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I I I a I I I I I ~ ~(S) A L E X I S de TOCQUEVILLE I N S T I T U T 1 0 N SCIENCE, ECONOMICS, AND ENVIRONMENTAL POLICY: A CRITICAL EXAMINATION ~ ~ A research report conducted by the Alexis de Tocqueville Institution I I I I I I August 11, 1994

I I a ~ I I I I I I I I I t I I I SCIENCE, ECONOMICS, AND ENVIRONMENTAL POLICY: A CRITICAL EXAMINATION A research report by the Alexis de Tocqueville Institution Academic Advisorv Board Dr. Gary Anderson Professor of Economics California State University-Northridge Dr. Nancy Bord Visiting Scholar The Hoover Institution Stanford University Dr. Gordon L. Brady Associate Professor and Director Environmental Studies Sweet Briar College Dr. Michael Marlow Professor of Economics California State Polytechnic University-San Luis Obispo Dr. Thomas Gale Moore Senior Fellow The Hoover Institution Stanford University Dr. Malcolm Ross Research Mineralogist U.S. Geological Survey Dr. Jeffrey Clark Professor of Economics University of Tennessee-Chattanooga Dr. Michael Darby Professor of Economics and Director J.M. Olin Center for Policy University of California, Los Angeles Dr. Robert Ekelund Lowder Eminent Scholar Auburn University Dr. Michael Gough Project Director Congressional Office of Technology Assessment Dr. William Hazeltine Environmental Consultant Dr. Thomas Hopkins Gosnell Professor of Economics Rochester Institute of Technology Dr. Dwight R. Lee Ramsey Professor of Economics University of Georgia Dr. S. Fred Singer Professor Emeritus of Environmental Sciences University of Virginia and President Science and Environmental Policy Project Dr. Gerhard Stohrer Director of Chemical Risk Program Science and Environmental Policy Project and former Department Head Sloan-Kettering Institute for Cancer Research Dr. Mark Thorton Professor of Economics Auburn University Dr. Robert D. Tollison Duncan Black Professor of Economics and Director Center for the Study of Public Choice George Mason University Dr. Richard Vedder Professor of Economics University of Ohio Dr. Richard Wagner Professor of Economics and Chairman Department of Economics George Mason University ~ ~ ~ -------- --------------- ----------------------- --------------------------- ---------------------------- --------------------------- F"a Note: Affliations are for identification purposes only. Not all members of the academic advisory agreed with Z~ every finding and recommendation in this report. ~ 0 ~ 00

I Author Kent Jeffreys Princinal Reviewer Dr. S. Fred Singer Senior Staff and Contributing Associates Rachael Applegate Bruce Bartlett Merrick Carey Cesar Conda Gregory Fossedal Dave Juday Felix Rouse Aaron Stevens The Alexis de Tocqueville Institution 2000 15th Street North, Suite 501, Arlington, VA 22201 Tel. 703.351.4969 Fax 703.351.0090 I I I I J I I I I I i I 11 I I I

ABOUT THIS STUDY... I I I I I I I t I I I I I I "Science, Economics, and Environmental Policy: A Critical Examination," is an evaluation of the data, statistical analyses, and scientific theories that underlie the Environmental Protection Agency's (EPA) risk assessments of environmental tobacco smoke, radon, pesticides and hazardous substances under the Superfund law. With the total costs of environmental regulations estimated to be $150 billion annually - or $1,500 per U.S. household -- it is extremely important that environmental decisions be based on sound scientific analyses of potential risks to public health and the environment, and that the cost of environmental regulation be weighed against the benefits. But as Dr. John Graham of the Harvard Center on Risk Analysis notes, "While it may seem obvious that EPA should use good science, students of the Agency have documented that the Agency's leadership, when preoccupied with public fears and legal pressures, has sometimes allowed good science to be neglected." Perhaps Sen. Daniel P. Moynihan (D-NY) put it best, "Truth be told, I suspect that environmental decisions have been based more on feelings than on facts." "Science, Economics, and Environmental Policy: A Critical Examination" was researched and prepared by the staff of the Alexis de Tocqueville Institution, and reviewed by an academic advisory board of 19 distinguished scientists and economists from prestigious universities and institutions around the country. The objective of this research is to promote more rational - and perhaps less costly -- environmental regulatory policies through the use of scientifically vigorous risk/cost-benefit analysis. In this regard, the Congress is debating several bipartisan initiatives to upgrade and expand the use of risk assessments and cost-benefit analyses in the environmental decision-making process, including the "Environmental Risk Reduction Act" sponsored by Sen. Moynihan, Rep. Richard Zimmer (R-NJ), and Rep. Jim Slattery (D-KS), and the risk/cost-benefit amendment sponsored by Sen. J. Bennett Johnston (D-LA) and Rep. John L. Mica (R- FL). The Alexis de Tocqueville Institution is a non-profit, non-partisan educational foundation established to conduct, publish, and publicize research on the extension and perfection of capitalism, freedom and democracy in the United States and abroad. For further information, contact Cesar V. Conda, executive director of the Alexis de Tocqueville Institution, 2000 15th Street North, S. 501, Arlington, Va. 22201, Tel: (703) 351-4969, Fax: (703), 351-0090. ------------------------------------------------- Note: Nothing written here should be construed as necessarily reflecting the views of the Alexis de Tocqueville Institution or its directors, or as an attempt to aid or hinder legislation before Congress.

