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Economics

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a guide to

the literature

Stephen F Weber

Barbara C Cassard

Center for Building Technology

National Engineering Laboratory

National Bureau of Standards

Washington DC 20234

NBSIR 80-2015

April 1980

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National Engineering Laboratory

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NBSIR 80-2015

ECONOMICS APPLIED TO STANDARDS:

A GUIDE TO THE LITERATURE

Stephen F. Weber

Barbara C. Cassard

Center for Building Technoloyg

National Engineering Laboratory

National Bureau of Standards

U S. Department of Commerce

Washington, D C. 20234

April 1980

Issued May 1 980

Sponsored by

Office of Engineering Standards

National Engineering Laboratory

and

Planning Office

Office of the Associate Director for

Programs, Budget, and Finance

U.S. DEPARTMENT OF COMMERCE, Philip M. Klutznick, Secretary

Luther H. Hodges, Jr., Deputy Secretary

Jordan J. Baruch, Assistant Secretary for Productivity, Technology, and Innovation

NATIONAL BUREAU OF STANDARDS. Ernest Ambler, Director

PREFACE

At the request of the Office of Standards Information, Analysis, and

Development (OSIAD) of the National Bureau of Standards (NBS), a search of

available literature on Benefit-Cost Analysis applied to standards was initiated in June 1978 by the Applied Economics Group of the NBS Center for Building Technology. This search covered case studies involving the evaluation of

specific standards as well as literature on those segments of economic theory

and methodology which could have direct application to standards evaluation.

A preliminary draft of the results of this search was produced in November

1978. Additional funds were sought and obtained from the NBS Planning Office

in order to complete the project. As a result, the subsequent issues of the

Journal of Economic Literature were searched, and the relevant entries found

in the 1978 search of the National Technical Information Service computer file

were included along with a number of works suggested by the reviewers of the

preliminary draft. In addition, extensive revisions were made to the annotations accompanying each bibliographical entry, the introduction and overview

of the major findings provided in Part I were considerably revised and expanded,

and an author index was added.

According to the Office of Management and Budget guidance on the FY 1979

NBS budget, "... NBS should conduct research and analysis to ... assess the

economic impact of standardization." When economic analysis plays a role in

the development and adoption of standards, more cost-effective decisions are likely to be made. Yet the useful literature on how economic analysis can

be applied to standards is widely scattered and difficult to identify. Hence

this guide will be useful to NBS researchers as well as to others interested

in the standards area.

The authors would like to thank OSIAD and the Planning Office for sponsoring this project. Dr. Carol Chapman Rawie, formerly of OSIAD, was very helpful

in providing guidance and sharing the results of her past research in the area. In addition, the authors are grateful to Dr. John S. McConnaughey for making

available his unpublished bibliography on the valuation of human life. In the

initial stages of this project, Elsie Cerutti provided invaluable technical

assistance in conducting the computerized literature search. Also deserving

special thanks are Bruce E. Thompson for editing several annotations,

Anne S. Bretzfield and Stephen J. Roberts for finding a number of the entries,

and Mary L. Rams burg for typing the manuscript. For providing useful comments

during the review process, the authors are grateful to Robert G. Atkins,

Dr. Belinda L. Collins, Dr. Kenneth F. Gordon, Dr. Harold E. Marshall,

Dr. John S. McConnaughey, Brian C. Pierman, Dr. Carol Chapman Rawie, and

Dr. Mary Ellen Weber.

iii
ABSTRACT

This report provides a guide to the available literature on the application

of economics to the analysis of standards and standardization. One hundred

eighty-nine relevant articles, reports, and books were found and organized into

four major categories of interest: (1) General methods of economic evaluation;

(2) Economics useful for standards analysis; (3) Evaluation of specific developed standards; and (4) Economics applied to the development of standards.

The significant findings within each of these categories are briefly discussed

in the text. The annotations which accompany the bibliographical entries provide more detailed information. The text includes a discussion of the approach

followed in the literature search. An author index is also provided.

Key Words: Benefits; benefit-cost analysis; benefit-risk analysis;

bibliography; costs; economics; evaluation; literature search;

regulation; standards; standardization.

iv
TABLE OF CONTENTS

Page

PREFACE iii

ABSTRACT iv

PART I: INTRODUCTION AND OVERVIEW 1

1. Purpose and Scope 1 2. Approach and Organization 1 3. Overview of Annotated Bibliography 4

PART II: ANNOTATED BIBLIOGRAPHY 12

1.0 GENERAL METHODS OF ECONOMIC EVALUATION 12

1.1 Benefit-Cost Analysis for Private Decisions 12

1.2 Benefit-Cost Analysis for Public Decisions 14

1.3 Benefit-Risk Analysis 19

2.0 ECONOMICS USEFUL FOR STANDARDS ANALYSIS 23

2.1 Economics of the Standards System 23

2.2 Economics of Regulation 31

2.3 Economics of Safety and Health 37

2.4 Valuation of Human Life 44

3.0 EVALUATION OF SPECIFIC DEVELOPED STANDARDS 50

3.1 Safety and Health Standards 50

3.2 Environmental Standards 58

3.3 Other Standards 64

4.0 ECONOMICS APPLIED TO THE DEVELOPMENT OF STANDARDS 73

4.1 Fire Standards 73

4.2 Energy Conservation Standards 76

4.3 Other Standards 80

AUTHOR INDEX 84

v

PART I: INTRODUCTION AND OVERVIEW

1. Purpose and Scope

The purpose of this report is to offer a guide to the available literature

on how economic analysis can be and has already been applied to the evaluation

of standards. Guidance is provided by identifying 189 relevant works and

organizing them into 13 distinct subcategories so that the reader can locate

sources of interest by subject matter. Further guidance is given through the

annotations which summarize the approaches and major findings of each entry.

In addition, an author index is available at the end of the report to assist

the reader in finding specific references.

The works identified here include case studies involving the evaluation of

specific standards as well as literature on those aspects of economic theory

and methodology that are relevant to the evaluation of standards. In the case studies, many different types of standards are evaluated. Some are mandatory

standards issued by a regulatory authority, while others are voluntary standards

developed and adopted by an industry, trade, or professional association. These

standards address such public policy issues as environmental control, occupational and consumer product safety, fire hazards, and energy conservation, as well as such directly commercial concerns as efficient performance, reduction

of unnecessary size variation for materials and parts, and improved accuracy of

measurements

The studies involving the economic evaluation of specific standards were

found to follow either of two basic approaches: (1) evaluation of a single form

or level of a proposed or existing standard; or (2) evaluations of alternative

forms or levels as part of the standards development process, in order to help

decide on the nature of the final standard. Although most evaluations are con- ducted for only a single version of a standard, considerable effort was made in

this survey to find studies in which economic analysis was used in a standard’s

development to help choose among alternative versions of the same standard.

Several interesting examples of the latter type were found.

Those areas of economic theory and methodology relevant to standards analysis include benefit-cost analysis for public and private investment decisions,

benefit-risk analysis, the economics of safety, economic theories of (non-price)

regulation, and methods to value human life.

2. Approach and Organization

The literature search was initiated by examining sources previously collected by the Office of Engineering Standards on the subject of voluntary

standards and product certification. These sources have since been listed in

Chapman, Bibliography on the Voluntary Standards System and Product Certification , NBSIR 79-1900, October 1979. A number of studies in this collection

address economic issues and proved useful in suggesting other sources of

information on economics applied to standards.

The Journal of Economic Literature , published by the American Economic

Association, was also searched for references on economic theory relevant to

1
standards analysis. This quarterly journal surveys almost all of the

significant economic and related journals, gives the tables of contents of

all current issues, indexes articles by author and by subject category, and

provides book reviews and article abstracts for the most noteworthy items.

Although the subject category scheme does not have a specific heading devoted

exclusively to the economics of standards, there are two categories which

appear to cover the topic quite well. These are Category 613, "Public

Utilities and Government Regulation of Other Industries in the Private Sector,"

and Category 920, "Consumer Economics; Levels and Standards of Living." A

search was conducted of these two categories in the journal issues covering

the past five years.

The National Bureau of Standards Library has available a useful computerized

literature searching service, called DIALOG Information Retrieval Service.

Four of the most promising data files accessible through this service were selected to be searched. A description of these data files in terms of

subject coverage, type of documents included, and time period covered, follows.

PAIS INTERNATIONAL covers the whole range of the social Sciences with

emphasis on contemporary public issues and the making and evaluating of public

policy. Worldwide in geographic scope, it lists publications in English,

French, German, Italian, Portuguese, and Spanish. PAIS INTERNATIONAL is

the machine-readable version of two hard copy indexes: PAIS Bulletin and

PAIS Foreign Language Index . This computerized file provides broad coverage

of the social sciences, including the following subjects relevant to the

present study: (1) Economics; (2) Business; (3) Government; (4) Public

Administration; and (5) Public Policy. PAIS INTERNATIONAL provides access

to periodical articles, books, pamphlets, and Federal, state, and local

government documents, as well as publications of public and private agencies,

yearbooks, and directories published throughout the world. It indexes over

1,200 journals and 8,000 monographs per year. The PAIS Bulletin index

begins in 1976, while the Foreign Language Index goes back to 1972.

SOCIAL SCISEARCH is an international, multidisciplinary index to the

literature of the social, behavioral, and related sciences. This data base

is prepared by the Institute for Scientific Information and corresponds to

the printed Social Science Citation Index. SOCIAL SCISEARCH provides coverage

of the most important worldwide social sciences literature. The relevant

subjects covered by SOCIAL SCISEARCH include the following areas: (1)

Communication; (2) Demography; (3) Law; and (4) Political Science. SOCIAL

SCISEARCH indexes all significant items (articles, reports of meetings, letters,

editorials, correction notices, etc.) from the 1,400 most important worldwide social sciences journals. Additional articles relevant to the social

sciences are selected from 2,400 journals in the natural, physical, and

biomedical sciences. The index covers material from 1972 to the present.

COMPREHENSIVE DISSERTATION ABSTRACTS is a definitive subject, title, and

author guide to virtually every American dissertation accepted at an accredited

institution since 1861, when academic doctoral degrees were first granted in

the United States. Approximately 99 percent of all American dissertations

are cited in this file. In addition, it serves to disseminate citations for

2
thousands of Canadian dissertations and an increasing number of papers accepted

in institutions abroad. Professional (e.g., M.D., L.L.D.) and honorary degrees

are not included. Individual, degree-granting institutions submit copies of

dissertations or lists of dissertations completed to University Microfilms

International (UMI). Citations for these dissertations are included in the

data base and in the following UMI publications: Dissertation Abstracts

International , American Doctoral Dissertations , and Comprehensive Dissertation

Index . A complete listing of sources consulted in compiling this data base

can be found in the preface to any volume of Comprehensive Dissertation Index . The subject categories most relevant to the present study are Business and

Economics

NTIS is an extensive data base consisting of government-sponsored research,

development, and engineering reports plus analyses, journal articles, and

translations prepared by Federal agencies, their contractors or grantees.

This data base is produced and maintained by the National Technical Information

Service of the U.S. Department of Commerce. NTIS also covers Federally generated

machine-readable files and software as well as U.S. Government inventions

available for licensing. It is the means through which unclassified, unlimited

distribution reports are made available to the public. The NTIS data base

includes material from both the physical and social sciences, including topics

of immediate widespread interest, such as environmental pollution and control,

energy conservation, technology transfer, health planning, societal problems,

and urban and regional development and planning. The file covers the period

from 1964 to the present.

The approach followed in all four of the computer file searches involved

the specification of a strategy in which key words are used in combination to

retrieve citations relevant to the topic. The basic strategy used was to

combine two groups of key words: (1) one group relating to the subject

matter of standards; and (2) the other group relating to the analytical

approach of economics. Some of the key words used to represent the subject

matter were: standard(s), standardization, test method, and testing. Some

of the words used to signify the approach were: economic(s), benefit(s),

cost(s), impact, effect, evaluation, and value. Once the two groups of key

words used to signify the approach were entered, the file was searched for

the intersection of the groups. That is, all citations with any combination

of at least one key word from each group would be counted and then printed, if

requested. For example, citations with the combined concepts, benefits of

testing, costs of standardization, and the evaluation of standards, would all

be counted. If the resulting count turned out to be unmanageably large, ways

were sought to exclude possibly irrelevant combinations. One prominent

example was the area of cost accounting standards.

A format was developed which would allow a consistent and comprehensive

method for full citation of the bibliographical items found in the various

searches. Each citation was written on a separate card allowing space for

the individual annotations. Whenever possible, these annotations were excerpted

from the abstract or executive summary of the reference. Abstracts of journal

articles were sought either from the Journal of Economic Literature or from a copy of the article when available. Abstracts of government reports are often

3
printed directly in the report. These abstracts were used when a copy of the

report was available. When abstracts were not available, an attempt was made

to summarize the purpose, scope and conclusions of the study or book.

After analyzing the results of the literature search, a scheme was devised

for categorizing the studies. There are four major categories: (1) General

methods of economic evaluation; (2) Economics useful for standards analysis;

(3) Evaluation of specific developed standards; and (4) Economics applied to

the development of standards. A brief overview of the significant findings of

each of these categories is presented in the next section. In referring to

a particular bibliographical entry, a three-part numbering system is used in

brackets. The first part refers to the major category number; the second part

refers to the subcategory number within each category; and the third part

refers to the alphabetical order within each subcategory. Thus, the full

citation of an item designated by [2.3.7] can be found in the third subcategory

of the second major category, and will be the seventh such item in alphabetical

order. The annotated bibliography itself is presented in Part II, following

the overview. At the end of the report is an index for locating references

by name of author.

3. Overview of Annotated Bibliography

3.1 General Methods of Economic Evaluation [1.0]

The first major category, General Methods of Economic Evaluation, includes

selected works in three basic areas: (1) Benefit-Cost Analysis for Private

Decisions; (2) Benefit-Cost Analysis for Public Decisions; and (3) Benefit-Risk

Analysis. Each area is discussed in turn.

Benefit-Cost Analysis for Private Decisions [1.1] . Benefit-Cost Analysis (also

referred to as Cost-Benefit Analysis) is a general approach to capital budgeting

decisions whereby the life-cycle benefits and costs of particular alternatives

are considered and compared on a time equivalent basis. A variety of methods

of comparison are used, such as the net present value, the net annualized value,

the benefit-cost ratio, and the internal rate of return. This first subsection

deals with Benefit-Cost Analysis as applied to investment decisions made by

private individuals or firms. In these analyses benefits and costs are included

only to the extent that they affect the financial position of the private

individual or business enterprise. Typical practice in such studies would be

to measure cash flows on an after-tax basis. A number of texts are available

describing Engineering Economy, which is a type of Benefit-Cost Analysis often

applied to industrial investment decisions. Grant et al. [1.1.4] is a widely

used text and reference work on this technique. Two recent works on Engineering

Economy containing many numerical examples are Newnan [1.1.6] and a comprehensive guidebook produced by American Telephone and Telegraph [1.1.1].

Two other recent works are designed to provide the noneconoraist with a good introduction to Benefit-Cost Analysis. Anderson and Settle [1.1.2] cover both the theory and practice of the method as well as techniques for collecting

cost and benefit data. Sugden and Williams [1.1.7] focus primarily on applying

the method and offer many practical examples. Another work addressed to the

4
noneconomist illustrates the principles of applying Benefit-Cost Analysis

to the evaluation of energy conservation investments in buildings: Marshall

and Ruegg [1.1.5].

Benefit-Cost Analysis for Public Decisions [1.2] . This second subsection deals

with Benefit-Cost Analysis as applied to public investment and policy decisions.

In these analyses, an attempt is made to include all benefits and costs and to

measure them from the public or social point of view. Prest and Turvey [1.2.10]

offer an excellent, though somewhat dated, literature survey of this type of

Benefit-Cost Analysis. An extensive collection of more recent literature on

the method applied to public policy evaluation is available from the Aldine

Publishing Company [1.2.1]. Mishan [1.2.8] offers a comprehensive presentation

of social Benefit-Cost Analysis, intended primarily for economists. Dasgupta

and Pearse [1.2.2] discuss theoretical problems (e.g., distribution effects

and uncertainty) often encountered in applying this type of analysis. A critical overview of the method is presented in Fischhoff [1.2.3], while Luft

[1.2.6] argues that the implementation phase of public policy should be included

in these analyses. The special problem of selecting an appropriate rate of

discount for public policy analysis is treated in Mikesell [1.2.7] and the U.S.

Office of Management and Budget [1.2.12]. Two works that illustrate how

Benefit-Cost Analysis should be applied to specific public decisions are: Peskin and Seskin [1.2.9] for evaluating water pollution policy, and Ruegg

et_ [1.2.11] for selecting energy conservation investments in public

buildings

.

