If you want to find out what can be learned about environmental policy from excellent fundamental research, read Calculating Risks by James T. Hamilton and W. Kip Viscusi. In contrast, the debates over environmental policy are often muddled by poor empirical work; politicians and newspapers use the "telling" anecdote; and many public policy writers on environmental topics throw together bits of data from some standard sources and then perform statistical analysis, much of which suffers from aggregation biases and inadequate data.

Hamilton and Viscusi decided to dig deep and collect the kind of data needed to make an assessment of the effectiveness of environmental policy. They study the Superfund, which has been established to clean up hazardous-waste sites around the country. They start with Environmental Protection Agency (EPA) documents that describe the hazardous waste and the nature of the dangers in more than two hundred sites around the country. They then match that information with data on socioeconomic factors in the same areas. In some case studies, they collect housing prices to allow them to examine the impact of the Superfund sites on housing values. Finally, they develop information about the political and economic forces that might influence EPA decisions about cleaning up various sites. Originally a series of articles that went through the peer-review process and were published in some of the leading economics and public-policy journals, Calculating Risks can be understood by policymakers, yet it contains enough dense material to ensure that strong-willed and avid students of political economy can examine exactly how Hamilton and Viscusi came to their conclusions. The result is an excellent political-economic analysis of Superfund.

One caveat is necessary. The discussions of the compensating differentials in labor and real-estate markets seem to assume that the full value that people place on avoiding risk is reflected in the estimated compensating differentials. That assumption is problematic because it presumes that information costs are low and that markets are essentially frictionless. More likely, the compensating differentials give a lower-bound estimate on how people evaluate the risks. My best guess is that in most cases the compensating differentials may understate the buyer's actual value of a statistical life by about 20 to 30 percent. Even if understated as much as 75 percent by the compensating differentials, however, the true value of a life would still be only in the $20 million range. Still, in many cases, the Superfund is paying far more than $20 million to reduce the risk of a statistical death.

Anyone interested in environmental policy needs to take a long, hard look at Calculating Risks. In places, the analysis is somewhat dense for the noneconomist, but in both the introduction and the conclusion of each chapter, the authors do a good job of explaining their results and the significance of what they have discovered. Some readers might quibble with certain specific interpretations, but my sense is that such quibbles will not influence the overall effect of the book. Hamilton and Viscusi have put together a truly impressive set of evidence, and they have painstakingly analyzed the operation of the Superfund. I doubt that one could find a better analysis in any other source.

The analysis is also fair-minded. The authors are not cranks tilting the data and the analysis to conclude that the Superfund should be eliminated. Instead, they focus on trying to find ways to make the program more effective. The EPA could save a similar number of lives at much lower cost if the EPA were allowed to follow an alternative strategy for choosing where and when to clean up hazardous waste. Further, the funds saved by the change in EPA policy could be used to save more lives in other areas. Of course, there is no guarantee that reducing the spending on the Superfund would lead to greater risk-reduction spending elsewhere. After all, one of the key lessons of the book is that political pressures can sway agency decisions in ways that are not always consistent with the stated goals of their projects.

This work provides an excellent overview of the field of regulation from an economic point of view. The primary focus is economic rather than institutional -- as a result it is more appropriate for economists than for legal scholars. Although the book does not require extensive training in economics, it does assume some formal knowledge of basic economic concepts. Since its focus is economic, little time is spent discussing legal cases surrounding many of the regulations compared with, for example, Law, Business, and Society, by McAdams, et. al.

This collection of seven essays taken from the _J._of_Risk_and_Uncertainty_, defends the rather self-evident notion that increased regulation does not automatically benefit the public. Rather, the essays provide mortality comparisons, coupled with statistical data to evaluate the impact of regulatory distortion in the economy.

Some terminology in these essays could have benefited from clearer definitions. In fairness, the essays are gleaned from a specialized journal geared to a narrow audience. Nonetheless, a glossary to distinguish between risk-risk analysis, health-health analysis, benefit-cost analysis and cost-effectiveness analysis used to evaluate comparative risks would have been helpful. Even the Lutter/Morrall essay, which distinguished willingness-to-spend and willingness-to-pay, was replete with acronyms. Unexpectedly, the Viscusi/Zeckhauser essay used italicized characters for vectors and matrices rather than bold typeface (contrary to its usual representation in mathematics), but also presented what for me was a novel idea of comparing industries not solely on the fatalities resulting from their operations, but also on the fatalities related to input and output. For example, power generation may be relatively safe, but the coal burned must be provided from the mining industry, which is much more hazardous. The reader may develop an agreeable or skeptical reaction depending on the reasonableness of the data. The numbers, at first glance, do not strain credulity, although a more thorough understanding of sources for data might lend more confidence. However, I remain unconvinced of the economic comparison between injuries and fatalities, not because of the assertion that injuries have a greater aggregate economic effect than fatalities but because the societal concern that death may present a far more severe disruption in a household than a much larger number of recoverable minor injuries to many families. This represents a social decision to establish a higher priority on preventing accidental death than in avoiding morbidity based on acceptable norms established by informal consensus. That this may result in economic inefficiency does not seem sufficient reason to abandon such priorities.

The most rewarding essay for myself was by Keeney on mortality risks. Keeney illustrated the hazards to ordinary people (as opposed to bureaucrats who may benefit from increased regulation) of regulation-induced cost increases that may cause increased unemployment or reduced purchasing power. People must then prioritize purchases with fewer economic resources -- and so decisions such as driving on bald tires may increase risk as a consequence of having less money to purchase new ones. The hypothetical example presented might have been amusing but for the inanity of power seekers: a requirement that all individuals in automobiles wear a motorcycle-style helmet. A few might survive otherwise fatal accidents. Others might suffer collisions due to degraded hearing or vision while driving. The helmet industry would temporarily surge, at the expense of other industries that would suffer eroded customer purchasing power. Keeney pointed out that the consequences of an industry failing from regulatory burden are imposed on a small segment -- those employed in the industry. Thus socialization of risk may be reversed, allegedly benefiting many at the expense of a few: a risk allocation scheme by a tyranny of the majority. This disproportionate effect is further described in Portney/Stavins. In another essay, the claim that wealth and increased longevity being statistically linked may indicate a causal connection was asserted by Chapman/Hariharan.

While the prose seems dense at times, most of the arguments are competently presented. Knee-jerk big-government liberals unlikely to find much appealing in this slim volume, but CATO institute members may be attracted to the rather dry but salient arguments made therein.