I I I I I I I I I I I I I I I TABLE OF CONTENTS CASE STUDY NO.1: ENVIRONMENTAL TOBACCO SMOKE .................................................................... 1 CASE STUDY NO.2: RADON .................................................................................................... ............................ 15 CASE STUDY NO.3: PESTICIDES .................................................................................................... .................... 33 CASE STUDY NO.4: SUPERFUND .................................................................................................... .................. 45 I

9 I i I I I ~ A A I a ~ I I I ENVIRONMENTAL TOBACCO SMOKE CASE STUDY NO. 1: ENVIRONMENTAL TOBACCO SMOKE Introduction The downward trend of cigarette smoking in America has been going on for many years. By the end of World War II, almost half of all adult Americans were smokers. Today, "fewer than three out of every ten American adults smoke, and this rate is continuing to decline."' (See Figure 1-1.) This downward trend is the result of a combination of factors: greater knowledge of the health risks associated with smoking, increased federal and state taxes, and a general reduction of tolerance for smoking on the part of nonsmokers, among other things. Ironically, as smoking has declined, the federal government has increased its campaign against smoking. Undoubtedly, many view this effort as beneficial to society. However, it now appears that the federal government has gone beyond its traditional anti-smoking efforts, consisting mainly of education and health warnings, and is now moving toward a (de facto) ban on smoking. The vehicle by which this ban may take effect is an Environmental Protection Agency (EPA) study which links lung cancer in non-smokers to environmental tobacco smoke, or ETS, which is also called "second- hand smoke" and "passive smoking." If this were the case, it would be difficult to stop the government from banning smoking in the name of protecting innocent non-smokers. Unfortunately, in its zeal to abolish smoking, science has been sacrificed. The EPA's finding that second-hand smoke is harmful to human health is based on a lower threshold of risk assessment than the agency normally uses for other substances. In short, the EPA study relied on methodologies different from those which have been historically used in such analyses. Scientific standards were seriously violated in order to produce a report to ban smoking in public settings. The EPA's finding that second-hand smoke is harmful to human health is based on a lower threshold of risk assessment than the agency normally uses for other substances. Before the government takes action to ban some substance on the basis of its danger to health, it is extremely important that we know the precise degree of danger based on generally accepted scientific principles. If science is debased in an effort to "do good," society ultimately may be left worse off. There are two reasons for this. First, if we debase the scientific method in pursuit of a political agenda, we are opening a Pandora's Box. Second, the ordinary dangers everyone encounters in everyday life are so numerous that if we do not carefully delineate the government's role in regulating such dangers there is essentially no limit to how much government can ultimately control our lives. The health risk from smoking is not the focus of this paper. Instead, this paper explores the EPA's analysis of ETS or second-hand smoke. By any name, it is a complex and highly variable mixture of substances which diffuse through the air. The Environmental Protection Agency has compiled several studies and reports which examine various aspects of the ETS issue. Two in particular are considered at length in this paper; one examined the respiratory health effects of ETSZ and the other examined the economic consequences of a proposed restric- tion on smoking.3 In brief, EPA makes certain assumptions about ETS which are then used to buttress EPA's scientific and economic conclusions. ~~.