If the benefits of a public investment or policy decision cannot be valued

in dollar terms, either they are assumed to be equal for the alternatives being

considered or the costs (net of any dollar-valued benefits) are denominated in

terms of cost per unit benefit. This approach, called Cost-Effectiveness

Analysis, is often used in evaluating military investment alternatives as illustrated in Goldman [1.2.4]. The method can also be employed to avoid the

necessity of placing a dollar value on human life, as was done in a case study

conducted by McConnaughey [3.3.14].

Benefit-Risk Analysis [1.3] . When the consequences of investment decisions

involve the degree to which the probability of an accident or catastrophe has

been reduced, the technique of Benefit-Risk Analysis is used. A comprehensive

bibliography on this method has been collected by Clarke and Van Horn [1.3.1].

One section of this work lists citations dealing specifically with standard

setting. The Committee on Public Engineering Policy of the National Academy of

Engineering [1.3.2] has published a useful collection of papers on Benefit-Risk

Analysis. Rowe [1.3.7] provides a thorough discussion of the nature of risk,

its valuation, and methods of risk analysis and decision making under uncertainty. In his classic collection of theoretical lectures, Raiffa [1.3.6]

argues that preferences for uncertain outcomes be scaled in terms of utility

values and the likelihood of each outcome be assigned a subjective probability.

Lowrance [1.3.4] offers nontechnical approaches to risk policy problems and

includes a discussion of how safety standards are developed. In a widely

cited article, Starr [1.3.8] analyzes public acceptance of personal risks

arising from technological developments. Fischhoff et^ al_.. [1.3.3] analyzes

the relationships between perceived risk, acceptable risk, and perceived

benefit for 30 activities and technologies. Risk assessment methods are

5
applied to nuclear power plants in the well known U.S. Atomic Energy Commission study directed by Rasmussen [1.3.9].

3.2 Economics Useful for Standards Analysis [2.0]

The second major category. Economics Useful for Standards Analysis,

includes economic research which has been or could readily be applied to the

study of standards. This research is divided into four subcategories:

(1) Economics of the Standards System; (2) Economics of Regulation; (3) Economics of Safety and Health; and (4) Valuation of Human Life.

Economics of the Standards System [2.1] . This subsection deals with studies

that address economic issues arising from the standards system or standardization in general. One of the most comprehensive economic studies of the U.S.

voluntary standards system is by Hemenway [2.1.8]. Another work by Hemenway

[2.1.9] provides an overview of the voluntary standards systems in Canada,

the United Kingdom, West Germany, and Denmark. Chapman [2.1.4] discusses how

Benefit-Cost Analysis can be applied by standards developing organizations

in allocating research funds and planning standards programs. Another work

that could be helpful in such applications is by Scherer [2.1.19]. An article

by Toth [2.1.23] describes the development of a standard which specifies a method for estimating the economic value of standardization efforts. In

Phucas [2.1.14] a conceptual framework for the economic evaluation of standards

is presented and applied to several areas of international standards activity

of the National Bureau of Standards. This work also contains a supplementary

section which reviews a number of works on the economics of standardization.

Matuura [2.1.11] proposes a logarithmic equation for estimating the cost

savings resulting from standardization. A study by Settle and Weisbrod

[2.1.20] analyzes the conditions under which mandatory standards are more equitable and/or economically efficient than alternative government policy

instruments such as taxes and public information programs.

Two studies have been conducted on economic effects of measurement systems: Crane [2.1.5] and Poulson [2.1.15], A study by the U.S. Federal Trade

Commission [2.1.25] analyzes industry standardization and certification

programs. The role of seals and certifications of approval in consumer decision making is examined by Parkinson [2.1.13]. Hearings were conducted by

the House of Representatives on the effects of voluntary standards on small

businesses [2.1.24]. In the 1950's, the American Standards Association

published two general studies on the benefits and costs derived from industry

standards: [2.1.1] and [2.1.2].

Economics of Regulation [2.2] . Over the past decade economists have been

developing a framework for analyzing public regulation of economic activity.

Although most of this literature is addressed to the regulation of prices

(i.e., tariffs, fares, and utility rates), much of it is applicable to the

regulation of non-price characteristics of goods and services such as is

accomplished through mandatory standards. Probably the most comprehensive

treatment of the economics of regulation is contained in Alfred Kahn's twovolume work [2.2.5]. The major articles on the general theory of regulation

are by Stigler [2.2.12], Posner [2.2.8], and Peltzman [2.2.7]. The discussions

in these articles of how coalitions are formed among diverse interest groups

6
may be relevant to the process of developing voluntary standards in the private

sector.

An excellent collection of papers on the economic effects of regulating

the quality and variety of products has been edited by Caves and Roberts [2.2.2].

A paper by Colantoni ^t al . [2.2.4] presents a framework for evaluating the

economic welfare effects of two types of regulation: information requirements

and restrictions on product types. Pustay [2.2.9] examines the question of

whether economic inefficiencies result in industries which are regulated.

Schmalensee [2.2.11] provides an economic rationale for regulating the durability of consumer goods in non-competitive industries.

Economics of Safety and Health [2.3] . A recent review of the literature on

the economics of safety may be found in Canada and Ayoub [2.3.5]. Another

review was published on alternative decision methodologies for evaluating

regulatory action affecting health and safety by Hendrickson et al. [2.3.12].

Several articles have been written on how to achieve the optimal balance between

safety and the cost of achieving alternative levels of safety: Spengler

[2.3.19]; Brown [2.3.2]; and Cannon [2.3.6]. The general problem of the cost

of safety regulation has been reviewed by Cornell et al. [2.3.7], Oi [2.3.17],

and Lave [2.3.14]. The specific area of product safety has received some attention from several noted economists: Grabowski and Vernon [2.3.11] and

Oi [2.3.18]. A number of studies have been conducted which apply economic

analysis to particular safety provisions, such as, aviation safety by Fromm

[2.3.9], transportation safety by Lave [2.3.15] and Blomquist [2.3.1], and

food safety by Campbell [2.3.4].

Valuation of Human Life [2.4] . Economic analyses of standards involving health

and safety frequently confront the problem of placing a value on human life.

The literature in this area is quite extensive and some of it has been collected

recently in the Clarke and Van Horn bibliography [1.3.1] referred to above.

One of the most comprehensive treatments of the subject can be found in JonesLee [2.4.8]. In his book on Benefit-Cost Analysis, Mishan [1.2.8] presents an excellent survey of alternative methods of valuing life. One of the earliest

works on the subject is by Schelling [2.4.14]. The two most widely used

approaches to valuing human life are the willingness-to-pay approach and the

discounted lifetime earnings approach (sometimes called the human capital

approach). The former measure is viewed by most economists as being theoretically correct, while the latter is easier to carry out in practice. Mishan

[2.4.11] offers the clearest exposition of the theoretical superiority of the

willingness-to-pay approach. Acton [2.4.1] demonstrates how this approach

can be used to evaluate a public program designed to reduce the risk of death

from heart attacks. Bailey [2.4.3] uses consumer choices between safety and

insurance to establish a theoretical relationship between the two approaches

to valuing lives. Conley [2.4.4] shows that discounted lifetime earnings

could serve as a lower bound measure of willingness-to-pay under certain

restrictive assumptions. Linnerooth [2.4.9] provides a detailed review of

several models which imply a theoretical relationship between the two approaches.

Several general articles have been written to introduce noneconomists to

the alternative techniques for valuing human life: Hayzelden [2.4.7],

7
Zeckhauser [2.4.16], and Rhoads [2.4.13]. Several case studies have been

conducted to estimate the value of life: by Ghosh et_ ad. [2.4.6] using highway speed data; by Thaler and Rosen [2.4.15] using employment data; by

Needleman [2.4.12] using kidney transplant data; and by Melinek [2.4.10]

using data on pedestrian injuries, smoking, and employment.

3.3 Evaluation of Specific Developed Standards [3.0]

The third major section, Evaluation of Specific Developed Standards,

deals with economic studies conducted to evaluate particular standards that

have already been developed. This type of evaluation occurs after the fact

and does not involve the integration of economic analysis into the actual

standards development process. Such evaluations either compute the costs,

the benefits, or both costs and benefits which result from the use of the

particular standard in question. The many different types of standards that

have been evaluated are grouped here into three subcategories: (1) Safety and

Health Standards; (2) Environmental Standards; and (3) Other Standards.

Safety and Health Standards [3.1] . Before proceeding to specific safety and

health standards which have been evaluated, several studies describing approaches to evaluating these standards should be mentioned. A framework for

evaluating occupational health and safety standards is developed and applied

to the Federal asbestos dust standard in a dissertation by Settle [3.1.18].

A theoretical model for examining the economic effects of the Occupational

Safety and Health Act of 1970 is presented by Pachauri [3.1.13]. The applicability of Benefit-Cost Analysis to evaluating product safety standards is

discussed and illustrated in Dardis et al. [3.1.4]. Methods of designing

sampling plans for effecting compliance with safety standards are discussed

in Broussalian et al. [3.1.3], and the problem of measuring risk in evaluating

safety standards is treated in Broussalian [3.1.2].

Case studies of several specific safety and health standards (e.g. venting

of aerosol cans, tempered glass for windows, and rotary lawn-mowers) are discussed in a staff report by the National Commission on Product Safety [3.1.12].

Quite a number of studies can be found which evaluate auto standards: Peltzman

[3.1.15], Pennington and Bouland [3.1.16], the U.S. General Accounting Office

[3.1.19], and Wu [3.1.21]. Another group of studies concerns the economic

effects of consumer protection legislation on the pharmaceutical industry:

Grabowski and Vernon [3.1.6], Grabowski al . [3.1.7], and Peltzman [3.1.14].

Other safety and health standards that have been evaluated include one for

cotton dust by Research Triangle Institute [3.1.17], and for miners and asbestos

workers in Canada by Doern [3.1.5].

Environmental Standards [3.2] . Within the past decade the literature on the

economics of the environment has been rapidly growing. Much of the literature

focuses on the use of financial incentives (taxes, subsidies, effluent charges,

etc.) to control pollution. Nevertheless, there are a number of economic

studies which deal with the use of standards to protect the environment.

Perhaps the most useful introduction to the subject is the survey of environmental economics literature by Fisher and Peterson [3.2.5]. A theoretical

article on how a system of standards combined with a set of effluent charges

8
can be used to achieve a specified reduction in pollution levels at minimum

cost was written by Baumol and Oates [3.2.1]. Another article by Maler [3.2.12]

discusses a framework for deriving the willingness-to-pay for certain public

goods such as clean air or water.

Several works are helpful for actually evaluating the economic effects of

environmental standards. Chugh et al. [3.2.3] examine the impact of pollution

control legislation on the market risk of securities. Lave and Seskin [3.2.9]

derive quantitative estimates of air pollution effects on various diseases

and of the dollar benefit of pollution abatement. The National Academy of

Sciences [3.2.13] has published a guide for decision making concerning the

regulation of chemicals in the environment. A number of studies analyze the

relationship between energy use and environmental standards: Harrison [3.2.6],

Lievano [3.2.10], Schlottmann [3.2.15], and Watson and Downing [3.2.17]. Two

other studies concern the income-distribution effects of environmental standards: Dorfman and Snow [3.2.4], and Harrison [3.2.7]. The economic effects

of certain noise standards are evaluated in both Kearney [3.2.8] and Plager

et al . [3.2.14]. There is even an economic analysis of a safe minimum standard

for endangered species: Bishop [3.2.2],

Other Standards [3.3] . A wide variety of standards besides those addressed to

safety, health, and environmental concerns have been subjected to economic

analysis. A great deal of this research is related directly or indirectly to

the building industry. In 1964, Fisher [3.3.5] conducted a study sponsored by

the National Bureau of Standards to assess the economic impact of a standard

for softwood lumber. Two studies were published by Lentz [3.3.8 and 3.3.9] and one by Little [3.3.11] on the economic impacts of the ASHRAE 90-75 Standard for

energy conservation in building design. In another study, Little [3.3.10]

assessed the economic impact of HUD's Minimum Property Standards to cover all new residential construction. Similar studies have been conducted on the

economic effects of building codes, which are often based on standards. A

method of evaluating building code impacts has been developed and applied by

McConnaughey [3.3.14 and 3.3.15] to the 1975 National Electrical Code requirement for ground fault circuit interrupters in residences. Marshall et al.

[3.3.13] have investigated the cost savings attributable to using reducedsized venting for the protection of the traps of plumbing fixtures.

Economic analyses of standards unrelated to buildings have been conducted

as well. Several studies relate to the computer industry: Fiorello and Jaffin

[3.3.4]; Slome [3.3.20]; and the U.S. Department of Commerce [3.3.21]. The

cost-effectiveness of medical device standards was studied by Miller [3.3.16].

Standards for plant designs for nuclear power plants are discussed by Kennedy

and Morse [3.3.7]. The U.S. National Highway Traffic Safety Administration

studied automotive fuel economy standards [3.3.22]. The economic impact metrication would have on commercial weights and measures activities was investigated by Hatos [3.3.6]. Bucklin [3.3.3] and the National Center for Productivity and Quality of Working Life [3.3.18] have conducted studies on standards

for grading tires.

9
3.4 Economics Applied to the Development of Standards [4.0]

The studies included in the fourth section, Economics Applied to the

Development of Standards, differ from those of the previous section in the

manner in which the economic analysis relates to the standards development

process. The standards studied in the third section citations were already

developed before the economic analysis was conducted. In the studies cited

below, on the other hand, economic analysis was used to determine the optimal

level of the standard in question. These studies fall into three subcategories, according to the type of standard analyzed: (1) Fire Standards;

(2) Energy Conservation Standards; and (3) Other Standards.

Fire Standards [4.1] . Two studies have been conducted on flammability standards for children's sleepwear. A report by Craw [4.1.4] provides a decision

analysis framework for setting the level of the standard. A more recent study

by Smith and Dardis [4.1.8] employs Benefit-Cost Analysis in the evaluation of

the 0-6X Children's Sleepwear Standard. The proposed upholstered furniture

standard of the Consumer Product Safety Commission is analyzed by Helzer et^ al . [4.1.6] using decision analysis and by Dardis and Thompson using Benefit-Cost

Analysis [4.1.5]. These two methodologies could be applied to other flammability standards as well. Three publications by Chapman [4.1.1] and Chapman

££ al_. [4.1.2 and 4.1.3] describe an application of linear programming to

determine the least-cost means of achieving compliance with the Life Safety

Code in health care facilities. Another study involving the use of economic

analysis for optimizing fire safety measures is by Lie [4.1.7].

Energy Conservation Standards [4.2] . An overview of the economic efficiency

considerations that can be incorporated into the development of energy conser- vation standards for buildings is presented in Marshall and Petersen [4.2.3].

Another report by Petersen [4.2.5] demonstrates in detail how differences in

building type, climate, energy cost, and operational requirements can be

directly included in the standards development process. An article by Marshall

and Ruegg [4.2.4] includes a discussion of energy conservation standards based on Life-Cycle Cost Analysis. Residential insulation standards are developed

for Vermont using an economic optimization model in a report by Heim [4.2.1].

The question of the proper value for energy to be used in the development of

optimal energy conservation performance standards for new buildings is addressed

by Weber [4.2.8 and 4.2.9]. These two studies recommend the use of the marginal

social value of energy rather than its price in the determination of optimal

standards. Hirst and Carney [4.2.2] use a simulation model of energy consumption in residences to assess the direct economic effects of thermal standards

for new construction. One very successful example of applying economic analysis

to energy related standards is a study of the 1000-hour standard for the life

of electric bulbs in the United Kingdom. Prais [4.2.6] derives an optimization

rule for the light bulb life which shows that 1000 hours is generally too short

a life and that the optimum life varies with bulb wattage.

Other Standards [4.3] . Economic methods have been used to determine the optimal

level for standards outside the areas of fire safety and energy conservation.

Much of this research is in the environmental field. Hyden [4.3.4] determines

the optimal economic wastewater treatment standards for individual users in a

10
river basin. Stollman et al. [4.3.6] conduct an economic impact analysis of

anticipated hazardous waste regulatory standards. Voornees and Associates

[4.3.7] develop a cost-effectiveness methodology for evaluating transportation

control strategies as a means of achieving ambient air quality standards.

Other environmental standards studied are those for groundwater quality [4.3.3]

and for automotive emissions [4.3.5].

Two reports published by the National Bureau of Standards concern the

building and construction industry. Chapman and Colwell [4.3.1] develop a methodology for determining the economic efficiency of draft standards to provide protection against the progressive collapse of buildings. Clark and Roat

[4.3.2] present a bibliography on the impact of metrication and dimensional

coordination on the construction industry.

