Partial Valuation in Cost-Benefit Analysis

Abstract

The National Highway Traffic Safety Administration (NHTSA) is considering promulgating a rule to increase rearview visibility in vehicles—a rule intended to reduce backover crashes, which occur when a vehicle moving in reverse strikes a pedestrian or a cyclist, and which kill hundreds and injure thousands of people a year. In performing a cost-benefit analysis of the proposed rule, NHTSA has refused to monetize many of the most emotional impacts of the rule, including the fact that many of the victims of backover crashes are small children. Without including these impacts, the monetized costs of the rule far exceed the monetized benefits.

This Article argues that treating these effects of the rearview rule as nonmonetizable assumes that people are willing to pay no money to secure those effects, and that it is therefore likely to lead to significant undervaluation of the amount of money people are actually willing to pay for the regulation. Regulators are often averse to attempting to monetize the nonmonetary effects of regulations, particularly when those effects are deeply emotional, as they are whenever regulation touches upon the death of small children. Insofar as this hesitation to monetize stems from concern about the incommensurability of money and other goods, it should cease immediately. Incommensurability does not necessarily preclude partial valuation, or the partial expression of a good’s value in terms of another good. Even something as horrific and emotionally laden as the death of a child can therefore be partially valued in monetary terms—so long as people are willing to pay money to prevent the event from occurring. Emotional goods like these are difficult to think about, and even more difficult to monetize, but refusing to monetize them at all is not a reasonable solution.

Keywords: cost-benefit analysis, valuation, rear-view camera rule, VSL, VSLY, incommensurability, OIRA, agency review, child mortality