Benefit-Cost Analysis Under Threat

The Trump Administration is underweighting the value of human health in benefit-cost analysis.

As Cass Sunstein famously argued in a book published almost 25 years ago, the modern administrative state has become, in important respects, a benefit-cost state. Although benefit-cost analysis was once criticized as a deregulatory tool that would systematically disfavor environmental, health, and safety regulation, experience has increasingly shown otherwise.

Scholars such as Richard L. Revesz and Michael A. Livermore have documented how benefit-cost analysis can and should be used to support, rather than undermine, protective regulation. At the same time, I have argued that judicial review doctrines have reinforced this shift by demanding reasoned explanation and engagement with the administrative record, making rules supported by high-quality analysis more difficult to undo and helping stabilize rulemaking in predictable ways.

Most importantly, the practice of benefit-cost analysis has been reinforced by decades of bipartisan presidential agreement, embodied most prominently in Executive Order 12,866, and by judicial opinions linking administrative rationality to attention to costs and benefits.

Without formally rescinding Executive Order 12,866, President Donald J. Trump is nevertheless attempting to dismantle that consensus in practice. The most striking recent manifestation is a decision by the U.S. Environmental Protection Agency (EPA) to stop assigning monetary values to health benefits associated with reducing emissions of fine particulate matter and ozone. Contrary to EPA spokespersons’ assurances, this move has the predictable effect of undervaluing these health benefits and making it impossible to make meaningful comparisons across rules with different levels of stringency and compliance costs. It also represents a sharp break from longstanding executive-branch practice under Executive Order 12,866 and Office of Management and Budget (OMB) guidance, both of which treat reductions in mortality as essential regulatory benefits. The decision sits uneasily with judicial decisions emphasizing that reasoned decision-making requires agencies to account for important aspects of a problem and evaluate costs and benefits in an evenhanded way.

This move did not come out of nowhere. Early in the current Trump Administration, Executive Order 14,154 disbanded the interagency group responsible for developing estimates of the social costs of greenhouse gases, withdrew its prior estimates, and explicitly attacked the scientific and legal legitimacy of using the estimates in regulatory analysis to value reductions in greenhouse gas emissions. At the same time, executive-branch guidance sought to reframe benefit-cost analysis to promote deregulation. A recent OMB memo, for example, encouraged agencies to circumvent analysis and public scrutiny as well as emphasize various additional difficult-to-quantify benefits of deregulation.

But this new move is particularly concerning. For environmental, health, and safety regulation, the most valuable benefits are health outcomes in terms of lives saved and illnesses avoided. For decades, agencies across administrations have relied on a broad consensus regarding the valuation of mortality risk reductions, grounded in the “value of a statistical life.”

That consensus draws heavily from the “revealed preference” labor literature pioneered by W. Kip Viscusi and others, and it has been repeatedly endorsed by OMB and consistently used by agencies such as EPA and the U.S. Department of Health and Human Services. Although estimates vary, the underlying methodology and its relevance to regulatory decision-making have not been seriously contested within mainstream economics.

Furthermore, the link between environmental regulation and health benefits is not speculative. A large empirical literature documents a strong relationship between pollution exposure and mortality and increased morbidity. The biological mechanisms—fine particulate matter and ozone affecting cardiovascular and respiratory systems and exacerbating pulmonary disease—are widely accepted.

The Administration cites no new scientific evidence, no methodological breakthrough, and no flaw in the existing literature that would justify not monetizing these health benefits wholesale. Instead, the Administration refers to general uncertainty, which, while true and unavoidable, is unpersuasive because as Alan Krupnick noted, “costs are uncertain, too.” And the answer, as Susan Dudley has explained, “is not to stop quantifying the health effects altogether.”

The Administration’s public defense of this shift obscures and misrepresents the real implications of this change. An EPA spokeswoman confirmed that even though the agency is “no longer assigning” health benefits “a dollar value in cost-benefit analyses,” it is “still considering the health effects of fine particulate matter and ozone.” But she asserted that this change would not lead to undervaluation, saying that “dollars and cents don’t define” these benefits’ worth. Previously, another EPA spokeswoman asserted the same.

But for anyone familiar with the history of benefit-cost analysis, that reassurance fails. In benefit-cost analysis, refusing to monetize large and important benefits is not a neutral choice. It predictably diminishes their weight relative to monetized costs and makes regulation appear less justified by design. Agencies know this. Courts know this. That is exactly why administrations of both parties have spent decades developing methods to monetize health benefits where feasible, rather than excluding their estimated value from calculations. And frankly, the Administration knows this as well. Industry groups have for years pressed EPA to scale back the role that monetized health benefits play in regulatory justification.

This approach echoes earlier efforts during the first Trump Administration’s term to discount regulatory benefits by questioning data availability or transparency of the underlying scientific studies. Now, the claim is that the benefits will be considered but not counted or presented in ways that matter in benefit-cost analysis. In both cases, the effect is the same: to weaken the justification for regulation without confronting the science or economics directly.

Assigning a dollar value to mortality risks from air pollution remains the most effective way to translate scientific evidence about the harms of air pollution into monetary terms that reflect society’s demonstrated willingness to trade resources for risk reductions, using well-established scientific and economic methods. In short, it shows how much these reductions matter. Calls for greater transparency about point estimates and uncertainty ranges are one thing. Abandoning monetization altogether without rejecting the underlying economics or offering a substitute framework predictably weakens regulatory stringency and risks imposing net social costs by hiding benefits that would otherwise justify more protective rules.

At this point, the response of courts and the public is essential. Courts need not decide whether a regulation is worth its costs. But they should insist on analytical integrity, evenhanded analysis, and disclosure of available information, as Viscusi and I have long documented them doing. Wholesale refusal to monetize the most consequential benefits of regulation looks very much like a failure to consider an important aspect of the problem, a fundamental principle of the rational decision-making required by the Administrative Procedure Act.

A President may choose a policy that reduces health or increases mortality risk relative to the status quo. But if one does, that choice should either be supported by sound benefit-cost analysis or be made openly for other reasons, with the tradeoffs owned politically. What should not be tolerated is the hollowing out of analysis to mask that choice behind the language of rationality and science. That path collapses the enterprise of benefit-cost analysis itself, transforming a tool designed to improve governance and promote transparency into one that conceals the true motivations and effects of policy choices. As a former president of the Society for Benefit-Cost Analysis, I will not remain silent while that transformation is attempted.