SCIENCE, ECONOMICS & ENVIRONMENTAL POLICY Moreover, the science as presented is insuf- Crossing the Threshold ficient and the economic claims are similarly unsupportable. They will be dealt with in turn. First, we will examine EPA's use of the scientific research surrounding ETS. EPA and the Science of ETS There are certain things about smoking which sound science can demonstrate. For example, active smoking is detrimental to the health of millions of smokers. Nevertheless, EPA has no official role when it comes to regulating smoking. Yet, EPA lately has taken the leading role in publicizing the potential health risks from smoking. According to EPA Administrator Carol M. Browner, "Although EPA has no regulatory authority over tobacco products, it does have a responsibility to inform the public about dangers it finds in the environment.n4 In particular, EPA has gone far beyond its authority in making ETS an "environmental" issue within its regulatory jurisdiction. In the process, it has manipulated both the science and the regulatory process. EPA has gone far beyond its authority in making ETS an "environmental" issue within its regulatory jurisdiction. Admittedly, trying to prove that second- hand smoke carries a measurable risk of lung cancer and determining precisely what that risk is are difficult tasks. It is accepted that smoking is linked to several forms of cancer, particularly of the lungs, and also to heart disease. Similar conclusions about passive smoking, or ETS, should be based upon equally strong scientific evidence. To that end, the EPA has undertaken a review of the scientific literature to determine the effects of ETS on the lungs of nonsmokers. The EPA's major finding was that "ETS is a human lung carcinogen, responsible for approximately 3000 lung cancer deaths annually in U.S. nonsmokers.n5 The question addressed by this section is whether or not that statement is justified. 2 It is well-established that "the dose makes the poison." That is, almost any chemical substance will harm a person's health if administered in sufficiently large quantities. Even substances which are necessary for life itself become deadly at high doses. Unfortunately, the EPA ignores this fact in most of its risk assessments by applying a "linear no-threshold" theory of environmental harm. In essence, the linear no-threshold theory holds that high-dose effects can be extrapolated back to a zero dose without searching for a threshold below which no health effect will be elicited.6 In other words, if it were found that exposure to a given level of some chemical substance caused one death per 100,000 population, then half the exposure would therefore cause one death per 200,000 population, one fourth the exposure would cause one death per 400,000 population, etc. This flawed assumption underpins almost all of the EPA's work on environmental exposures, from the Superfund program to radon in homes to ETS. The EPA claims to discern an "apparent non-threshold nature of the dose-response relationship observed between active smoking and lung cancer."' Even if this were true for active smoking (and, as questionable as that statement is, it is beyond the scope of this paper), it is not automatically valid to reject the possibility of a threshold effect for ETS. For environmental tobacco smoke is not just a lower dose of the substances inhaled by a smoker; important, if poorly researched, chemical changes occur as tobacco smoke is diluted and cooled in the open air. Researchers recognize three principal types of tobacco smoke. "Mainstream smoke" is produced when the smoker draws air through a cigarette, thereby "fanning" the temperature as high as 900 degrees centigrade. Most of the compounds in smoke change as they cool and as they react with the smoker's mouth, throat and lungs. "Exhaled smoke" is not the same as the smoke that was inhaled. "Sidestream smoke" is that which is produced by the smoldering cigarette between puffs. Because the temperature is significantly lower (perhaps 500 to 600 degrees centigrade), different chemical I I I 1 I I J ~ I I I 1 I

9 I I I I t I ~ I I I I ~ t I I compounds (or different amounts) are pro- duced. Together, mainstream smoke,exhaled smoke and sidestream smoke produce environ- mental tobacco smoke, with sidestream smoke accounting for 85 to 90 percent $ The EPA notes that some potentially carcinogenic compounds are present at much higher levels in sidestream smoke than in mainstream smoke. This is a function of the respective temperatures at which various compounds form. Regardless of the composi- tion of sidestream smoke when it is produced, it rapidly undergoes changes, both chemical and in terms of concentration per liter of air. EPA's report recites several distinctions between ETS and mainstream, or even sidestream smoke. The most important distinction arises from the significant dilution of the ETS. In addition, the composition and concentration of ETS is dependent on the number of smokers, their smoking styles, and the number of cigarettes smoked in a given period of time. According to the EPA, for active smoking "A clear dose-response relationship exists between lung cancer and amount of exposure, without any evidence of a threshold level."9 Of course, a strong dose-response relationship does not rule out the existence of some minimum dose below which there will be zero response. Yet the EPA almost never looks for a threshold for any potentially harmful substance. In fact, it is essentially an unofficial EPA policy to deny that thresholds exist for any potentially hazardous substance. As examples, consider EPA's stance on dioxins, radon gas, or pesticide residues in the food supply.1o What is more, the fact that tens of millions of smokers survive their habitwithout developing lung cancer seems to suggest that a threshold exists for each individual, regardless of EPA's assumptions concerning aggregate data. Thus, the statement that no evidence for a threshold exists could easily confuse members of the public. As mentioned earlier, essentially every substance to which humans are exposed is potentially harmful. Many ordinary substances -- common table salt, for instance - are fatal if ingested in sufficiently large amounts. In addition, hundreds of foods in the human diet contain enormous quantities of "natural carcinogens."" Because the human species has evolved the ability to self-repair the damage causedby these naturally occurring substances, ENVIRONMENTAL TOBACCO SMOKE we are also able to repair the similar damage caused by small amounts of other carcinogens, including the ones found in ETS. In the face of this assertion by EPA that no safe threshold exists for active smoking, it becomes important to examine how closely EPA links ETS with mainstream smoke. The EPA's Guidelines for Caminogen Ri.rlcAssesrment (U.S. EPA, 1986) sets out "three criteria that must be met before a causal association can be inferred between exposure and cancer in humans: 1. There is no identified bias that could explain the association. 2. The possibility of confounding has been considered and ruled out as explaining the association. 3. The association is unlikely to be due to chance n12 Under these criteria, one could conclude that mainstream smoke (MS) easily qualifies as a lung carcinogen. However, the EPA asserts that because sidestream smoke is chemically similar to MS and because sidestream smoke is the major constituent of ETS, then by inference ETS is also a Group A carcinogen under the EPA test. However, EPA is well aware that ETS is not identical to mainstream smoke, either qualitatively (chemical makeup) or quantitatively (dose). Nevertheless, EPA seems to adopt the old cliche': "Close enough for government work." In fact, most U. S. studies conducted on ETS and lung cancer have found no statistically significant indications of carcinogenicity. It should be borne in mind that even if ETS is legitimately considered a "known human carcinogen," that does not prove that, at actual environmental exposures, it can or does cause lung cancer. In fact, most U.S. studies conducted on ETS and lung cancer have found no statistically significant indications of carcinogenicity. Many observers have ques- tioned whether EPA's conclusions are justified.13 If this were limited to the question of 3