Having completed the overview of the major findings within each subcategory, we now turn to Part II, which presents each bibliographic entry along

with its annotation. The items are arranged in alphabetical order within

each category.
PART II: ANNOTATED BIBLIOGRAPHY

1.0 GENERAL METHODS OF ECONOMIC EVALUATION

1.1

1 . 1.1

1 . 1.2

1.1.3

Benefit-Cost Analysis for Private Decisions

American Telephone and Telegraph Company. Engineering Economy:

A Manager's Guide to Economic Decision Making . 3rd ed. New

York: McGraw-Hill Book Company, 1977, 516 pp.

The stated purpose of this comprehensive text is to

provide the manager with guidelines for dealing with

the economic choice among alternatives involving

various amounts of capital expenditures, expenses,

and revenues. The material is in three sections:

five background chapters on accounting, financing,

and the nature of costs; four chapters on the

capital costs associated with an investment; and

six chapters on techniques of structuring an actual economic analysis. This edition has been

enlarged and brought up to date.

Anderson, Lee G. and Settle, Russell Franklin. Benefit-Cost Analysis: A Practical Guide . Lexington, Mass.: Lexington Books, 1978.

This book provides a brief, but thorough, introduction

to the theory and practice of benefit-cost analysis.

Two basic objectives are accomplished: (1) to provide an understanding of the theoretical foundations

of benefit-cost analysis; and (2) to demonstrate the

application of benefit-cost analysis in realistic

(and less-than-ideal) situations. Typical of such

situations are those involving incomplete data or time and budget constraints. In addition to the

usual treatment of discounting and decision rules

for project selection, there is considerable discussion of methods for collecting cost and benefit

data. The intended audience includes both

economics students as well as those with little

or no formal training in economics. An extensive

bibliography is included.

Dewhurst, R. F. J. Business Cost-Benefit Analysis . London:

McGraw-Hill Book Company (UK) Limited, 1972, 288 pp.

This study begins by considering existing social

benefit-cost techniques and then applies them, where

appropriate, to the business situation. The

largest chapter in the book is devoted to providing

an adequate mathematical background. The author's

main aim is to try to place money values on those

12
benefits which have hitherto been thought unquantifiable. This permits both costs and benefits to be

expressed in money terms so that a meaningful com- parison of all factors can be made.

1.1.4 Grant, Eugene L., Ireson, W. Grant, and Leavenworth, Richard S.

Principles of Engineering Economy . 6th ed. New York: John Wiley & Sons, 1976, 624 pp. Includes 4 pages of bibliographical references.

This comprehensive text explains the principles and

techniques needed for making decisions about the

acquisition and retirement of capital goods. The

major focus is on decisions made in the context of

a private firm with a goal of maximizing profits.

The effects of taxes, inflation, and the cost of

financing on the outcome of capital budgeting

decisions are considered in depth. This text is

useful not only for engineering students but also

for students of economics, accounting, finance,

and management. This book also can serve as a working manual for engineers, management personnel,

and others whose duties require them to make

decisions about investments in capital goods.

1.1.5 Marshall, Harold E.; Ruegg, Rosalie T.; and Wilson, Forrest.

Simplified Energy Design Economics: Principles of Economics

Applied to Energy Conservation and Solar Energy Investments

in Buildings . National Bureau of Standards Special Publication 544.

Washington, D.C.: U.S. Government Printing Office, 1980.

The goal of this book is to provide a guide to

basic economic concepts and tools for solving

simple economic problems in energy conservation.

Principles and step-by-step examples are included

as aids in determining the economic efficiency of

specific energy investments. The book is intended

as an adaptable instrument for the design community:

architects, engineers, builders, building owners

and managers, codes and standards writers, government policy makers, and students of these disciplines. The emphasis is on practical method rather

than theoretical discussion.

1.1.6 Newnan, Donald G. Engineering Economic Analysis . Revised Edition.

San Jose, Calif.: Engineering Press, 1977, 469 pp. Includes 3 pages of bibliographical references.

This book is designed to teach the fundamental con- cepts of engineering economy to engineering students.

Over 130 example problems are provided together with

detailed solutions. Economic analysis methods (present

13
worth, rate of return, etc.) are examined in detail. A

rigorous analysis is provided with special attention

given to the restrictions and limitations of each

method. Such special topics as the effects of inflation and the application of computers are discussed. There is a full (1/4% to 60%) and conveniently organized set of compound interest tables

at the back of the book. The result is a modern

and complete presentation of engineering economic

analysis techniques applicable to the evaluation of

standards

1.1.7 Sugden, Robert and Williams, Alan. The Principles of Practical

Cost-Benefit Analysis. New York: Oxford University Press,

1978, 288 pp.

This introduction to the practice of benefit-cost

analysis is geared to the needs of both the non- economist and the economist. After a discussion of

financial appraisal, the distinguishing features of

benefit-cost analysis are introduced progressively.

Practical examples are used whenever possible and

economic theory is introduced only where it is

immediately relevant to practice. Appendices which

relate the ideas of the book to the mainstream

economic theory and comprehensive guides to further

reading have been included for the experienced

economist.

1 .2 Benefit-Cost Analysis for Public Decisions

1.2.1 Aldine Publishing Company. Benefit-Cost and Policy Analysis: An

Aldine Annual on Forecasting, Decision-Making, and Evaluation . Chicago, 1972-1975, 4 volumes on an annual basis. Includes

bibliographical references.

Each volume of Benefit-Cost and Policy Analysis

presents a selection of important works on the

subject that appeared in the previous year. The

articles selected reflect the several main trends

in this field of study as well as its general scope

and breadth. They are intended to contribute to an understanding of the way policy analysis ought to be

conducted. Specific topics covered by the papers

include the following: judgment under uncertainty,

public policy alternatives for energy conservation

and pollution control, environmental protection and

income distribution, the theory of marginal public

expenditure choices, and principles for policy and

program analysis.

14
1 . 2.2 Dasgupta, Ajit K. and Pearce, D. W. Cost-Benefit Analysis:

Theory and Practice . New York: Barnes and Noble Books,

1972, 270 pp. Includes 170 bibliographical references.

Benefit-cost analysis is an attempt to devise a formal

system of rules whereby the social worth of a policy

can be judged. This book analyzes this system of

rules and shows that they are essentially equivalent

to the prescriptive rules derived in the theory of

welfare economics some thirty years ago. The

authors investigate the limitations of these rules

against the background of subsequent developments

in welfare theory. The distributional effects of

investment decisions are considered in addition to

the efficiency effects. The problems of risk and

uncertainty, the selection of a social rate of

discount and an appropriate decision rule are all

thoroughly discussed. Two case illustrations are provided.

1.2.3 Fischhoff, Baruch. "Cost-Benefit Analysis and the Art of Motorcycle

Maintenance.” Policy Sciences , Vol. 8 (1977), pp. 177-202.

Partially as the result of consumer and environmentalist pressure, proposals for large-scale

government and private projects are increasingly

coming under the scrutiny of benefit-cost analysis,

decision analysis, risk assessment and related

approaches. This paper presents a critical overview

of such analyses. It discusses their rationale,

their acceptability as guides to decision making,

the problems they encounter, their possible misuses,

and steps needed to increase their contribution to

society. The discussion is illustrated with a variety of examples, based on the evaluation of new technologies.

1.2.4 Goldman, Thomas A., ed. Cost Effectiveness Analysis: New Approaches

in Decision Making . New York: Frederick A. Praeger, Publishers,

1967, 231 pp.

This work is a collection of 13 papers presented at a symposium on cost-effectiveness analysis sponsored by

the Washington Operations Research Council. Although

most of these papers deal with applications to the

area of defense procurement, the method of costeffectiveness analysis is well illustrated. The

method is appropriate for investment decisions whose

benefits cannot be valued in dollar terms. Such

situations frequently arise in the context of public

investment decisions.

15
1.2.5 Harberger, Arnold C. Project Evaluation: Collected Papers . Chicago: Markham, 1973, 330 pp.

This book contains eleven articles published between

1964 and 1972 on the theory of benefit-cost (b-c)

analysis and its application to project evaluation.

They survey a wide range of activities to which b-c

techniques may be applied. The essays provide a summary of some of the principal issues involved,

as well as of the references to b-c analysis for

students examining project evaluation. The issues

include the choice of the correct discount rate, the

social opportunity cost of public funds, the rate of

return to private capital, and the social opportunity

cost of labor. Practical evaluations of electricity,

irrigation, transportation and education projects are presented as well.

1.2.6 Luft, Harold S. "Benefit-Cost Analysis and Public Policy Implementation: From Normative to Positive Analysis." Public Policy , Vol. 24, No. 4 (Fall 1976), pp. 437-462. Includes 35 bibliographical references.

Benefit-cost analysis and the closely related costeffectiveness analysis are techniques designed to

assist the public decision maker in choosing from

among various alternative projects or policies.

These tools are used to help identify the socially

beneficial alternatives and thus are used in a nor- mative way to indicate what should be done. It is

becoming increasingly apparent that this is only the

first step; explicit attention must also be paid to the

implementation phase, or whether and how the project

will be done. This paper presents the argument that

not only is a positive or predictive analysis necessary

to supplement the more common normative approach, but

that a relatively simple conceptual extension of

benefit-cost analysis can usefully apply to this task

the tools that have been developed over the past few

decades

.

1.2.7 Mikesell, Raymond F. The Rate of Discount for Evaluating

Public Projects . Washington, D.C.: American Enterprise

Institute for Public Policy Research, 1977, 64 pp. Includes 9

pages of bibliographical references.

In an era of rapid expansion of the public sector,

it is important that government officials employ methods

of evaluating projects that reflect the opportunity

cost of capital in the private sector. The author

argues that efficient allocation of the nation’s

16
resources for maximum social welfare requires

private and public projects to be evaluated by the same standards and that these standards are best

revealed in private competitive markets. The same rate of discount would serve as a common denominator

for the evaluation of projects in both the private

and the public sectors, assuming comparable determination of cost and benefit streams.

1.2.8 Mishan, E. J. Cost-Benefit Analysis: New and Expanded Edition . New York: Praeger Publishers, Inc., 1976, 454 pp.

This work is a comprehensive presentation of all

aspects of social benefit-cost analysis. The book

will enable the reader to ask the right questions for

evaluating public investment projects. What is the

social value foregone elsewhere when economic

resources are channeled into a projected economic

activity? What are the real effects on the consumer

and the environment? Through carefully selected case studies, the various ways to allocate costs and

benefits are described, drawing on present-day

techniques of economic analysis, including operations

research, decision theory, and game theory. These

case studies illustrate the fundamental principles of

benefit-cost analysis. The book includes an entirely

new section on program evaluation that confronts some

of the issues which frequently arise in estimating

the benefits of public projects.

1.2.9 Peskin, Henry M. and Seskin, Eugene P., eds. Cost-Benefit

Analysis and Water Pollution Policy . Washington, D.C.: The Urban

Institute, 1975, 370 pp.

The major portion of this volume consists of papers

presented in September 1973 at a symposium designed

to determine and advance the state-of-the-art of

benefit-cost analysis with special reference to water

pollution policy. In addition, the editors have

provided a comprehensive introduction and overview.

Following this introductory material, the thirteen

symposium papers and excerpts from the pertinent

discussions are presented on both theoretical

and applied issues relating to the measurement of

benefits. Part Two contains similar material

pertaining to the assessment of costs. Part Three

deals with aspects of uncertainty which are relevant to benefit-cost analysis. Finally, Part

Four relates the specific technique of benefitcost analysis to the broader area of public policy.

17
1 . 2.10 Prest, A. R. and Turvey, R. "Cost-Benefit Analysis: A Survey.

The Economic Journal, Vol. 75 (December 1965), pp. 683-735.

Although considerable work has been done in the

field of benefit-cost analysis since 1965, this

survey article still remains one of the most

complete introductions to the field. In addition

to covering the general principles of the method,

the article surveys particular applications in a variety of fields: water supply projects, transport,

land usage, health, education, and research. An

extensive bibliography is included.

1.2.11 Ruegg, Rosalie T.; McConnaughey , John S.; Sav, G. Thomas; and

Hockenbery, Kimberly A. Life-Cycle Costing: A Guide for

Selecting Energy Conservation Projects for Public Buildings . National Bureau of Standards Building Science Series 113.

Washington, D.C.: U.S. Government Printing Office, September 1978,

70 pp. Includes 25 annotated bibliographical references.

This report provides a step-by-step guide for con- ducting life-cycle cost evaluations of energy

conservation projects for public buildings. It

explains the use of life-cycle cost analysis to

evaluate and rank the cost effectiveness of

alternative energy conservation retrofit projects

to existing public buildings, and to select the most

cost-effective design for new buildings. Worksheets,

illustrated with a realistic example, and a computer

program are provided. This guide is compatible with a life-cycle costing guide prepared for the Department

of Energy for use in the Federal Energy Management

Program by Federal agencies. The purpose of this

report is to provide a guide to state and local governments for use in their energy conservation programs.

1.2.12 U.S. Office of Management and Budget, Circular No. A-94 Revised.

"Discount Rates to be Used in Evaluating Time-Distributed Costs

and Benefits." March 27, 1972.

This circular prescribes a standard discount rate to

be used in evaluating the measurable costs and/or

benefits of government programs or projects when they are distributed over time. The prescribed discount

rate of 10 percent represents an estimate of the

average rate of return on private investment, before

taxes and after inflation.

18
1.3 Benefit-Risk Analysis

1.3.1 Clark, Elizabeth M. and Van Horn, Andrew J. Risk-Benefit Analysis

and Public Policy; A Bibliography . Report No. BNL-22285. Cambridge,

Mass.: Energy and Environmental Policy Center, Harvard University,

November 1976, 81 pp.

This bibliography is illustrative of the breadth of

the methodologies which have been applied to examine

the trade-offs between risks and benefits. The

citations are divided into 26 categories, ranging from

the value of human life to methods of benefit-risk

analysis. There are categories dealing specifically

with areas in which there are risks, such as nuclear

power. One section contains citations dealing with

standard setting.

1.3.2 Committee on Public Engineering Policy. Perspectives on BenefitRisk Decision Making . Washington, D.C.: The National Academy of

Engineering, 1972.

This is an extremely useful collection of papers

presented at a colloquium sponsored by the Committee

on Public Engineering Policy of the National Academy

of Engineering. Summaries of the discussions and some of the recommendations are given. An extensive

bibliography on benefit-risk analysis is included.

1.3.3 Fischhoff, B. et al . How Safe is Safe Enough? A Psychometric

Study of Attitudes Towards Technological Risks and Benefits . Report No. UCLA-ENG 7717. Los Angeles: Publication Services

Center, UCLA School of Engineering and Applied Science, January

1977.

This study investigates a benefit-risk technique

in which psychometric procedures were used to elicit

quantitative judgments of perceived risk, acceptable

risk, and perceived benefit for each of 30 activities

and technologies. The results indicated little

systematic relationship between perceived existing

risks and benefits of the 30 risk items. When the

unacceptably high current risk levels were adjusted

to what would be considered acceptable, risk was

found to correlate with benefit. Two basic

dimensions of risk proved to be effective predictors

of the trade-off between acceptable risk and

perceived benefit. The limitations of the method

and the implications of the findings for policy

decisions are discussed.

19
1.3.4 Lowrance, William W. Of Acceptable Risk: Science and the

Determination of Safety . Los Altos, Calif.: William Kaufman,

Inc. , 1976

.

This book relies on real world examples and common

sense approaches in its nontechnical and nonmathematical discussion of safety and risk policy problems

and their history. It summarizes the ways an industrial

society may methodically appraise risk, and in doing so describes how judgment and knowledge interact in the

creation of safety standards.

1.3.5 Payne, John W. "Alternative Approaches to Decision Making Under

Risk: Moments Versus Risk Dimensions." Psychological Bulletin , Vol. 80, No. 6 (December 1973), pp. 439-453. Includes 50

bibliographical references.

The literature in the area of individual decision

making under risk may be characterized by two

different approaches to the description of gambles.

The first approach describes gambles as probability

distributions over sets of outcomes. Models of

decision making developed within this approach have

concentrated on the means and standard deviations

of the distributions as the primary determinants

of risky decision behavior. The second approach

describes gambles as multidimensional stimuli which

may be conceptualized in terms of basic risk dimensions,

such as probability of winning, amount to win, probability of losing, and amount to lose. This approach

views risky decision behavior as a form of information

processing. The relative merits of explanations derived

from each approach are discussed. It is argued that

the risk dimension approach appears more promising

than that based on the mean and standard deviation

of the underlying probability distribution.

1.3.6 Raiffa, Howard. Decision Analysis: Introductory Lectures on Choices Under Uncertainty . Reading, Mass.: Addison-Wesley

Publishing Company, 1968, 309 pp. Includes bibliographical

references

.

