” flying onto some of Ms. Cragg’s lots. The scrub jay was listed as “threatened” under the Endangered Species Act. So the agents halted development because it would disturb land that was, as they put it, “suitable for occupation by scrub jays.”

Please note that phrase – “suitable for occupation by scrub jays” – because the phrase “suitable for occupation by people” also applied to the land in question. I’ll flag that and return to it in a few minutes. First, let’s finish Ms. Cragg’s short, tragic story.

For the next year and a half, her little four-person company struggled to get the moratorium lifted, and all the while her buyers were paying taxes on land they couldn’t use. The only way Ms. Cragg could get the Federal regulators off her back was to buy four acres of land off-site for each acre she developed on-site.

This cost her more than $100,000. Whether the scrub jays derived any benefit is doubtful, because animal experts believed the development probably wouldn’t have disturbed their living arrangements in the first place – and they never did stop by the office to get a map for where the new four acres was.

Now, in the grand scheme of things, these cases are not going to damage the U.S. GNP in any measurable way – 260,000 doughnuts in Illinois; $100,000 in Florida. But this is replicated in thousands of instances across this land, and there are many ways to measure its costs. For example, one can simply total up the fines and extraneous costs (such as the value of the land Ms. Cragg was forced to buy) and arrive at some large, incredible numbers – in billions of dollars.

But we get a more telling measure if we apply the economist’s maxim that the cost of anything is equal to the forgone alternatives. A few years ago, Heritage policy analysts calculated some forgone alternatives – or opportunity costs – of various federal regulations.

For example, the cost of averting or preventing one death under the Hazardous Waste Disposal Ban is $4.19 billion. This isn’t the budgeted cost of the program. It is a statistically sound projection of what businesses would have to spend complying with that program long enough to avert just one fatality.

The Heritage analysts calculated that for the same $4.19 billion, America could have incarcerated 47,890 criminals for a period of 3½ years.

Next Heritage researchers asked: What are the costs – the opportunity costs – of not incarcerating 47,890 criminals for 3½ years? Using statistical data from the Justice Department, they found that if left on the streets for that period of time, those criminals would be charged with (though not necessarily convicted of) 22,680 violent crimes; 1,035 homicides; 7,711 robberies; 658 kidnappings; 586 rapes; and 1,191 other sexual assaults.

It doesn’t take a statistician or a rocket scientist to see the absurdity of the trade-off here: $4 billion to avert one death, versus $4 billion to avert more than 1,000 homicides – to say nothing of all those other crimes.

Another example: Under the Formaldehyde Occupational Exposure Limit, industries would have to spend $119 billion to avert one death. For the same amount of money, pharmaceutical companies could bring 331 new drugs to market (even under the current expensive and stringent regulations those companies are currently under).

It is entirely reasonable to assume that if those 331 new drugs were put on the market, they would save far more than the one life spared under the Formaldehyde Occupational Exposure limit. Put another way, such regulations do not save lives. On balance, they cost lives.

That is precisely what a 1994 Harvard University study concluded after examining 500 regulatory interventions that purportedly saved lives. Researchers concluded that “more than 60,000 lives are lost every year due to the current command-and-control regulatory system, which squanders billions of dollars eliminating risks that are negligible or nonexistent while failing to protect the public from others that are much more serious.”

Now I want to step back from these examples and ask you to think with me about the philosophical character of this debate. Whenever we debate the costs of environmental regulation, we are engaging in a utilitarian debate. So that we will be clear on what that means, allow me to define my terms.

Utilitarianism, sometimes called consequentialism, is a moral theory made popular in the 19th century by such philosophers as John Stuart Mill and Jeremy Bentham. You might have heard it described by the slogan: “the greatest good for the greatest number.”

In a nutshell, the classical rule of utility goes like this: If you are faced with a moral choice – any moral choice – estimate the net happiness likely to result from each alternative. The action that would yield the most human happiness is the choice you must take, morally speaking to the utilitarians.

In many cases, this rule makes a good deal of sense. The decision by President Truman to use the atomic bomb in World War II, for instance, is often justified on utilitarian grounds. Many were killed by the bombs, it is correctly argued, but far more would have died in a prolonged war had we not used those bombs. This is a moral justification. But more precisely, it is a utilitarian justification.

Environmental (and other) regulations were initially justified, and often still are, by the same kind of argument. People would be better off – happier, healthier, etc. – if a given regulation were put in place than if it were not.

What we see in the cost-benefit analyses that I cited earlier is the collapse of utilitarian justifications for those particular regulations. In case after case, research shows quite clearly that the regulations in question do not result in a net gain in human well-being. On the contrary, as the Harvard study showed, the opportunity costs of regulation can be measured in tens of thousands of human lives lost every year.

Now one might conclude from this that common sense is winning, and that it is just a matter of time before the opponents of absurdly expensive regulations carry the day. But that conclusion might be hasty. For if we take another step back and examine the debate in a slightly wider context, we will see many friends of regulation switching their tactics from their original concepts of utility to rights.

Utility and rights are notoriously opposed. Here’s a simple illustration. Suppose you have just $20. You are about to spend it on movie tickets when you see someone soliciting funds for a worthy charity. This presents you with a moral choice between movie tickets and a charity. What are you moral obligations?

