Unquantified Benefits and Bayesian Cost-Benefit Analysis

Author: 
Jonathan S. Masur
Author: 
Eric A. Posner

As the last act of its 2014-2015 Term, the Supreme Court struck down a major EPA regulation limiting mercury emissions from electrical power plants. The formal legal reason was EPA’s failure to consider the costs of regulating mercury before deciding that it must be regulated. But the costs of the regulation — $9.6 billion — would not have attracted such attention if they had not seemed so disproportionate to the regulatory benefits. The only mercury-related benefits that EPA could measure and include in its analysis related to the possibility that mercury exposure would slightly reduce the IQ of the children born to women who consumed fish high in mercury while pregnant. Against $9.6 billion in costs, EPA calculated only $5 million in benefits — a ratio of 1,920 to 1. The imbalance in this ratio had a significant impact upon the court. As Justice Scalia wrote for the majority in Michigan v. EPA, “One would not say that it is even rational, never mind ‘appropriate,’ to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits.”