The methodology presented in these lectures requires that

preferences for uncertain consequences be numerically

scaled in terms of utility values and that judgments

about uncertainties be numerically scaled in terms of

probabilities. The author discusses the intertwining

concepts of utility and subjective probability, and

demonstrates that these concepts are logical concomitants

of some basic behavioral assumptions. The author

adopts the so-called Bayesian viewpoint, which uses both

utilities and subjective probabilities. After arguing

20
the validity of this approach throughout most

of the book, he attempts to place it in a broader

perspective in the final chapter, which is devoted

to a brief historical account of the theory of subjective probability and an overview of the different

existing schools of statistical thought.

1.3.7 Rowe, William D. An Anatomy of Risk . New York: John Wiley and

Sons, 1977, 488 pp. Includes bibliographical references after each

chapter.

This book is a comprehensive guide to the evolution

and applicability of various methodologies for

decisionmaking under conditions of uncertainty.

It begins with a discussion of the nature of risk

and factors in risk valuation and progresses to

a sophisticated survey of competing methodologies

that can be used in risk analysis and decisionmaking under uncertainty. The author stresses

that the assessment of risk is as important as the quantification of risk and that the subjective

perception of risk is the basis for risk assessment

regardless of the objective or quantified evaluation.

1.3.8 Starr, Chauncey. "Social Benefit versus Technological Risk." Science , Vol. 165 (September 19, 1969), pp. 1232-1238. Includes 5 bibliographical

references.

In this article the author offers an approach

for establishing a quantitative measure of benefit

relative to cost for accidental deaths arising from

technological developments. The application of

this approach leads to several conclusions regarding

accepted social values relative to personal risk:

(i) The indications are that the public is willing

to accept "voluntary" risks roughly 1000 times

greater than "involuntary" risks. (ii) The statistical risk of death from disease appears to be a psychological yardstick for establishing the level

of acceptability of other risks. (iii) The acceptability of risk appears to be crudely proportional

to the third power of the benefits (real or imagined).

(iv) The social acceptance of risk is directly

influenced by public awareness of the benefits of an activity, as determined by advertising, usefulness,

and the number of people participating. (v) In a sample application of these criteria to atomic

power plant safety, it appears that an engineering

design objective determined by economic criteria

would result in a design risk level very much

lower than the present socially accepted risk

for electric power plants.

21
1.3.9 U.S. Atomic Energy Commission, Norman C. Rasmussen, Study

Director. Reactor Safety Study: An Assessment of Accident

Risks in U.S. Commercial Nuclear Power Plants . Report No.

WASH-1400. Washington, D.C., August 1974.

The Reactor Safety Study was undertaken to estimate

the public risks that could be involved in potential

accidents in commercial nuclear power plants of the

type in use in 1974. Its objective was to make a realistic estimate of these risks and to compare

them with non-nuclear risks to which our society

and its individuals are already exposed. The basic

conclusion of this study is that the risks to the

public from potential accidents in nuclear power

plants are relatively small. This conclusion

is based on the finding that the non-nuclear

accidents examined in this study are much more

likely to occur and can have consequences comparable to or larger than nuclear accidents.
2.0 ECONOMICS USEFUL FOR STANDARDS ANALYSIS

2.1 Economics of the Standards System

2.1.1 American Standards Association. Company Standardization: Organization, Costs, and Savings . New York, 1959, 26 pp.

This report describes the results of a survey of 2,800

firms regarding standards work. Of the 238 respondents,

89 reported a formal organized program. Of these, 34

firms reported average dollar savings from standards

of 1% of sales.

2.1.2 American Standards Association. Dollar Savings Through Standards:

Report of Survey to Obtain Data on Savings Derived from the Use

of Standards by American Industry . New York, July 25, 1956, 40 pp.

This work was compiled to demonstrate the economic

benefits to American industry that could be specifically attributed to standardization. Examples of

measurable savings from standardization are provided.

These illustrations were prepared by some 70 American

companies and 6 associations, mostly in 1955.

2.1.3 Chapman, Carol A. Bibliography on the Voluntary Standards System

and Product Certification . National Bureau of Standards Internal

Report 79-1900. Washington, D.C., October 1979, 22 pp.

This bibliography lists references accumulated by the

NBS Office of Engineering Standards in the course of

its research into the workings of the voluntary standards system, and the economic and legal effect of

standards. The first portion of the bibliography

lists references alphabetically by author. The

second portion groups references by subject.

Subject categories include: standards system reform,

regulatory use of standards (buildings, safety,

environment), certification and laboratory accreditation, solar heating and cooling, product liability,

and international and foreign.

2.1.4 Chapman, Carol A. "How to Stop Worrying and Love Benefit/Cost

Analysis." Standards Engineering , Vol. 29, No. 3 (June 1977),

pp. 54-56.

Economic analysis is useful in justifying standards

efforts, setting priorities for standards work, and

making decisions about specific standards. In using

economic analysis, some basic laws should be kept in

mind: (1) There is no free lunch; (2) Something is

usually forgotten; and (3) Money is a common measure

23
of (almost) everything. This paper shows how to apply

these and some other concepts to standards-related

problems. It gives hypothetical examples concerning

mobile home fire safety standards and effluent

measurement methods, as well as examples of actual

studies conducted at the National Bureau of Standards

Center for Building Technology. The latter studies

involve energy conservation in buildings, reduced-sized

venting, and ground fault circuit interrupters.

2.1.5 Crane, Garry M. Economic Effects of an Improved Measurement: A

Microeconomic Approach to Technological Change . Unpublished

Ph.D. dissertation, The George Washington University, February 15,

1971.

Three issues related to improved measurement are studied in this dissertation. First, a theoretical

method of analyzing the economic effects of an improved measurement is developed. Second, in a case study of an improved measurement used in manufacturing

stainless steel it is found that annual savings of

several millions of dollars resulted. Finally, it is

shown that the optimum supply of improved measurements

would be provided by the private market if inventors were risk-neutral or risk-pref errers . Government is

needed, however, to supervise and certify privately

provided measurement systems and to reduce biases in

meters used in retail sales.

2.1.6 Foldesi, Tamas. Economic Effects of Standardization . Geneva:

International Standards Organization, 1975, 12 pp.

This work provides a general overview of 3 types

of studies of the economic effects of standardization. Company studies generally involve the calculation of cost savings due to variety reduction

and the consequent increased production runs. National studies involve the estimation of as many of the significant effects as possible.

International studies that have been conducted

focus on establishing priorities among standardization areas. Each type of study is illustrated

by examples and it is noted that all methods of

analysis are still in the experimental stage.

2.1.7 Frontard, R. "Economic Aspects of Standardization." ISO Bulletin , Vol. 18 (October 1966), pp. 441-446.

This article presents a brief analysis of tangible

monetary benefits that could be derived from the

24
application of standardization at various stages

in the manufacture of a product. A case study is

conducted for a mechanical engineering firm.

2.1.8 Hemenway, David. Industrywide Voluntary Product Standards . Cambridge, Mass.: Ballinger Publishing Company, 1975, 141 pp.

Includes 170 bibliographical references.

Except for the consideration of collusive conduct,

economists have rarely analyzed industrywide

activity, much less the role played by industrywide

voluntary product standards and standardization in our society. This work examines this important aspect

of intercompany behavior and offers, for the first

time, an in-depth economic analysis of voluntary

standards and standardization. Standards are classified and their benefits and costs discussed.

The author shows how market structure determines both

the incentives and the ability needed to create workable product standards within a given industry. The

discussion includes prescriptions for public policy

regarding industrywide standards. This book is the

most comprehensive economic study of the U.S. voluntary

standards system available to date.

2.1.9 Hemenway, David. Standards Systems in Canada, the U.K., West

Germany, and Denmark: An Overview . NBS GCR 79-172. Prepared

for the U.S. Department of Commerce, National Bureau of Standards,

Washington, D.C., April 1979, 195 pp.

This report provides an overview of the voluntary standards systems of Canada, the UK, West Germany and

Denmark. The immediate purpose is to identify areas where further research might be useful. Ultimately,

the aim is to gain a better understanding of national

standards systems in other highly industrialized

countries. Based on interviews and other research,

the author discusses these aspects of the four standards systems: (1) history; (2) organization and

finances; (3) standards development; (4) certification

and accreditation; (5) international standards work;

(6) consumer and labor participation; (7) metric con- version; (8) antitrust aspects; (9) research into

economic impacts; (10) the government's use of

standards and its role in standards work; and (11)

other activities.

25
2 . 1 .10 Kean, John. "Benefits and Efficiencies of Standardization."

Consensus (Standards Council of Canada), Vol. 3, No. 1 (January 1976), pp. 4, 5, and 12.

This brief article offers a general discussion of the

benefits of standards. The Canadian Standards Association industrial safety footwear standard is cited as being very cost-effective. It was estimated that the

reduction in lost manhours due to foot injuries

in one province resulted in a $3.5 million savings

over a 6-year period. This represents a dollar

saving 20 times the cost of developing and maintaining

the standard in that province.

2.1.11 Matuura, S. "Measurement of the Effect of Standardization."

ISO Bulletin , Vol. 20 (August 1965), pp. 305-309.

This paper proposes a method of measuring the

effects of standardization in quantitative terras.

The method entails computing a numerical index of

the cost savings as a function of the logarithm

of the ratio of index numbers representing the

states of complexity before and after standardization. The estimation of the savings, however, is

admittedly subjective and would be applicable only

for ranking alternatives.

2.1.12 Melnitsky, Benjamin. Profiting from Industrial Standardization . New York: Conover-Mast Publications, 1953.

This book describes sources and uses of voluntary

standards. There are detailed comments on how to

operate a company standards program. Benefits

to firms of various kinds of standards (classification, materials, parts, design, testing, purchasing,

etc.) are also described.

2.1.13 Parkinson, Thomas L. "The Role of Seals and Certifications of

Approval in Consumer Decision-Making. " The Journal of Consumer

Affairs , Vol. 9, No. 1 (Summer 1975), pp. 1-14. Includes 11

bibliographical references.

One important source of product-related information

available to consumers is seals and certifications

of approval. Yet little is known about the role

played by these symbols in the decision-making

process. This study examines the level of recognition,

the perceived credibility, the perceived meaning, and

the use of nine seals or certifications of approval

among adult female consumers. The results would

appear to have significant implications for consumer protection and education.

26
2.1.14 Phucas, Charles B. International Standards Activities; A Study of

NBS Impact on International Standards Committee Activities . Washington, D.C.: U.S. Department of Commerce, National Bureau of

Standards, June 6, 1975, 9 pp. Includes as one of its appendices the

following report: Jack Faucett Associates, Inc. Principles and

Practical Approaches for Evaluating International Standards . Report

No. JACKFAU-75-136 . Prepared for the National Bureau of Standards,

Gaithersburg, Md., April 3, 1975, 42 pp. Includes 17 bibliographical

references.

This appendix briefly outlines a conceptual framework

for the economic evaluation of standards. The

approach is applied in case studies of three areas of

NBS international standards activities: computers,

rubber and rubber products, and nuclear instruments.

Two supplementary sections briefly discuss welfare

changes as measured by consumer and producer

surplus, as well as the welfare consequences of

changes in international trade as a result of

standardization. Another supplementary section

provides a useful review of some works on the

economics of standardization.

2.1.15 Poulson, Barry W., ed. Economic Analysis of the National Measurement

System . National Bureau of Standards Internal Report 75-948.

Washington, D.C., September 1977.

This report is a comprehensive summation of relevant

work known to NBS on economic analysis of the national

measurement system. It is written for a mixed

audience of economists and physical scientists.

The first part deals with the concept of measurement

for economic analysis, the quantitative dimensions of

measurement in the economy, and the relationships

between measurement and economic change. The second

part of the study examines the measurement system

from the standpoint of the private sector, including

the economic rationale for measurement by producers,

consumers, and in sales transactions. The third

part deals with government's role of incorporating

an economic rationale for measurement activities in

the public sector, and case studies of costs and

benefits of activities by NBS. While none of the case studies satisfies the conditions of rigorous

cost-benefit or cost-effectiveness analysis, they

do provide insight into the economic role of NBS

in the national measurement system.

27
2.1.16 Rawie, Carol Chapman. A Guide to Papers Citing Antitrust Cases

Involving Standards or Certification . National Bureau of Standards

Internal Report 79-1921. Washington, D.C., December 1979, 17 pp.

Since at least 1912, standards and certifications for

products ranging from lumber to milk cans have been

at issue in antitrust cases. Studying these cases may provide information about the economic effects of

standards and certifications based on standards — in

particular, their impacts on competition and innovation. This paper describes several articles and

reports which examine the antitrust history of standards. It is intended as a research tool to help

economists and others decide which (if any) antitrust

cases they should study to learn more about the

economic effects of standards.

2.1.17 Rawie, Carol Chapman. Economics of the Product Certification

Industry: Some Research Needs . National Bureau of Standards

Internal Report 80-2001. Washington, D.C. , 1980.

A number of private organizations certify products

for safety and other qualities. With the increase

in safety regulation, product liability suits, and

interest in encouraging use of new technologies

through certification, certification is likely to

become more and more important as a way to show

conformance with voluntary or regulatory standards.

There have been a number of Federal and State government activities related to product certification.

However, the potential impact of past and proposed

government actions is not clear. One reason may

be that there has been insufficient study of the

economics of the product certification industry.

This paper asserts that such study is needed as

a basis for setting government policy and raises

issues that should be addressed concerning structure and performance of the product certification

industry

2.1.18 Reck, Dickson, ed. National Standards in a Modern Economy . New York

Harper & Row Publishers, Inc., 1956, 372 pp.

This book is a collection of 33 articles by various

authors concerning the history and effects of

standardization. It focuses primarily on technical

benefits of standards in a number of sectors, but

also contains some qualitative comments concerning

price and cost effects. A chapter by T. Richard Witmer

discusses antitrust consequences of consumer goods

standards and a chapter by Corwin Edwards discusses

28
the relationship of standards and product differentiation.

2.1.19 Scherer, Frederic M. "Government Research and Development Programs."

In Measuring Benefits of Government Investments (edited by Robert

Dorfman) . Washington, D.C.: The Brookings Institution, 1965,

pp. 12-70.

This paper examines the problem of measuring research

and development program benefits in a nonmarket environment. Special attention is given to benefit estimates

in decisions involving the trade-off between development

costs and the expected time of successful completion of

the program. Because much government activity in the

standards area involves research and development, this

article is of interest to those concerned with economic

aspects of standards.

2.1.20 Settle, Russell Franklin and Weisbrod, Burton A. Government allyimposed Standards; Some Normative and Positive Aspects . Prepared

by the Department of Economics, Wisconsin University for Assistant

Secretary for Planning, Evaluation, and Research, U.S. Department

of Labor, Washington, D.C., June 1976, 53 pp. NTIS No. PB-256-274.

This report provides a conceptual discussion of the

need for governmentally-imposed standards. These

mandated standards are compared with alternative

policy instruments, such as taxes and public

information programs. The conditions under which

standards would be preferable to these other

alternatives are studied. The analysis includes

both equity and efficiency considerations.

2.1.21 Silberston, Aubrey. The Economic Consequences of International

Standardization . Document IS0/STAC0 (Secretariat-54) 389E. Geneva:

International Standards Organization, May 1967.

This report presents a list of possible economic

consequences of both national and international

standards, including costs and benefits to producers,

consumers, and supplying industries. The importance of the distribution of benefits and costs

is noted. A particular standard may benefit

some parties (e.g., the long run gains to

producers resulting from a reduction of variety

in production) while simultaneously resulting

in a loss to others (e.g., a reduction of choice

to consumers).

29
2.1.22 Spillenkothen, Roy and Renner, John. "Standardization and

Industrialization: Some Thoughts on the Related Benefits, Risks

and Economic Factors Inhibiting their Growth in a Competitive

Economy." Industrialization Forum , Vol. 2, No. 1 (October 1970),

pp. 29-40.

This article examines the introduction of standardization and industrialization, considering particularly

the point of view of the building products manufacturer.

Standardization affects the manufacturer’s position

in relation to competitors; in order to maintain some freedom to set prices, one's product must be differentiated. The typical cycle of a product’s life is

explained in terms of development, market establishment and growth, and finally standardization which

inhibits product differentiation. Because greater

profits are expected from product differentiation,

the authors claim that the building products

manufacturer has a vested interest that runs counter

to standardization. The authors suggest that new industry structures might modify this situation.

2.1.23 Toth, Robert B. "The Economics of Standardization: Credits vs. Debits.” Standards Engineering , Vol. 24, No. 2 (April 1972),

pp. 10, 14-18, 23. Includes 12 bibliographical references.

This article describes the development of a standard

that documents the general subject of cost reduction

and cost avoidance. This standard was developed by

the Aerospace Industries Association's National

Aerospace Standards Committee and provides the means

for evaluating the economic value of standardization

efforts. Specific cost factors are presented as developed from industry-wide surveys and specialized

sources. Several companies have applied this standard.

