The Fatal Failure of the Regulatory State
Viscusi, W. Kip
Although regulatory agencies place high values on the benefits associated with the reduction in mortality risks due to regulations, these same agencies substantially undervalue lives in their enforcement efforts. The disparity between the valuation of prospective risks and fatalities that have occurred is often by several orders of magnitude, diminishing whatever safety incentives the regulations might have generated. A review of the practices by the major federal agencies with responsibility for product safety and occupational safety finds that the value placed on fatalities in agencies' regulatory analyses can be a factor of 1000 times greater than the magnitude of the corresponding sanctions that the agency levies for regulatory violations that led to the fatalities. The source of the mismatch between the valuation of prospective risks and fatalities that have occurred can be traced to agencies' dated and restrictive legislative mandates. This Article proposes revisions in these statutes to create more appropriate, stronger safety incentives. Setting the pertinent price to deter excessive risks will also foster corporate risk analyses so long as companies are also provided with pertinent legal protections.