The young, the old, and the economists: rethinking how agencies account for age in cost-benefit analysis.

Abstract

Federal agencies count all fatalities prevented by regulation as having the same value for the purposes of cost-benefit analysis, making no adjustment for the age of the person saved. This uniform valuation is guided by empirical studies that find that the young are not willing to pay more than the elderly for small risk reductions in private markets. This Note argues for a different approach. It proposes that agencies take account of a previously ignored body of "public choice" research that finds that most individuals think government should adopt lifesaving programs that benefit the young over those that benefit the old. These data illustrate a divergence between people's private and public preferences. While the economic theory that guides current agency practice prioritizes the former over the latter, this Note argues that it should be the other way around. The Note maintains that public choice data reflect a wider range of societal commitments than individual willingness-to-pay metrics, and therefore that the use of public choice data could help agencies satisfy their mandate under Executive Order 13,563 to engage in broader forms of analysis. The Note also posits that public choice data actually provide a better guide to the welfare consequences of prioritizing lifesaving regulations for different age groups than do individual willingness-to-pay data. It accordingly recommends a new system of age adjustment based on public choice results.