Their results confirm the need for and the usefulness

of conservative, logical and workable guidelines for

deriving and defending standardization savings.

2.1.24 U.S. Congress, House of Representatives, Select Committee on Small

Business, Subcommittee No. 5. The Effect Upon Small Business of

Voluntary Industrial Standards . House Report No. 1981, 90th Congress,

2d Session, Washington, D.C., December 24, 1968, 110 pp.

The general theme of these hearings is the effect

of voluntary industrial standards programs on small

business. Specific attention is paid to the degree

to which smaller firms are being denied minimum

participation in the development of the techniques

on which the standard is based, or are denied full

participation in the actual writing and promulgation

30
of the standard itself. Possible violations of

antitrust laws as well as other anticompetitive

practices are also discussed.

2.1.25 U.S. Federal Trade Commission. Preliminary Staff Study (Precis:

Self-Regulation — Product Standardization, Certification and

Seals of Approval . Washington, D.C., April 1972, 38 pp.

Industry standardization and certification programs

have a large potential both for public benefit and

public injury. Their benefits arise from their

capacity for promoting cost-price reductions and

thus improving the public's standard of living.

Their costs arise from their capacity for supporting

restraints of trade and consumer deception. This

report contains some policy recommendations regarding

these programs for the Federal Trade Commission.

2.1.26 Verman, Lai C. Standardization; A New Discipline . Hamden, Conn.:

The Shoe String Press, Inc., 1973, 461 pp. Includes bibliographical

references after each chapter.

One chapter of this comprehensive work on standardization is devoted to economic effects and the

problem of their measurement. The author delineates a number of likely advantages and possible

adverse effects of standards that could arise at

various organizational levels of standardization

(i.e., plant, industry, national, international).

The chapter concludes with a discussion of several

attempts to measure quantitatively the savings

in production costs that result from standardization and longer production runs.

2.2 Economics of Regulation

2.2.1 Baram, Michael S. Federal Energy Regulation and the Use of CostBenefit Analysis . Prepared by Bracken, Selig and Baram for the

Environmental Policy Office, Brookhaven National Laboratory,

Boston, Mass., October 1, 1977, 200 pp.

This report assesses the role of cost-benefit

analysis in the energy-related decision making

of four Federal agencies: the Environmental

Protection Agency, the Nuclear Regulatory

Commission, the Energy Research and Development

Administration, and the Federal Energy Administration. A case-study format is used to present

findings and conclusions with respect to each

agency. It is concluded that cost-benefit analysis

tends to improve certain critical aspects of

agency performance — directly because of the

31
inherent discipline of the method, and indirectly

because it promotes agency articulation of all

relevant considerations and therefore enhances

agency accountability.

2.2.2 Caves, Richard E. and Roberts, Marc J., eds. Regulating the Product:

Quality and Variety . Cambridge, Mass.: Ballinger Publishing

Co., 1975, 268 pp. Includes bibliographical references.

This volume contains papers presented at a workshop

on the regulation of economic activity held at

Harvard University. Several broad themes run through the volume. The first is the interconnection

of economic and political processes. The second is the

need for more detail in the theory of the firm to

account for the shorter-run aspects of decision

making. Without this detail, oligopolistic interaction in the area of product quality and variety

cannot be sufficiently disentangled. Finally, the

studies in this collection frequently reveal

the endogenous nature of two forces usually

considered as exogenous: the structure of markets,

and the direction of public policy.

2.2.3 Chugh, Lai C. and Berbeco, George R. "Impact of Government Regulations

on Small Firms in New England." The New England Journal of Business

and Economics , Vol. 4, No. 1 (Fall 1977), pp. 33-47. Includes 12

bibliographical references.

Numerous laws pertaining to the improvement of our environmental resources, the protection of consumers,

and the provision of safe and healthful working

conditions for workers have been passed at the

Federal and State levels since the mid-sixties.

The purpose of this article is to discuss the

effects of such regulations on capital expenditures, operating costs, profitability, and other

operating aspects of small firms in New England.

The first section of the paper describes the nature,

the special provisions and the enforcement systems

of these acts as they may affect small business.

The second section discusses the results of a questionnaire survey of small firms with the

assistance of the Small Business Association of

New England.

32
2 . 2.4 Colantoni, C. S.; Davis, 0. A.; and Swaminuthan, M. "Imperfect

Consumers and Welfare Comparisons of Policies Concerning Information

and Regulation." The Bell Journal of Economics , Vol. 7, No. 2 (Autumn 1976), pp. 602-615. Includes 14 bibliographical references.

Consumers possess limited capacity to process

technical information concerning the characteristics

of products. In response, two forms of regulation

commonly emerge: requirements for more understandable information about products, or restrictions

on the types of products sold. This paper presents

a framework for understanding and evaluating

the consequences of these two forms of regulation.

By using a recently developed approach to consumer

theory, the authors develop a model for consumer

behavior with imperfect information processing,

which is then used to illustrate methods for

evaluating the welfare effects of regulation.

2 . 2.5 Kahn, Alfred E. The Economics of Regulation: Principles and

Institutions . 2 Vols. New York: John Wiley and Sons, 1970 and 1971

The purpose of these volumes is to explore the contribution that economics can make to government regulation

of firms. Although the primary focus is on the

regulation of public utilities and the determination of

a fair rate of return, the work is applicable to non- price regulation. Volume I deals with the traditional

theory of economic efficiency and rules for achieving

it. Volume II treats the relationship between economic

performance and such institutional arrangements as market structures, incentive systems, and legal and

administrative procedures.

2.2.6 MacAvoy, Paul W. "The Effectiveness of the Federal Power Commission.

The Bell Journal of Economics and Management Science , Vol. 1, No. 2 (Autumn 1970), pp. 271-303.

This paper takes the view that the former Federal

Power Commission (FPC) dispensed services that

had measurable economic benefits and imposed

the costs of these services on both the regulated

firms and the final consumers of gas and electricity.

An attempt is made to define and measure benefits

from rulemaking and surveillance activities. The

costs of regulatory proceedings are estimated to

include expenditures of the FPC and of other

participants in FPC proceedings and to include

implied losses of final consumers consequent from

regulatory delay. The estimates imply that the

\

33
FPC operated at a greater scale than net benefits

warrant, particularly as a result of its

regulation of natural gas production in the previous

decade.

2.2.7 Peltzman, Sam. "Toward a More General Theory of Regulation." The

Journal of Law and Economics, Vol. 19, No. 2 (August 1976), pp. 211-

240.

This article offers a formal model of George Stigler's

theory of the optimal size of effective political

coalitions (see 2.2.12). The model reveals that the

costs of using the political process limit not only

the size of the dominant group but also their gains.

This point has some interesting implications for entry

into regulation and for the price-output structure

that emerges from regulation. In a comment following

the article, Hirshleifer argues that Peltzman wrongly

assumes that regulatory politics are governed by

constitutional rules. In another comment, Becker

suggests that regulations that survive the keen

competition for votes tend to be relatively

efficient ways to redistribute resources.

2.2.8 Posner, Richard A. "Theories of Economic Regulation." The

Bell Journal of Economics and Management Science , Vol. 5,

No. 2 (Autumn 1974), pp. 335-358.

Several theories have been advanced to explain

the observed pattern of government regulation

of the economy. These include the "public

interest" theory and several versions, proposed

either by political scientists or by economists,

of the "interest group" or "capture" theory.

This article analyzes those theories. It argues

that the public interest theory and the political

scientists' versions of the interest group theory

are unacceptable in their present form. The

economists' version of the interest group theory

is discussed at greatest length; its theoretical

and empirical foundations are reviewed, and the

conclusion is reached that, while promising, the

theory requires both more analytical development

and new sorts of empirical investigation before

it can be accepted as an adequate positive

theory of regulation.

34
2.2.9 Pustay, Michael W. "Industry Inefficiency under Regulatory

Surveillance." The Journal of Industrial Economics , Vol. 27,

No. 1 (September 1978), pp. 49-68. Includes 18 bibliographical

references

The presence of regulation may allow firms to

tolerate substantial inefficiency in their

operations. The extent of such inefficiency

in the trunk airline industry is examined in

this paper. Indices of efficiency are developed

and tested for the domestic trunk airlines. The

article then explores whether there are systematic

and sustained differences in the measured efficiency

performances of the trunk airlines. Finally, the

author concludes that Peacock and Rowley’s warning —

that regulation may induce inefficient resource

use which would more than offset any allocative

gains attributable to regulation — cannot be

dismissed as empirically unimportant on the basis

of the results of this study.

2.2.10 Russell, M. and Shelton, R. B. "A Model of Regulatory Agency Behavior.

Public Choice , Vol. 20 (Winter 1974), pp. 47-62.

This paper develops a model which predicts the

behavior of regulatory agencies involved in

the regulation of firms engaged in providing

services under conditions of controlled entry.

The analysis is based on an examination of the

implications of utility maximization by three

major "types" of regulators. The examination

stresses the likely consequences of political

coalitions and the resultant pressures placed

on the regulators. Cross-subsidization is shown

to be a consequence of coalition behavior and

utility maximization by members of the regulatory

body. The paper concludes by offering some policy recommendations.

2.2.11 Schmalensee, Richard. "Regulation and the Durability of Goods.”

The Bell Journal of Economics and Management Science , Vol. 1, No. 1 (Spring 1970), pp. 54-64.

This paper considers the production of durable

goods that deteriorate at a constant

percentage rate under conditions of competitive

and monopoly equilibrium. A perfect market in

used units of the good is assumed, as is

constant returns to scale in production. It is

shown that a monopolist will generally produce

goods that deteriorate faster than those produced

35
by a competitive industry. Regulation of the

durability of the monopolist's output will always cause him to increase the volume of services of

the good available to the market. The author

concludes that durability must be regulated if a monopolist is to be made to reproduce competitive

2.2.12 performance.

Stigler, George J. "The Theory of Economic Regulation." The Bell

Journal of Economics and Management Science , Vol. 2, No. 1 (Spring 1971),

pp. 3-21.

This is a seminal article on the economics of regulation.

The potential uses of public resources and powers to

improve the economic status of interest groups are analyzed to provide a scheme of the demand for

regulation. The characteristics of the political

process which allow relatively small groups to

obtain such regulation is then sketched to provide

elements of a theory of supply of regulation. A

variety of empirical evidence and illustration is

also presented.

2.2.13 Weidenbaum, Murray L. "On Estimating Regulatory Costs."

Regulation , Vol. 2, No. 3 (May/June 1978), pp. 14-17.

Government regulation of business is one of the

growth areas of the U.S. economy. While this

activity produces both benefits and costs and

while they are of equal importance in judging

the worth of regulatory activity, only the

growth in costs is examined here. The author

estimates that in fiscal year 1979, the sum of

the administrative costs of Federal regulation

(paid by the taxpayer) and the related compliance

costs (generally passed on to the consumer in the

form of higher prices) may exceed $100 billion.

2.2.14 Weidenbaum, Murray L. "The Case of Economizing on Government Controls."

Journal of Economic Issues, Vol. 9, No. 2 (June 1975), pp. 205-218.

This article argues that government regulation of

business results in excessive costs because of

waste, bias, conflicts among regulators, and

concentration on trivia. Alternative solutions

to the problems currently addressed by regulation

are explored. Comments on this article were published in the same journal by A. T. Andersen

(June 1975) and D. W. Penn (December 1975).

36
2.2.15 Wright, Charles L. "A Note on the Decision Rules of Public Regulatory

Agencies." Public Choice, Vol. 31 (Fall 1977), pp. 151-155.

In recent years, economists have investigated the

use of market mechanisms to deal with external

diseconomies. They have also recognized that many

external diseconomies cannot be compensated by

internalization. When this occurs, the relevant

problem becomes the specification of legal

parameters for non-market regulation. This note

examines one such legal parameter, namely decision

rules of public agencies. The analysis is presented

in formal terms using the analogy of statistical

decision rules. This approach provides insight

on how a change in decision rules can reverse

a regulatory agency’s decisions without changing

its technical evaluation procedures.

2.3 Economics of Safety and Health

2.3.1 Blomquist, Glenn. "Economics of Safety and Seat Belt Use." Journal

of Safety Research, Vol. 9, No. 4 (December 1977), pp. 179-189.

A theoretical model of life-saving activity is

developed in this article. The ability of the

model to predict automobile seat belt use is

tested on a sample of 1800 drivers. Some of the

significant explanatory variables are age of driver,

male sex, and rural speed limit, all of which are positively correlated with increased seat belt

use. Future labor earnings and health also

significantly increase seat belt use. On the

other hand, high wage rates, short trips, extra

adjustment and fastening due to family demands,

and lack of education tend to decrease seat

belt use. A useful policy implication is that

consideration of time costs (including inconvenience) is imperative in formulating any

successful safety regulation.

2.3.2 Brown, David B. "Cost/Benefit of Safety Investments Using Fault

Tree Analysis." Journal of Safety Research, Vol. 5, No. 2 (June 1973), pp. 73-81. Includes 3 bibliographical references.

This paper presents a working guide to the use

of fault tree analysis to determine the benefit-cost

ratios of safety investments. Fault tree analysis

is a logical approach to identify the areas in a system that are most critical to safe operation.

Four factors are considered when evaluating a safety

alternative: (a) the severity of the accident to be

37
avoided, (b) the frequency of occurrence of the

accident, (c) the cost of the alternative, and (d)

the amount by which this alternative can reduce

the expected negative utility of the accident.

Comparisons of benefit-cost ratios can be made for

each accident to aid in allocating the safety

budget in an optimal manner.

2.3.3 Calabresi, Guido. The Costs of Accidents: A Legal and Economic

Analysis . New Haven, Conn.: Yale University Press, 1970, 340 pp.

Includes 106 bibliographical references.

This comprehensive book adopts an economic benefit-cost

framework for evaluating alternative systems of accident

law (e.g., fault insurance, social insurance and

enterprise liability). Defining the goal of accident

law as the maximum reduction of accident and accident

avoidance costs that can be achieved fairly, the author

examines the political and economic choices implied in

various approaches to reducing these costs. Then two

basic problems are discussed which all systems of

accident law must face: who should be held

responsible for accident costs, and how should

they be valued? The author analyzes the fault

insurance system now widely used and finds it wanting

on grounds both of cost reduction objectives and

fairness. In conclusion, he discusses recent

proposals for reform of the law, points out

questions they raise, and ends by indicating

that a mixed system of accident law can be developed

as an improvement over the fault system.

2.3.4 Campbell, Rita Ricardo. Food Safety Regulation: A Study of the Use

and Limitations of Cost-Benefit Analysis . Washington, D.C.:

American Enterprise Institute for Public Policy Research, 1974,

59 pp. Includes 5 pages of bibliographical references.

This study brings to the attention of the consumer

the delicate balancing of costs against benefits

and of biological risks against advantages which

is often involved in public policy decisions

regulating the safety of the U.S. food supply.

It deals with the effect of regulation on the

supply, prices, exports, and quality of U.S.

food production. The report analyzes some of

the basic biochemical problems involved within

a framework of economic analysis. An individual

case study, iron enrichment of flour and breads,

is used to clarify the conceptual problems.

This case study highlights several typical

38
scientific, economic, and ethical considerations

involved in policy making in the area of food

safety regulation.

2.3.5 Canada, John R. and Ayoub, Mahmoud A. "Economics of Safety: A Review

of the Literature and Perspective." Professional Safety , Vol. 22,

No. 12 (December 1977), pp. 31-38.

Economic considerations are normally at the core of

safety and risk management decision-making. The

decision-maker, whether in the public or private

sector, must decide how to allocate scarce

resources to achieve objectives. This article

summarizes a broad cross section of approaches

for economic decision analyses and provides

references to literature on approaches and

techniques for analyzing the economics of safety

problems

2.3.6 Cannon, James A. "Economic Analysis of Hazards." Journal of

Safety Research , Vol. 6, No. 4 (December 1974), pp. 159-165.

Includes 6 bibliographical references.

This paper presents a mathematical methodology for

the economic analysis of hazards. The analysis

consists of four parts: (1) estimation of the hazard

cost, (2) estimation of the costs of various solutions

to eliminate or mitigate the hazard, (3) elimination

of the unfeasible solutions, and (4) determination

of the optimal solution(s). Several examples of

various phases of the analysis are presented, as well as a total analysis for a hypothetical

industrial operation. The validity and accuracy

of the estimates used in the analysis are discussed.

2.3.7 Cornell, Nina W.; Noll, Roger G.; and Weingast, Barry. "Safety

Regulation." Setting National Priorities: The Next Ten Years

(edited by Henry Owen and Charles L. Schultze) . Washington, D.C.:

The Brookings Institution, 1976, pp. 457-504.

