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'Astrologers have been placed on earth to give economists credibility' [Anon]
Mikhail Gorbachev, in announcing his policies of glasnost and perestroika, confirmed to the world that the USSR was in a mess. It was unable to keep up with the rapid pace of technical development in the west. An environmental catastrophe was unfolding, manifest most visibly in the explosion at Chernobyl. There were widespread signs of social breakdown.
How had a country that had once achieved so much got into this state? A major factor was the dogged pursuit of an ideology that flew in the face of common sense and empirical evidence.1 This ideology permeated all aspects of society including science. Soviet science rested heavily on beliefs that had only the most tenuous association with empirical evidence. Assertions were made according to a tortuous logic that defied comprehension. Anyone who dared question this orthodoxy was ignored or worse. In biological matters, Lysenko ruled. The few areas of success, such as weapons programmes, often drew extensively on ideas copied from the west.
Today the former countries of the USSR are progressively disposing of the Soviet model of science, though it remains influential in some quarters. Unfortunately, in the USA, the only remaining superpower, we are seeing ideological distortion of science in a new form. The degree to which the scientific agenda is coming under the influence of neoconservatism has been deplored by the American Union for Concerned Scientists2 and the Congressional Committee on Government Reform.3 Essentially, this new ideology seeks to employ science in the interests of the religious right and large corporations. The methods vary but an important element is the use of economic assessment to challenge any legislation considered to act against these interest groups, a prominent target being regulations to protect the environment from the effects of polluting or hazardous industries. At the forefront of these efforts has been the Office of Management and Budget, a government body that has long had the right to review the work of federal regulatory agencies such as the Environmental Protection Agency but which, until the presidency of George W Bush, had rarely done so. Since 2000 this Office has taken on a new lease of life, using cost-benefit analysis to challenge proposed and existing regulations that are seen as damaging to the interests of business.
The methods used in economics are often perplexing to those from other disciplines, even if the results look simple (for example, policy A costs £x to save a life, policy B costs £2x to achieve the same result, therefore policy A must be the correct one to adopt). The contrast between the simplicity of the result and the complexity of the methods is such that most of us are prepared to accept unquestioningly what the 'expert' economists tell us. In their book Priceless,4 Ackerman and Heinzerling set out, in a remarkably clear way, just why we should not accept what we are told. Examining the stance of some Washington economists, who invariably find the costs of regulation huge and the benefits negligible, they show in example after example why many of the central tenets of contemporary economic evaluation are built on sand.
They begin by challenging the basis of cost-benefit evaluation, reminding us of the principle established by the Vilfredo Pareto (an economist who provided inspiration for Italian fascists in the 1930s). Pareto argued that society derived a net benefit where one person gained as long as everyone else was no worse off. Superficially, who could disagree? Yet what if society wants to do something that would improve the lot of the overwhelming majority of the population, such as remove lead from petrol, but would cause a loss to a few, in this instance the manufacturers of lead additives? Acceptance of this principle makes it almost impossible to change the status quo.
A second target is the public perception of the scale of government regulation—an issue that is especially relevant in the USA where a substantial proportion of the citizenry believe themselves entitled, in some circumstances, to take up arms against the Federal Government.5 Many of the frequently cited costs, they show us, are based on regulations that have never been proposed, let alone implemented. The mythology thus created provides fertile ground for policies promoting deregulation or, as expressed in the UK, a 'bonfire of red tape'.
They then engage with a series of technical issues. One is the way in which a value is placed on human life. A widely adopted approach is to take a job where there is a degree of risk that can be quantified (in reality guestimated) and combine this knowledge with information on the additional income earned by someone who agrees to do this job. A key assumption is that those who undertake hazardous jobs fully understand the risks and can make informed choices—a notion that lacks plausibility when we think about illegal Hispanic migrants exposed to pesticides on US farms. The authors show how the figure that emerges differs strikingly according to whether you are black or white or male or female. This provides strong justification, they note, for taking toxic waste from rich countries and dumping it in poor ones—as was once proposed by a chief economist at the World Bank. The Brazilian Secretary of the Environment appropriately replied: 'Your reasoning is perfectly logical but totally insane'.
A related issue is how to value human suffering. In a study of the economic impact of removing arsenic from drinking water, researchers used a method known as 'willingness to pay' to quantify how much people valued not having bladder cancer. They were not deterred by the absence of data since they had information on what people in a shopping mall in North Carolina thought about bronchitis. Except that it was not that simple. Individuals were asked about how much lower the cost of living in a community with a high risk of bronchitis would have to be for them to be indifferent between living there or in one with a lower risk. Only two-thirds understood what was being asked of them and the investigators then rejected a further one-third of responses deemed to be 'inconsistent' or 'irrational'. The researchers ignored the fact that bladder cancer and bronchitis are different diseases. Still, as Lewis Carroll noted, if you have done six impossible things before breakfast6 what difference does another one make? The net effect is to show that the value placed on suffering is so low that it can be essentially ignored.
A further issue relates to how to deal with costs and benefits that occur in the future. We all like to enjoy a benefit today and postpone the costs until later, and this natural inclination has given rise to the practice of discounting, whereby future benefits are reduced in value while costs incurred now retain their full value. Thus, the value of a year of life lost at age 70 to a child who is now three would be 0.9 of a year, at the conventional 7% discount rate. With judicious use of this technique it is easy to show that a regulation that would save the lives of fifty 3-year-olds is really equivalent to a present value of only 35 children, each with a present value of life expectancy of only 14 years.
Priceless is replete with other problematic issues, including how to value the environment or wildlife (how much is it worth to us that whales are not driven to extinction?) and the quantification of risks that cannot be known (a point illustrated by the low estimates of potential deaths made by some economists in their quest to reduce the cost of airport security before 11 September 2001). The logic of cost-benefit analysis is applied selectively and is seldom applied critically to policies that favour corporations. So is there an alternative? Ackerman and Heinzerling do offer a different way forward. First, a holistic approach is preferable to an atomistic one in which each decision seems reasonable yet the conclusion is ludicrous. Second, we should recognize moral imperatives; some things simply must be done. Third, they accept the precautionary principle: where the range of possible risks is large, assume the worst. And their fourth recommendation is to promote fairness—both between rich and poor and across generations. They show how, taken together, these strategies might make the world a better place.
The neo-conservative economists in Washington have constructed a paradigm that has about as much rational basis as alchemy or astrology. The tragedy is that they now have a direct line to politicians who, if not acting as fronts for the large corporations onto whose boards they will migrate effortlessly upon leaving office, are so gullible that they believe this nonsense.7 And this collective madness is not confined to Washington; many examples can currently be found in the vicinity of Downing Street.
Although many of the examples cited in Priceless relate to the environment, most are equally applicable to the health sector. The book thus represents a strong argument for health professionals to get trained in economics, so that they can understand and challenge erroneous assumptions. Soviet scientific ideology contributed substantially to the catastrophes that afflicted health and the environment in the USSR in the 1980s. If the economic ideology in Washington continues on its present course, the USA is unlikely to escape a similar fate.8