SCIENCE, ECONOMICS & ENVIRONMENTAL POLICY an internal EPA categorization, it would not be excessively controversial. However, much more is riding on this classification than mere bookkeeping entries. Declaring ETS to be a Group A carcinogen has set in motion a chain of policy events which must ultimately result in widespread federal bans on smoking. To quote the EPA's expressed reasoning in full: The conclusive evidenceof the dose-related lung carcinogenicity of MS [mainstream smoke] in active smokers, coupled with information on the chemical similaritiesof MS and ETS and evidence of ETS uptake in nonsmokers, is sufficient by itself to establish ETS as a known human lung carci- nogen, or"Group A" carcinogen under U.S. EPA's carcinogen classification system.l` Similarly simplistic reasoning has allowed the EPA to publicly fret over almost every suggested cancer risk, from electro- magnetic radiation to artificial sweeteners.ls When its review discovered that existing ZI. S. studies of lung cancer and ETS did not support its position, the EPA arbitrarily reduced the traditional standard of proof, or "confidence interval." Despite the EPA's conclusion that ETS is a Group A carcinogen, it is at the very least arguable that ETS would flunk each separate step of the three-prong test. And it is the EPA's effort to cross the final hurdle that has produced the harshest criticism. When its review discovered that existing U.S. studies of lung cancer and ETS did not support its position, the EPA arbitrarily reduced the traditional standard of proof, or "confidence interval " Only by this manipulation could the EPA claim that its analysis was statistically significant. Why is the concept of statistical significance so important to epidemiological studies? As valuable as these studies can be, there are well-recognized limitations. For instance, no matter how well designed, epidemiological studies can only show correlation, not causation. Only after many studies have found strong correlations covering large populations (as is the case with active smoking and lung cancer) are researchers on firmer ground in asserting direct causation. (Yet even then they may not know the precise mechanism.) Most individual studies, which are expensive and time-consuming, involve only a small number of individuals (or sample size). This reduces the confidence that researchers place in how well the sample population reflects the characteristics of the general population. Epidemiologic studies can test the specific hypothesis, for example, whether ETS is a risk factor for lung cancer. While even well designed studies cannot prove beyond any doubt that a particular substance is the cause of cancer, they can indicate that a particular substance is a potential risk factor. In this case, the EPA assumed -- before it even began its investigation -- that ETS is a risk factor for lung cancer; the very question supposedly being asked. However, the fact that most studies of ETS and lung cancer do not support this assumption is not entirely ignored by EPA, which may suggest that the EPA adopted unique manipulations of the data. Furthermore, the EPA does not utilize the appropriate "two-tailed" analysis of whether ETS causes lung cancer. In a two-tailed test, a specific assumption is made, for example, that ETS has an effect on human health. (The two "tails" refer to the fact that the hypothesized effect may be harmful or beneficial: the evidence may point in either direction.) In addition, if ETS were found to have no measurable effect either way, that would be called the "null hypothesis " In its examination of ETS, however, the EPA utilizes a "one-tailed" test. That is, the EPA makes the assumption that ETS cannot stimulate the human immune response and thereby produce lower rates of lung cancer than would exist in the absence of exposure. However, several American studies examined by the EPA leave open this very point. Indeed, of the 30 studies considered for inclusion in the EPA report, "six found a statistically significant (but small) effect, 24 found no statistically significant effect, and six of the 24 found a passive smoking effect opposite to the expected relationship."16 Worse perhaps, the EPA goes further and rejects the possibility of any null hypothesis: J I ~ I I I I I ! I I F-+ ~. ,id~ 00 C 4 ~ ' '>RCJt