This article offers a thorough survey and analysis of

Federal safety regulation programs. In this context,

safety regulation refers to policies that seek to

prevent parties to private market transactions from

taking certain risks that they would otherwise assume. Four alternatives to Federal promulgation of mandatory

safety standards are analyzed: a pure market system of

buyer and worker beware; a system of liability laws; a no-fault liability compensation system funded by mandatory insurance or a tax on injuries; and information

programs. The authors conclude that standards are

39
called for in two instances: when decisions are numerous and information complex, and when the nature

of the hazard is uncertain. The article recommends

that the focus of regulatory efforts be switched from

preventing industrial accidents to the more complex

problem of reducing health hazards. Other recom- mendations are: that more research funds be given to

the regulatory agencies; that greater reliance be

placed on information programs; that Congress establish a system of fines for noncompliance; and that

bounties be offered for identifying firms not in

compliance.

2.3.8 Epple, D. and Raviv, A. "Product Safety: Liability Rules, Market

Structure, and Imperfect Information." The American Economic Review , Vol. 68, No. 1 (March 1978), pp. 80-95.

In this paper, a durable good that fails randomly

is considered. Failure of the good results in a loss,

which consists of damages and possibly the destruction

of the good itself. The safety characteristics are determined by the manufacturer. The effects of

market structure and liability rules on the chosen

characteristics of the good are determined. Analysis

of the desirability of alternative liability rules

is based on the determination of their effects on consumer welfare. Product safety and consumer

welfare are shown to depend on the terms of available

insurance contracts and the extent of consumers’

information regarding the safety characteristics

of the product.

2.3.9 Fromm, Gary. "Aviation Safety." Journal of Law and Contemporary

Problems , Vol. 33 (1968), pp. 590-618.

This paper reviews the growth of aviation activity,

estimates accident rates and costs (including the

value of human life) , and describes some potential

measures for accident prevention. There is a discussion of a proposal to provide for no-fault

compensation of aviation accident victims.

2.3.10 Fujii, Edwin T. "On the Value of Information on Product Safety: An

Application to Health Warnings on the Long Run Medical Implications

of Cigarette Smoking." Public Finance , Vol. 30, No. 3 (1975),

pp. 323-332. Includes 12 bibliographical references.

This study develops the welfare economics underlying

the valuation of information provided consumers on product hazards. It provides a willingness-to-pay

estimate for a public good, information. The

methodology is then applied to recent warnings on the

AO
long-run medical implications of cigarette smoking.

The results indicate that consumer valuation of the

information provided by the Surgeon General’s report on smoking and health (1964) amounted to a minimum of

$48 million per year.

2.3.11 Grabowski, Henry G. and Vernon, John M. "Consumer Product Safety

Regulation." American Economic Review, Vol. 68, No. 2 (May 1978),

pp. 284-289.

This paper analyzes the behavior and performance

of the two principal agencies engaged in product

safety regulation: the Food and Drug Administration

and the Consumer Product Safety Commission. The

authors show that the priority rankings established

for regulatory efforts are clearly inconsistent with

benefit-cost analysis. Product safety regulators

are seen to rely solely on direct controls (product

bans and standards) and to be concerned with the

benefits only, as measured in the number of lives

saved and accidents avoided. The authors argue that

costs of controls must also be considered for

efficient allocation of resources.

2.3.12 Hendrickson, Paul L.; McDonald, Craig L.; and Schilling, A. Henry.

Review of Decision Methodologies for Evaluating Regulatory Actions

Affecting Public Health and Safety . Report No. BNWL-2158UC-11

.

Prepared by Battelle Pacific Northwest Laboratories for the U.S.

Nuclear Regulatory Commission, Washington, D.C., December 1976,

108 pp. Includes 14 bibliographical references.

This report examines several aspects of the problems

and choices facing the governmental decision maker who

must take regulatory actions with multiple decision

objectives and attributes. Particular attention is

given to the problems facing the U.S. Nuclear Regulatory

Commission and to the chief concern of that agency —

the protection of human health and safety. The study

examines quantitative and qualitative approaches

to achieving maximum reduction in health risk at

minimum implementation cost. The report concludes

that rational approaches considering the value and

impact of proposed regulatory actions are available.

2.3.13 Kunreuther, Howard and Slovic, Paul. "Economics, Psychology and

Protective Behavior." American Economic Review , Vol. 68, No. 2 (May 1978), pp. 64-69.

It is argued that policy makers responsible for

protecting society from natural and technological

hazards need to understand the ways in which people

41
think about risk and uncertainty. Without such

understanding, well-intended policies may not achieve

their goals and, indeed, may even backfire. Because

rationality is "bounded," utility theory is rejected

as a guide for policy. The authors call instead for

systematic empirical investigations that employ

multiple methods of observation and analysis.

2.3.14 Lave, Lester B. "Risk, Safety, and the Role of Government."

Perspectives on Benefit-Risk Decision Making (Report of a colloquium

conducted by the Committee on Public Engineering Policy, National

Academy of Engineering, April 26-27, 1971). Washington, D.C.: The

National Academy of Engineering, 1972, pp. 96-108. Includes 14

bibliographical references.

Transportation safety is predominantly a private risk

and air pollution is predominantly a public risk.

This article considers these two cases in detail - including problems and suggestions for optimizing

safety. Market failures relevant to safety are also catalogued, and the role of government in the

safety area is examined.

2.3.15 Lave, Lester B. "Safety in Transportation: The Role of Government."

Law and Contemporary Problems , Vol. 33 (Summer 1968), pp. 512-535.

This paper begins with a simple model of transportation

safety in a society with no liability laws and no government controls on transportation but in which the

individual can insure himself against certain risks. In

such a society, insurance has a somewhat remarkable role,

although chaos is the rule. Next, liability laws are introduced. With liability laws and insurance,

individuals are encouraged to act in such a way that

a more nearly optimal level of transportation safety

is reached, although practical and theoretical considerations prevent such a society from achieving the

optimal level of safety. The need for government

action in these circumstances is then discussed.

Finally, some current federal safety programs are examined.

2.3.16 Mellinger, Glen D. et al . "A Mathematical Model with Applications to

a Study of Accident Repeatedness Among Children." Journal of the

American Statistical Association , Vol. 60, No. 312 (December 1965),

pp. 1046-1059. Includes 15 bibliographical references.

In this article, four sets of accident data obtained in

a study of childhood accidents are used to determine

how well accident liability is measured by the

observed number of accidents. The authors find that

42
for this data the number of accidents does serve

as a criterion of accident liability. It is also

shown that for the number of accidents to serve well requires rigorous accident criteria, large

groups from which to select accident repeater

study groups, and accident histories for prospective

subjects extending over long periods of time.

2.3.17 Oi, Walter Y. "Safety at Any Price?" Regulation , Vol. 1, No. 6

(November 1977), pp. 16-23. Includes 10 bibliographical references.

This essay provides a general overview of the economic

issues of safety and its regulation. The basic premise of the author is that individuals maximize the

difference between perceived benefits and perceived

costs. The willingness to pay for safety (higher

prices for safer products or lower wages for safer

jobs) depends on the probability of an accident

and the cost inflicted by the accident. The author

argues that the cost of increased safety through

standards and information programs should be weighed

against the benefits.

2.3.18 Oi, Walter Y. "The Economics of Product Safety." The Bell Journal

of Economics and Management Science , Vol. 4, No. 1 (Spring 1973),

pp. 3-28. Includes 27 bibliographical references.

This article challenges the belief that a shift in the

assignment of liability for accident costs from consumers

to sellers would discourage sales of the more hazardous

product grades, thereby reducing the frequency and severity

of home accidents. The theory developed in this paper

argues that the demand for a risky product is

determined by the full price, consisting of the price

of the risky good itself plus the imputed expected

damage costs. The consumer maximizes utility by

demanding that product grade which minimizes his

full price. Under the assumptions of this model,

a shift to producer liability is shown to lead to

the increased production of riskier product grades.

In the Autumn 1974 issue of the same journal,

Goldberg criticizes Oi's assumption of full consumer

information about product risks and argues in favor

of product bans and liability rules as means of

providing information. In the same issue, Oi

responds by modifying the model to analyze the

implications of imperfect consumer information

concerning single-parameter product risks.

43
2.3.19 Spengler, J. J. "The Economics of Safety." Law and Contemporary

Problems, Vol. 33, No. 3 (Summer 1968), pp. 619-638.

This article considers two basic questions which

are fundamental to the economics of safety. The

first question is how an optimal balance can be

achieved between the value of varying degrees of

safety and the cost of providing these degrees. The

other inquiry concerns how combinations of rewards

and penalties can give rise to a degree of safety

that is neither excessive nor deficient but optimal

in the sense that its value and cost are in balance.

2.3.20 Yandle, Bruce, Jr. "Products Liability, Risk and Economic Efficiency."

Journal of Risk and Insurance , Vol. 41, No. 4 (December 1974), pp. 699-709.

This article analyzes certain economic effects associated

with differing liability assignments between buyers

and sellers. A three-actor model involving buyers, a producer-seller, and an insurance institution is

developed under varying assumptions. The question

of economic efficiency is approached by attempting

to identify the potential gainers and losers

under three possible regimes: (1) Where the buyer assumes all product liability; (2) Where the

producer-seller assumes liability; and (3) Where

the producer-seller removes the hazard which is

the source of the risk. Finally, the movement

toward producer liability is analyzed via a political-economic framework.

2.4 Valuation of Human Life

2.4.1 Acton, Jan Paul. Evaluating Public Programs to Save Lives: The Case

of Heart Attacks . Report No. R-950-RC. Santa Monica, Calif.: The

Rand Corporation, January 1973, 136 pp. Includes 10 pages of

bibliographical references.

This report presents a methodology for evaluating health

programs that save lives by structuring the problem

as one in decision making under uncertainty and by

developing a willingness-to-pay measure of the worth

of the program. The procedure is designed for

application to general public evaluation problems

where a benefit-cost analysis is appropriate.

2.4.2 Akehurst, R. L. and Culyer, A. J. "On the Economic Surplus and the

Value of Life." Bulletin of Economic Research (November 1974),

pp. 63-78. Includes 32 bibliographical references.

In this article, it is suggested that the appropriate measure of the value of human life in benefit-cost

44
studies be one half of earned income plus some additional supplementary amounts to allow for transfer

payments, overtime, and other features of everyday

life. In advocating this measure, the authors

reject the common view that earnings necessarily

understate the value of life.

2.4.3 Bailey, Martin J. "Safety Decisions and Insurance." American Economic

Review , Vol. 68, No. 2 (May 1978), pp. 295-298.

This brief paper shows how consumer choices between

safety and insurance can in principle reveal a cardinal

utility function unique up to a linear transformation.

In the case of persons with no assets who buy

insurance it is shown that the value of life implicit

in safety choices exceeds discounted lifetime

earnings. The lower bound for this value is

a simple function of the loading charge of the

insurance and the amount of insurance purchased.

2.4.4 Conley, Bryan C. "The Value of Human Life in the Demand for Safety."

The American Economic Review , Vol. 66, No. 1 (March 1976), pp. 45-55.

Includes 17 bibliographical references.

The stated purposes of this theoretical article are:

1) to extend the traditional model of individual

maximization to include the effects of choices

involving a changed probability of living; and 2)

to determine the value of human life with reference

to an individual's wealth and utility function

characteristics. The major theoretical result is

that for most income levels, the value of lifesaving exceeds discounted lifetime earnings, so that the latter measure could serve as a lower

bound for valuing human life in benefit-cost studies

of safety standards. Two comments on this article

and a reply were published in the September 1978

issue of the same review. Cook offers a simpler

version of the same model but questions the

generality of Conley's result. Jones-Lee also

points out several limitations that restrict the

generality of Conley's conclusion. In reply, Conley

introduces the concept of subsistence income to his

model to show that the value of life-saving is always

greater than lifetime consumption (where consumption

and income are defined net of subsistence expenditures).

45
2.4.5 Cornell, M. et^ al_. A Survey of Methods for Estimating the Cost Value

of a Human Life . Report No. CG-D-66-76. Prepared by Operations

Research, Inc. for the U.S. Coast Guard, Washington, D.C., May 1976,

45 pp. Includes 14 bibliographical references.

This report presents a literature search of existing

methods and philosophies for the valuation of human

life. A survey is also made of various federal, state,

and local agencies and organizations to determine how

life valuation methods are currently being applied to

make funding decisions within these organizations.

The various methods and costing components defined by

these surveys are compared and examined for potential

application to Coast Guard benefit-cost analyses.

2.4.6 Ghosh, D.; Lees, D.; and Seal, W. "Optimal Motorway Speed and Some

Valuations of Time and Life. " Manchester School of Economics and

Social Studies , Vol. 43, No. 2 (June 1975), pp. 134-143.

The paper analyzes the relationships between speed,

accidents, and fuel consumption in order to reveal

some of the trade-offs made by individuals and governments in their choice of speed and speed limits. A

formula for optimal average speed is derived from a general model of these relationships. The model also

requires estimates of the technical relationships

between speed and accidents, and speed and fuel

consumption. The former is estimated using a production function approach to accident causation.

The mirror image of the model is also investigated

by estimating the shadow prices of life and time

implied by the observed average speed.

2.4.7 Hayzelden, J. E. "The Value of Human Life." Public Administration,

Vol. 46 (1968), pp. 427-441.

This article shows that a figure for the value of

human life is often required in social benefit-cost

studies and outlines some of the ways in which such

a calculation may be made. The main approach proposed

is to base the value of life on the earnings of a typical individual and to use the same value in

all studies relating to similar circumstances.

2.4.8 Jones-Lee, M. W. The Value of Life: An Economic Analysis . Chicago:

University of Chicago Press, 1976, 162 pp. Includes bibliographical

references

.

This book represents a major contribution to the

value of life literature. The work focuses on developing a procedure for placing a value on a lower

46
mortality rate resulting from increased public expenditures on safety measures. The author attempts to

define the value of life in a form amenable to economic

analysis and to develop a framework within which the

value of life question may be answered, at both a qualitative and quantitative level. The book includes

an index and an excellent review of the literature

on the value of life and safety improvements and a brief exposition of several aspects of the theory

of choice under uncertainty.

2.4.9 Linnerooth, Joanne. "The Value of Human Life: A Review of the Models.

Economic Inquiry , Vol. 17, No. 1 (January 1979), pp. 52-74.

Includes 41 bibliographical references.

This paper reviews four consumer maximization models

where the probability of premature death enters as a variable that is both known to the consumer and under

his control. These models generate a number of

interesting results with respect to a person’s

willingness-to-pay for an increased chance of living.

The most useful to the benefit-cost analyst is the

derived relationship between this willingness-to-pay

value and a person's lifetime earnings, and thus the

relationship between the theoretically correct

willingness-to-pay approach to the valuation of lifesaving programs and the widely-used human-capital

approach. However, the conclusions of the reviewed

models are in this regard conflicting. Two of the

models establish a theoretical basis for investigating

the correlation of these two measures; however, this

basis is shown to follow from an unrealistic assumption

concerning the person's lifetime utility function.

The remaining two models, although based upon more

realistic assumptions, do not claim to provide

theoretical grounds for making such investigations.

The conclusion of this review is that in the absence

of available data on personal demand for increased

survival probability it is impossible to determine the

relationship between the willingness-to-pay and the

human-capital approaches to placing a value on human

life.

2.4.10 Melinek, Stanley J. "A Method of Evaluating Human Life for

Economic Purposes." Accident Analysis and Prevention , Vol. 6 (October 1974), pp. 103-114. Includes 32 bibliographical references.

A method of estimating a monetary value of life which

can be used for the evaluation of safety precautions is

presented. People are willing to spend money to reduce

the risk of accidents, or alternatively to increase the

probability of some benefit. The method described

47
endeavors to estimate the value of life which is

consistent with such behavior. Examples of the

application of this method are given which indicate

that the value of a life is of the order of £50,000.

The results obtained are compared with values given

by discounted earnings. The importance of and factors

influencing perceived risk are also considered.

2.4.11 Mishan, E. J. "Evaluation of Life and Limb: A Theoretical Approach.

Journal of Political Economy , Vol. 79, No. 4 (July/August 1971),

pp. 687-705. Includes 14 bibliographical references.

This article reviews the existing methods of evaluating

the loss of life, or assessing an increase or reduction

in accidents resulting from investment projects. The

author finds that none of these methods is consistent

with a basic principle of existing allocation theory

and benefit-cost analysis. This principle states that

a public investment represents an improvement only if

at least one person is made better off and nobody is

made worse off. Strict application of this principle

to changes in accidents and fatalities requires a calculation of those sums which compensate each person

in the community for the additional risk to which he is

to be exposed. The various categories of risk which

must be compensated are discussed at length. This

article represents the clearest exposition of the

willingness-to-pay approach to valuing human life.