A utilitarian might argue that because more good would come from giving the $20 to charity, you are obliged to do that. But a rights advocate could reply that, after all, it is your money. You have a right to spend it on a movie if you wish. You have no obligation to produce maximum utility with your every dollar. Or, as it is sometimes said, rights trump utility.

One reason these theoretical debates about moral obligation are important is that they inevitably lead to theoretical grounds for legal obligations. A classic bridging question between moral philosophy and politics is: When is government morally justified in using compulsion to restrict people’s freedom or mandate specific actions by people?

One answer often given by some is “environmental regulation,” and it’s an answer our citizens have been conditioned to accept for 30 years now. But it is and should be a controversial answer. As we saw from the research I mentioned earlier, the utilitarian ground is caving in under the weight of the absurd opportunity costs of many regulations.

Are the advocates and defenders of these regulations surrendering? You know well the answer. No, they are not. Many of them are shifting their arguments from utility to rights. More specifically, they are proclaiming the rights of animals and even the rights of trees and mountains.

We are not talking stewardship responsibilities here – but rights. To dismiss such thinking is a mistake, a serious mistake, because these are serious people with serious objectives. To appreciate their intensity of purpose, consider that at the Rutgers University Law School today, you will find an Animal Rights Law Center. Its purpose is “to disseminate materials so that other practitioners, educators, and animal advocates can share our research, tactics and experience to speak and act in defense of animals.”

From this Center, you can order books with titles like “Rain Without Thunder: The Ideology of the Animal Rights Movement” or “Animals, Property, and the Law.” You can read learned papers with titles like “Human Superiority,” in which the author writes – and this is a direct quote: “To say that we can exploit animals because we are ‘superior’ is nothing more than to say that we are more powerful than they. And nothing more.” End quote.

Did you get that? “And nothing more.”

Bear that in mind while we return to Anita Cragg and her Florida subdivision. Development was halted because her land was “suitable for occupation by scrub jays.” We could easily demonstrate that, on balance, human happiness would be greater if her buyers were allowed to build their homes and live in them.

That is a good utilitarian argument. And it could prevail – if our opponents agree to settle the issue on grounds of utility. The problem is that they increasingly do not agree to do that. They are switching the terms of the debate to rights. They know that, on balance, everyone will not be happier if the land is left to the scrub jays. So they are devising legal theories about the rights of scrub jays and other animals.

On that tack, to that way of thinking no right-holder is superior to another. As the Rutgers University author I quoted earlier asserts, humans are superior to animals in power, “and nothing more.” And we all know, of course, that might doesn’t make right. So, if rights trump utility, and if jay birds have rights, then their rights trump our utility. Suddenly, utilitarian arguments have no persuasive power.

My point here is not one of doom but of reality. If we are going to restore common sense to regulatory law gone berserk, we must understand and adapt to the shifting contours of the battle. The most fundamental issues in this battle are not scientific, not technological, and not economic. They are philosophical.

We should, of course, continue to analyze and understand the costs of environmental regulation. But we must also understand the significance when the debate shifts from costs to quite different kinds of issues – from utility to rights. This subtle shift radically alters the character of the debate, and we must alter our tactics accordingly.

On this point, I need to say another word for public policy institutions. Because public policy battles have grown ever more complex and sophisticated, they must include organizations looking at these different facets. That is one reason Heritage has grown 50-fold since 1973. This is a market response to demand and thus reflects a democratic impulse: Americans are increasingly fed up with overbearing government. People want something done about it. And they are willing to invest money in people and organizations that defend their ideals.

Earlier, I mentioned a few of the ways Heritage mounts that defense of liberty and common sense – through radio stations, the Internet, speeches, op-ed pieces, and so on. Heritage now has established a Center for Data Analysis to break the monopoly on data analysis held by federal agencies like the CBO. Today, when congressional conservatives need numbers crunched on their proposed regulatory reforms, they can come to us for an independent analysis.

Heritage is now directing increased resources to the infamous Kyoto Protocol, the potential costs of which are truly mind-boggling. I would have to give a separate and much longer speech just to summarize the projected costs of that proposal – costs measured in losses of jobs, income, productivity, and national sovereignty.

But, to repeat, I want to emphasize a broader point: Measuring costs will support one kind of argument in a battle that must be fought on many fronts using many kinds and levels of argument. That is why it is important, necessary, and logical for industry organizations like CSMA and think tanks like The Heritage Foundation to work as allies. One area where your attention is needed immediately is comments on the second annual OMB report on the costs/benefits of federal regulation which is out for public comment with a closing date of October 16. I brought a couple of Heritage papers to share with you also.

In fighting mindless and ruinous regulation, the common enemy we face is not some vast conspiracy seeking to destroy America. It is a gaggle of coercive utopians who purport to want to make America a better place. On that point, I would like to leave you with some insightful words written in 1928 by Justice Louis Brandeis:

“Experience should teach us to be most on our guard to protect liberty when the government’s purposes are beneficial. Men born to freedom are naturally alert to repel invasion of their liberty by evil-minded rulers. The greater dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding.”

Ladies and gentlemen, it has been a privilege to address you. I look forward to working with you. Thank you very much.