Water in D.C. Exceeds EPA Lead Limit reminds me of something else from a subscriber-only article in the Economist:

...common sense gets you only so far when dealing with risks to safety, security and health. How far, for instance, should a government go to save lives by reducing everyday hazards? Life is priceless, of course, especially when it is yours or a loved one's. Yet governments have budgets and must try to weigh costs and benefits. If a life can be saved for a few thousand dollars, that sounds like money well spent. But what if the cost is $100m?

According to Kip Viscusi of the Harvard Law School, the price that Americans put on a life is around $7m. He has researched what people are willing to pay to reduce the risk of death at their place of work and how much money they will accept to compensate them for an increased risk of dying on the job. By cross-analysing data from many surveys, he says, it is possible to discover the value people put on avoiding the loss of a life. Different countries, it seems, have different preferences (see chart 2). The Japanese, perhaps true to their reputation of being risk-averse, put a price of almost $10m on each life, whereas the Taiwanese seem to be satisfied with a modest $600,000. In general, as countries get richer the price of a life goes up: by 5-6% for every 10% rise in income per head, according to Mr Viscusi.

A country's rule book should reflect its people's preferences, but John Morrall, an official at America's Office of Management and Budget, noted 20 years ago that many regulations fail a basic cost-benefit test. He has just updated his analysis by looking at 76 American regulations for the period from 1960-2001, and has found that government is still doing a poor job. Only just over half the regulations he studied were “cost-effective” as defined by saving a life at the cost of less than $7m, and some were vastly more expensive. In itself, that may not be a bad thing: people may well decide to spend a lot more to protect themselves from particularly nasty deaths, and less to prevent deaths that result from voluntary risk-taking. The problem comes when inefficient regulation is promoted at the expense of the thriftier sort.

According to Mr Morrall, environmental regulations, such as restrictions on hazardous waste and other kinds of pollution, generally cost over $1 billion for every life saved, often much more (see table 3). The cost of such regulations, many of them designed to reduce the use of substances that cause cancer, is far higher than the results seem to justify.

On the other hand, fairly cheap measures can produce big benefits. In America, simple precautions, such as requiring cigarette lighters to be child-proof or reflectors to be installed on heavy lorries, have proved especially cost-effective. Disappointingly, many measures that could save lives at low cost are still waiting to be introduced. These include reducing some types of fats, such as trans fatty acids, in foods (each life saved would cost only $3,000), or installing defibrillators in workplaces to treat cardiac arrests.