2.4.12 Needleman, L. "Valuing Other People’s Lives." Manchester School of

Economics and Social Studies, Vol. 44, No. 4 (December 1976),

pp. 309-342.

This paper presents valuations of changes in the risk

of dying by the relatives of those at risk. What

individuals will pay to reduce their relative's risk

by a given amount depends on their wealth and their

concern for their relative's safety. The degree of

concern is defined and estimated for different

relationship groups using U.S. kidney transplant data.

2.4.13 Rhoads, Steven. "How Much Should We Spend to Save a Life?" The

Public Interest (Spring 1978), pp. 74-92.

This article provides a general survey of benefit-cost

approaches to valuing life, concentrating on "willingness to pay" (WTP) and "discounted future earnings"

(DFE) and their applications. The commonly used

DFE approach involves calculating what future income

would have been, given a normal life terra. This

figure is then discounted to give the value of life

for the average member of the group in question.

In contrast, the WTP approach tries to determine

48
I

preferences based on the willingness of individuals

to pay for reductions in risk. The author argues

that neither approach is completely satisfactory

and that their use must be supplemented with

political judgment.

2.4.14 Schelling, T. C. "The Life You Save May Be Your Own." Problems

in Public Expenditure Analysis (edited by S. B. Chase, Jr.).

Washington, D.C.: The Brookings Institution, 1968, pp. 127-162.

1

This is one of the first articles to discuss the

value of life in terms of what individuals would be

willing to pay for a reduction in the probability

of death. The author considers the impact of one's

death upon the economic circumstances of one's

family, the impact upon the distribution and

magnitude of the tax burden on society, and also

the extent to which life insurance schemes provide

an opportunity for individuals to share the

financial losses occasioned by death. The author

favors the use of direct surveys to discover what

individuals would be willing to pay for a reduction

in the risk of death.

2.4.15

I

Thaler, B. and Rosen, S. "The Value of Saving a Life: Evidence

from the Labor Market." Household Production and Consumption

(edited by Nestor E. Terleckyj). New York: Columbia University

Press, 1976, pp. 265-297.

2.4.16

1

In this paper, the value of life is estimated from

data on the risk premium that workers demanded for

dangerous jobs. For the sample of 907 workers

studied, the value of life was estimated to be

about $200,000.

Zeckhauser, Richard. "Procedures for Valuing Lives." Public Policy,

Vol. 23, No. 4 (Fall 1975), pp. 419-464.

i

!

The process of valuing lives involves and reflects

many of the most basic beliefs and institutions of

society. The legitimacy and acceptability of the

process itself may exert a significant influence on welfare. This essay argues that economists have

much to contribute to the life-valuation discussion

and that economics as a discipline can provide much

needed organization and insight to this complex

problem.

49
3.0 EVALUATION OF SPECIFIC DEVELOPED STANDARDS

3.1 Safety and Health Standards

3.1.1 Bolt, Beranek, and Newman, Inc. Technological Feasibility Assessment

and Economic Impact Statement of the Proposed Beryllium Regulation . Washington, D.C.: U.S. Occupational Safety and Health Administration,

April 1977, 130 pp. NTIS No. PB-268-982.

The technology feasibility, benefits, costs of

compliance, and economic impact of complying with

the current OSHA standard for exposure to beryllium

of 2-micrograms/cu m, with the proposed 1 microgram/cu

m 8-hr time-weighted average (TWA) exposure limit

and with an alternate 0.5 micrograms/cu m exposure

limit are examined in this report. Compliance with

the current exposure level and with the proposed

1 microgram/cu m exposure limit can be achieved

with existing technology; compliance with the

alternate 0.5 micrograms/cu m exposure limit would

require extensive adaptation of present technology,

however. Incremental capital expenditures for

moving to compliance with the proposed 1 microgram/cu

m level are estimated to be $6.1 to $7.9 million.

3.1.2 Broussalian, V. L. "Risk Measurement and Safety Standards in

Consumer Products." Household Production and Consumption: Studies in

Income and Wealth , Vol. 40 (edited by Nestor E. Terleckyj). New York:

National Bureau of Economic Research, 1976, pp. 491-524.

The author examines the problem of measuring risk when

the primary purpose of the measurement is to decide

whether a safety standard can be justified. Since

the standard would be required only if the hazard

was judged to be unreasonable, the author develops

a criterion of reasonableness based on economic

theory. This criterion is then applied to an illustrative case.

3.1.3 Broussalian, V. L. Considerations in the Use of Sampling Plans

for Effecting Compliance With Mandatory Safety Standards . National

Bureau of Standards Internal Report 75-697. Washington, D.C.,

June 1975, 54 pp. Includes 17 bibliographical references.

In this report, various means available to a regulator

for gaining compliance with mandatory safety standards

are examined. Particular attention is given to the

option of mandating a sampling plan or scheme along with

the standard. It is concluded that this option as well

as the other identified are all viable under suitable

conditions and should be available to the regulator

for possible application on a case by case basis.

50
3.1.4 Dardis, Rachel; Aaronson, Susan; and Lin, Ying-Nan. "Cost-Benefit

Analysis of Flammability Standards." American Journal of Agricultural

Economics , Vol. 60, No. 4 (November 1978), pp. 695-700. Includes

26 bibliographical references.

This paper investigates the role of cost-benefit

analysis in determining whether product safety

regulations are in the public interest and applies

such analysis to an evaluation of flammability

standards for children's sleepwear. The results

indicate the feasibility of applying cost-benefit

analysis to an evaluation of safety regulations.

Limitations of the study include the omission of

the indirect costs of the standards and the neglect

of reduced pain and suffering in the measurements

of benefits.

3.1.5 Doern, G. Bruce. "The Political Economy of Regulating Occupational

Health: The Ham and Beaudry Reports." Canadian Journal of Public

Administration , Vol. 20 (Spring 1977), pp. 1-35.

This article examines the content and findings of

the report of the Ham Royal Commission on health

and safety of mine workers and of the preliminary

report of the Beaudry inquiry into health in the

Quebec asbestos industry. The reports are analyzed

in relation to a case study and in the broader

context of the political economy of regulating

occupational health. The analysis suggests that

interdepartmental jurisdictional conflicts were

the main cause of past regulatory inadequacies.

3.1.6 Grabowski, Henry G. and Vernon, John M. "Consumer Protection Regulation in Ethical Drugs." American Economic Review , Vol. 67, No. 1 (February 1977), pp. 349-364.

This paper examines some undesirable or unintended

side effects of government regulation on the

structure of innovation in the pharmaceutical

industry. Recent changes in the regulatory

environment in ethical drugs are reviewed and

shown to be a major factor leading to higher costs

and risks in pharmaceutical innovation. Then

significant shifts are shown to have also occurred

in the structure of innovation in this industry.

Namely, innovation has become more concentrated

in large multinational drug firms. These firms

are apparently in a better financial position

to deal with the higher costs and risks of innovation and also can shift resources on a worldwide

basis to offset some of the adverse impact of

51
regulations in this country. Some evidence con- cerning these international transfers is presented in the last part of the paper.

3.1.7 Grabowski, Henry G.; Vernon, John M.; and Thomas, Lacy Glenn.

"Estimating the Effects of Regulation on Innovation: An International

Comparative Analysis of the Pharmaceutical Industry." The Journal

of Lav and Economics , Vol. 21, No. 1 (April 1978).

A range of hypotheses to explain the declining rate

of innovation in the pharmaceutical industry are proposed and analyzed based on a comparison of

developments in the United States and the United

Kingdom. In particular, the impact of increased

regulatory controls in the United States (stemming

from the 1962 amendments to the 1938 Federal Food,

Drug, and Cosmetic Act) is separated from other

factors by using the U.K. industry as a control.

Firms in the latter country have been governed

by a very different regulatory system but are similar to U.S. firms in most other ways.

3.1.8 JRB Associates, Inc. Economic Impact Assessment of the Occupational

Safety and Health Administration's Proposed Standard for Occupational

Exposure to 1,2 Dibromo-3-Chloropropane . Washington, D.C.: U.S.

Occupational Safety and Health Administration, October 31, 1977, 89 pp.

NTIS No. PB-278-301

Based on information received from manufacturers and

formulators of 1,2 dibromo-3-chloropropane (DBCP),

governmental agencies, analytical laboratories, and

suppliers of pollution control equipment, major

findings and conclusions of this report are:

(1) Compliance with the proposed standard on DBCP is

technologically feasible; (2) The average capital cost

of compliance for plants manufacturing DBCP is

estimated at approximately $1.1 million with

an annual operating cost of approximately $50,000;

(3) The average capital cost of compliance for existing

plants which formulate DBCP Is estimated at

approximately $610,000 with an annual operating cost

of $12,500; (4) Because of the high capital cost of

compliance, it is expected that many formulators

will discontinue formulated DBCP, which represents

only 2-4% of total sales of average formulators;

thus reducing the number of plants formulating

DBCP; (5) The total capital cost of compliance with

the proposed standard is estimated to be about $9.5

million and the annual operating cost about $450,000;

when amortized, the combined annual cost of compliance

would be $1.95 million.

52
3.1.9 Lave, Lester B. "Product Safety: An Economic View." Standardization

News , Vol. 1, No. 2 (February 1973), pp. 14-21.

This article argues that the economically optimal

level of safety is less than what is technically

feasible; that consumers should have more freedom

and information to choose among products with a range of safety; that regulatory agencies should

avoid setting high minimum standards of safety

for products; and that the market has generally

worked quite well to incorporate the correct level

of safety in products, in spite of the millions

of injuries each year. A benefit-cost analysis

for four automobile safety features first

required in 1968 cars is used as an example of

the proper decision process.

3.1.10 Little (Arthur D.), Inc. Technology Assessment and Economic Impact

Study of an OSHA Regulation for Benzene, Volumes I and II . Washington,

D.C.: U.S. Occupational Safety and Health Administration, May 1977.

NTIS Nos. PB-268-862 and PB-268-863.

The technological feasibility and economic impact

of the proposed OSHA regulation for exposure to

benzene is assessed in this report. The potential

health benefits of the proposed standard, estimated

to affect 30,000 employees currently exposed above

the 1 ppm level, are related to a possible reduction

in the incidence of blood abnormalities including

possibly leukemia. Estimated compliance costs of

implementing the proposed standard for benzene

are $267.3 million for capital investment, $124

million for first year operating costs, and $74.3

million for recurring operating costs. The costs

to industry for complying with the proposed

regulation are reflected in both capital costs

for engineering controls and increased operating

costs related to medical surveillance, exposure

monitoring, training, and record-keeping. Volume

II contains appendixes covering: the potential

for worker exposure to benzene in the chemical

process industries; descriptions of benzenerelated industries including service stations;

compliance costs; and engineering controls.

3.1.11 Muelhause, Carl 0. "A Cost/Benefit Framework for Consumer Product

Safety Standards." Journal of Research of the National Bureau of

Standards , Vol. 83, No. 5 (September-October 1978), pp. 459-483.

The effect of a mandated consumer product safety standard on the net public benefit is expressed in terms

of the difference between two market states (pre- and

53
post-standard), each of which is assumed to be in

static equilibrium. The analysis is facilitated

by treating the post-standard state as one which

can be "derived" from the pre-standard state by

1) expanding the production cost and demand

functions around their initial market values and

2) introducing modifications in the production cost

function required for compliance with the standard.

A gain in net benefit would imply that promulgation

of the standard is favorable. This approach is

applied to a case study of the upholstered furniture

industry, which may be subject to a certain fire

prevention standard.

3.1.12 National Commission on Product Safety. Industry Self-Regulation:

Supplemental Studies, Volume II (A Staff Report) . Washington, D.C.:

National Commission on Product Safety, June 1970.

Part IV of this report, "Economic Factors," contains

a number of economic (mainly cost) studies of

specific safety standards or programs: quality

control in bottling; a safety vent for aerosol

cans; substitution of tempered glass for annealed

glass in buildings; hazards from rotary lawn mowers. In addition, there is a methodology

for estimating costs of injuries from household

products and a report on the use of cost data

in planning a safety program.

3.1.13 Pachauri, R. K. "The Economics of Occupational Health and Safety."

Journal of Safety Research , Vol. 10, No. 2 (Summer 1978), pp. 78-86.

This paper develops a theoretical framework for

examining the economic effects of the Occupational

Safety and Health Act (OSHA) of 1970. Relevant

work done by other economists on this subject is

reviewed, and a model is developed that attempts

to conceptualize the decisions of a profit-maximizing

firm in relation to employment levels and expenditures on safety measures. The mathematical model

uses neo-classical theory to examine the effects

of safety legislation both in a risk-neutral

labor market and a risk-averse labor market.

Some inferences on the effects of OSHA are drawn

using the theoretical model derived in the paper.

54
3 . 1.14 Peltzman, Sam. "An Evaluation of Consumer Protection Legislation:

The 1962 Drug Amendments." Journal of Political Economy , Vol. 81,

No. 5 (September/October 1973), pp. 1049-1091. Includes 18

bibliographical references.

The 1962 drug amendments seek to prevent wasted

expenditure stimulated by exaggerated claims for

effectiveness of new drugs by requiring premarketing

approval of all new drug claims by the Food and

Drug Administration. This article shows that the

costs of complying with this requirement have

engendered a marked reduction in drug innovation.

Consumer surplus analysis is then adapted and

supplemented with "expert" drug evaluations to

estimate the relevant benefits and costs. The

main finding is that benefits forgone on effective

new drugs exceed greatly the waste avoided on ineffective drugs. The estimated net impact

is equivalent to a 5-10 percent tax on drug

purchases.

3 . 1.15 Peltzman, Sam. "The Effects of Automobile Safety Regulation." Journal

of Political Economy , Vol. 83, No. 4 (August 1975), pp. 677-725.

Includes 28 bibliographical references.

Technological studies imply that annual highway

deaths would be 20 percent greater without the

legally mandated installation of various safety

devices on automobiles. In this article, the

author argues that these studies ignore offsetting effects of nonregulatory demand for safety

and driver response to the devices. The author

finds that those offsets are virtually complete,

so that regulation has not decreased highway deaths.

Time-series data imply some saving of auto occupants'

lives at the expense of more pedestrian deaths and more

nonfatal accidents, a pattern consistent with expected

driver response to regulation.

3.1.16 Pennington, John and Bouland, Heber. "Evaluating Benefits and Costs of

Auto Safety Standards." The GAO Review , Vol. 10, No. 4 (Fall 1976),

pp. 36-42.

This article reports on a benefit-cost analysis of

the auto safety features required to be introduced

in the model years 1966 through 1970. Using accident

data from North Carolina, nationwide estimates of the

benefit-cost ratios were found to range from 0.5 to

1.9, for assumed values of a life saved of $52,000

and $200,000, respectively. It is suggested that

the corresponding ratios for safety features

introduced between 1971 and 1974 are even lower.

55
Limitations to the study include the fact that

nationally representative accident-cause data

were not available, there is a difficulty in

separating benefits from different sources,

manufacturers were reluctant to reveal safety

feature costs and there are no universally

acceptable dollar values for lives saved and

injuries avoided.

3.1.17 Research Triangle Institute. Cotton Dust: Technological Feasibility

Assessment and Inflationary Impact Statement, Parts I and II . Washington, D.C.: U.S. Occupational Safety and Health Administration,

July 1976. NTIS Nos. PB-263-613 and PB-263-614.

Part I of this report contains information on the

estimated benefits of control of cotton dust under

the proposed standard, the feasibility of controls,

implementation costs, the economic analysis of the

textile industries, and the inflationary impact

of the proposed standard. Part II contains six

appendixes providing supplemental information and

detailing the methodology used in sections of the

analysis. These appendixes are: A. Cotton processing

operations and technologically feasible engineering

controls; B. Cost estimating procedures and detailed

results; C. The cotton industry economic environment;

D. Financial impacts of OSHA standard for 35 publiclyowned major textile companies; E. The input-output

price model; F. NIOSH recommended standard for

occupational exposure to cotton dust.

3.1.18 Settle, Russell Franklin. The Welfare Economics of Occupational Safety

and Health Standards . Unpublished Ph.D. dissertation, The University

of Wisconsin-Madison, 1974, 319 pp.

The central questions addressed by this dissertation are: (1) Under what circumstances "ought"

governments to intervene in the private market's

provision of occupational safety and health?

(2) Given a governmental decision to intervene,

under what circumstances are occupational safety and

health standards the least-cost policy instrument

for attaining the desired levels and types of job

safety and health? The workings of the perfectly

competitive, full-information model are taken as

a normative benchmark for assessing the "desirability"

(on allocative efficiency grounds) of governmental

interventions in private occupational safety and

health (OSH) decisions. Next, a framework for

evaluating the social costs and benefits of governmental action to alter the private market's

provision of OSH—that is, for identifying actual

56
market failures—is developed. Finally, the

efficiency implications of two principal policy

instruments for improving OSH (namely standards

and tax-subsidy measures) are investigated and

compared.

3.1.19 U.S. General Accounting Office. Need to Improve Benefit-Cost Analyses

in Setting Motor Vehicle Safety Standards . Report No. B01-64497(3)

Washington, D.C., July 1974. (Report to the Committee on Commerce,

U.S. Senate).

This report discusses the National Highway

Traffic Safety Administration's capability of

making benefit-cost analyses of motor vehicle

safety standards. It compares the Administration's

estimate of accident costs with estimates of the

National Safety Council and an Office of Science

and Technology Ad Hoc Committee.

3.1.20 Viscusi, W. Kip. "The Impact of Occupational Safety and Health

Regulation." The Bell Journal of Economics (Spring 1979),

pp. 117-140. Includes 24 bibliographical references.

Occupational health and safety regulation imposes on enterprises an expected penalty that is positively

related to the presence of unsafe working conditions

for firms not in compliance with the standards. Higher

expected penalties will increase enterprises' investment in work quality inputs, which in turn will lead

workers to reduce their safety-enhancing actions.

Low and moderate expected penalty levels increase

health and safety, whereas very severe penalties may

have a counterproductive effect. Present OSHA

penalty levels are too low to create an effective

financial incentive. The analysis of pooled time

series and cross section data on industry health and

safety investments and injury rates for the 1972-1975

period failed to indicate any significant OSHA impact

for the data set analyzed.

3.1.21 Wu, Roland Y. "A Microeconomic Analysis of Highway Speed Limitation."

Economic Inquiry , Vol. 14, No. 2 (June 1976), pp. 309-312.

This paper demonstrates that the total effect of a lower speed limit can be decomposed into two effects:

A technical effect due to the greater efficiency of

the automobile operated at lower speeds, and an induced effect due to the change in demand for

automobile travel. The former effect is always

positive, meaning a parallel change in speed and

gasoline consumption. The second effect is either

positive or negative, so that theoretically the

direction of the total effect is uncertain.

57
Simulation analysis indicates that the second

effect is also positive so that the speed

regulation will yield a larger percentage saving

in fuel than was originally anticipated from the

technical effect alone.

3.2 Environmental Standards

3.2.1 Baumol, W. J. and Oates, W. F. "The Use of Standards and Prices for

Protection of the Environment." Swedish Journal of Economics , Vol. 73,

No. 1 (March 1971), pp. 42-54.

This paper proposes the establishment of a set of

somewhat arbitrary standards of environmental

quality (e.g., the dissolved oxygen content of a waterway will be above a specified percent at

least 99 percent of the time) and then the

imposition of a set of charges on waste emissions

sufficient to attain these standards. While such

resource-use prices clearly will not in general

produce a Pareto-efficient allocation of resources,

it is shown that they nevertheless do possess

some important optimality properties and other

practical advantages. In particular, it is

proved that, for any given vector of final

outputs such prices can achieve a specified

reduction in pollution levels at minimum cost

to the economy, even in the presence of

firms with objectives other than that of simple

profit maximization.

3.2.2 Bishop, Richard C. "Endangered Species and Uncertainty: The Economics

of a Safe Minimum Standard." American Journal of Agricultural

Economics , Vol. 60, No. 1 (February 1978), pp. 10-18. Includes

25 bibliographical references.

Species extinction irreversibly narrows the

reservoir of potential resources. The future

repercussions of this narrowing are uncertain.

This paper develops the safe minimum standard

(SMS) approach to public decisions involving

endangered species. The SMS approach is based on game theory and calls for avoidance of extinction

unless the social costs are unacceptably large.

The paper also explores important linkages

between the SMS approach and recent literature

on preservation of natural environments.

58
3.2.3 Chugh, Lai. C.; Hanemann, M.; and Mahapatra, S. "Impact of Pollution

Control Regulations on the Market Risk of Securities in the U.S."

Journal of Economic Studies , Vol. 5, No. 1 (May 1978), pp. 64-70.

Includes 10 bibliographical references.

The purpose of this paper is to examine the effects

of the recent water and air pollution control

legislation in the United States upon the stock

market risk of the firms in the most directly

affected industries, such as chemicals, electric

utilities, iron and steel, petroleum, nonferrous

metals and textiles. The results suggest that

the market risk of these affected industries

has increased during the Seventies—the period

when EPA emission and effluent standards began to be

enforced. Although the impact of each specific

standard is not assessed, the study is useful in

indicating the general trend of one type of impact

resulting from environmental standards.

3.2.4 Dorfman, N. S. and Snow, A. "Who Will Pay for Pollution Control?

The Distribution by Income of the Burden of the National Environmental

Protection Program, 1972-1980." National Tax Journal, Vol. 28, No. 1 (March 1975), pp. 101-115.

The incidence of the burden of the federally

mandated environmental protection program is

measured in this article, based on cost estimates

for the years 1972, 1976, and 1980. Data in the

Brookings Institution's MERGE File are used to

distribute the burden among households by income

class. The incidence of the total burden turns

out to be mildly regressive in 1972, and more

regressive than a general sales tax by 1980.

3.2.5 Fisher, Anthony C. and Peterson, Frederick M. "The Environment in

Economics: A Survey." Journal of Economic Literature , Vol. 14, No. 1 (March 1976), pp. 1-33.

This survey article provides an excellent and

comprehensive review of the literature on environmental economics. Numerous bibliographical

references are included.

3.2.6 Harrison, David, Jr. "Controlling Automotive Emissions: How to Save

More Than $1 Billion Per Year and Help the Poor Too." Public Policy , Vol. 25, No. 4 (Fall 1977), pp. 527-553. Includes 15 bibliographical

references

.

This paper analyzes federal policy on automotive

tail pipe emissions, suggesting that the current

strategy be modified to permit new car emissions

59

I
to vary for cars sold in different areas. The

empirical estimates focus on a two-car strategy

in which automobiles registered in polluted urban

areas would continue to be subject to the strict

standards mandated by the 1970 Clean Air Act,

while autos registered in relatively unpolluted

urban areas and rural areas would be subject to

less severe standards. The author estimates that

switching to a two-car strategy would save American

households more than $1 billion per year with

virtually no sacrifice in air quality. Moreover,

while this switch would lower the cost of emission

controls for all income groups, it would work to

the particular advantage of low-income households.

3.2.7 Harrison, David, Jr. Who Pays for Clean Air: The Cost and Benefit

Distribution of Federal Automobile Emission Standards . Cambridge,

Mass.: Ballinger Publishing Company, 1975, 167 pp.

An examination of the relative economic effects

of the Federal auto emission standards on various

groups of people. The cost of reducing emissions

in compliance with the standard is treated as a form of taxation imposed primarily on car buyers.

The present standards are found to be regressive

in the distribution of costs among income groups.

For a detailed technical summary of this work,

see the book review by Timothy E. Morgan in Ecology

Law Quarterly , Vol. 6, No. 4 (1978), pp. 859-868.

3.2.8 Kearney (A. T.), Inc. A Study to Determine the Economic Impact of Noise

Emission Standards in the Construction Equipment Industry: Portable

Air Compressor Report. Washington, D.C.: U.S. Environmental Protection

Agency, June 1974, 285 pp. NTIS No. PB-244-307.

The scope of this study includes an analysis of the

volume changes, resource costs, industry and market

impacts, foreign trade impacts, individual company

impacts and potential economic disruption associated

with various noise emission levels for portable air

compressors. The chapters of the report cover the

technical and cost data base upon which the impact

analysis is built, industry characteristics, baseline

industry forecast, and finally, projected economic

impacts for the various noise emission levels studied.

60
3.2.9 Lave, Lester B. and Seskin, Eugene P. "Air Pollution and Human Health."

Science , Vol. 169, No. 3947 (August 21, 1970), pp. 723-733. Includes

bibliographical references.

In this article, the effect of air pollution on human health is investigated. The authors

characterize the problem of isolating health

effects; they derive quantitative estimates of the

effect of air pollution on various diseases and

point out reasons for viewing some earlier

estimates with caution; they discuss the economic

costs of ill health; and they estimate the costs

of effects attributed to air pollution.

3.2.10 Lievano, Rodrigo Joseph. Energy Use and the Environment: The Effects

of Environmental Quality Standards on the Supply, Demand and Price

of Fossil Energy. Unpublished Ph.D. dissertation, University of Houston,

1975, 129 pp.

An economic model is developed in this study to

analyze the effects of changes in (1) resource

availabilities, (2) resource prices, (3) operating

environment (e.g., energy and environmental policy),

and (4) patterns of energy demand, on the supply,

demand, and price of fossil energy resources. The

model is developed by interfacing a normative

economic model of oil and natural gas supply, and an econometric demand model for the important

fossil fuels and electricity, through a linear

programming model of the energy conversion industries. The model is used to evaluate the economic

effects of currently announced limitations on waste

discharges to the water and air by industrial

sources. Four cases representing different levels

of restrictions on waste discharges to the water

and air are evaluated for 1985 and overall results

are indicated.

3.2.11 Little (Arthur D.), Inc. Economic Assessment of Proposed Toxic

Pollutant Standards for Manufacturers and Formulators of Aldrin/Dieldrin,

DDT, Endrin and Toxaphene . Washington, D.C.: U.S. Environmental

Protection Agency, May 1976, 62 pp. NTIS No. PB-253-678.

This report provides an assessment of the economic

impact of proposed toxic pollutant effluent

standards for the manufacturers and formulators

of aldrin/dieldrin, DDT, endrin, and toxaphene,

based on abatement cost data supplied by EPA.

The report concludes that there will be no significant adverse economic impact upon prices,

sales, profitability, employment, or the end use

61
markets for these pesticides. The impact on prices

will be potential increases of no greater than

2.3%. The assessment includes descriptions of

firms, plants, and markets for these pesticides;

investments and operating costs for the abatement

technologies; evaluation of pricing for these

products and potential adverse impacts.

3.2.12 Maler, K. G. "A Method of Estimating Social Benefit from Pollution

Control." Swedish Journal of Economics, Vol. 73, No. 1 (March 1971),

pp. 121-133.

The ideas in this article are first presented

intuitively in a non-rigorous way. Then, there

is a brief review of demand analysis and a statement of the marginal conditions for Paretooptimality in an economy with public goods. A

theoretical framework is developed which enables

a derivation of the willingness to pay for the

public control of certain types of pollution on the

basis of information on demand functions for

private goods.

3.2.13 National Academy of Sciences. Decision Making for Regulating Chemicals

in the Environment . Washington, D.C., 1975. Includes bibliographical

references

This report examines principles of decision making

for regulating chemicals in the environment. The

intent of the study is to assess the state of the

art of this type of decision making, to identify

inadequacies in current methods, and to make

recommendations that could aid regulatory agencies

in making more equitable and scientifically sound

decisions for controlling chemicals in the environment. The study is also intended to find ways to

increase the information base upon which regulatory

decisions are made and to develop methods of displaying the available information to make it more useful

to the decision maker.

3.2.14 Plager, Sheldon J. ^_t al^ Economic Impact Study of the Proposed

Motor Vehicle (In-Use) Noise Regulations . Chicago: Illinois

Institute for Environmental Quality, May 1976, 239 pp. NTIS No.

PB-255-686

This study examines economic impacts expected to

result from the establishment of proposed noise

standards applicable to motor vehicles in use in

Illinois. The study assesses the costs of the

standards as applied to the several vehicle classes

and the impact of these costs on state and local

62
3.2.15

3.2.16

government, and on Illinois agriculture. The

potential effects on prices, employment, and

industrial activity are also considered. The

last section of the study reviews the anticipated

benefits from noise abatement expected to be

achieved by the proposed standards, provides a measure of those benefits, and compares benefits

with costs on an overall basis and, for certain

vehicle classes, on an incremental basis. The

method for determining the amount of noise

reduction expected from each of the vehicle classes

is described.

Schlottmann, A. "A Regional Analysis of Air Quality Standards, Coal

Conversion, and the Steam-Electric Coal Market.” Journal of Regional

Science , Vol. 16, No. 3 (December 1976), pp. 375-387.

Proposals have been made to prohibit the use of oil or natural gas by power plants as their primary

generating fuel. There has been serious debate on

the impacts on air quality of reconversion to coal.

This paper investigates the possible impacts that

such standards for existing power plants would have on coals with different sulfur contents and, con- sequently, the regional effects on the coal industry.

The feasibility of placing sulfur limits directly

on coal use is also considered. With these results,

the implications for public policy encouraging

power plant conversions to coal are investigated.

U.S. Environmental Protection Agency. Guidance Economic Analysis for

the Concrete Products Industries. Washington, D.C., July 1977, 100 pp.

NTIS No. PB-27 3-471.

The purpose of this study is to analyze the economic

impact which could result from the application of

alternative effluent limitation guidelines and

standards of performance to be established under

sections 304 (b) and 306 of the Federal Water

Pollution Control Act (FWPCA), as amended.

The report surveys existing and potential waste

treatment control methods and technology within

particular industrial source categories and

supports proposal of certain effluent limitation

guidelines and standards of performance based

upon an analysis of the feasibility of these

guidelines and standards. The investment and

operating costs associated with various alternative

control and treatment technologies are presented.

The study supplements this analysis by estimating

the broader economic effects which might result

from the required application of various control

63
methods and technologies. This report investigates

the effect of alternative approaches in terms

of product price increases, effects upon employment and the continued viability of affected

plants, effects upon foreign trade and other

competitive effects.

3.2.17 Watson, W. D., Jr. and Downing, P. B. "Enforcement of Environmental

Standards and the Central Limit Theorem." Journal of the American

Statistical Association , Vol. 71, No. 355 (September 1976), pp. 567-574.

This analysis indicates that the source fly ash

standard for coal-fired power plants is likely

to be frequently violated. A model is developed

that simulates emitters' reactions to key enforcement parameters. It is found that the Environmental

Protection Agency's choice of policy parameters is

biased in the direction of strongly inducing firms

to pick pollution control devices of low collection

efficiency. The article concludes that enforcement

systems must account for the random sampling

properties of pollution control devices and implications of certification test sampling procedures on firm behavior if effective enforcement is to be

achieved.

3.3 Other Standards

3.3.1 Baumann, Harry and Montador, Bruce. "Government Intervention in the

Marketplace and the Case for Social Regulation." (A report of the

Treasury Board of Canada), Ottawa, 1977.

This paper, cited in Hemenway [2.1.9], provides an overview of four benefit-cost analyses of proposed

mandatory standards conducted by economists at the

Treasury Board and the Department of Consumer and

Corporate Affairs. The studies, all conducted in

1977, concern insulation standards for ceilings

and walls, school bus standards, safety glazing

regulations, and energy consumption labeling

of refrigerators.

3.3.2 Bergman, Edward Monroe. Toward a Standard for Eliminating Exclusionary

Zoning: An Economic Analysis of Housing and Employment in Zoning

Ordinances of Developing Townships . Unpublished Ph.D. dissertation,

University of Pennsylvania, 1972, 405 pp.

This dissertation focuses on the growing tendency

of municipalities to engage in exclusionary zoning;

that is, zoning which purposely excludes lower

class groups by using housing cost as a barrier

and fiscal strategies which foster the commercial

64
and industrial tax base in order to lower residential property taxes. These aspects of zoning contribute to reduced housing and inequitable sharing of

fiscal resources. This study develops and applies

a performance standard for local zoning which

requires the provision of housing of the type and

price which can be afforded by the households of

workers employed in that zone. The policy

implications which might result if this performance

standard were applied to developing municipalities

are also analyzed.

3.3.3 Bucklin, Louis P. "The Uniform Grading System for Tires: Its Effect

Upon Consumers and Industry Competition." The Antitrust Bulletin , Vol. 19, No. 4 (Winter 1974).

This article notes that in spite of the valuable

information made available by uniform grading

systems such as the one for tires, there is little

consumer interest in expanding such systems. This

lack of interest is attributed to the difficulty

in creating readily understandable grading systems

and insufficient motivation to learn the systems.

The analysis also questions the compatibility

of the approaches used by the consumer movement and

by antitrust groups.

3.3.4 Fiorello, Marco and Jaffin, Stanley. Costs and Benefits of Federal

Automated Data Processing Standards: Guidelines for Analysis and

Preliminary Estimating Techniques . Prepared by Logistics Management

Institute for the U.S. Department of Commerce, Washington, D.C.,

June 1978, 104 pp. Includes 87 bibliographical references.

The objectives of this report are to recommend

guidelines and demonstrate a basic methodology for

estimating the potential costs and benefits of automated data processing (ADP) standards. These guidelines are to assist program managers to achieve

consistent and effective preparation and documentation of cost-benefit estimates for ADP standards.

The report deals with the scope of a cost-benefit

effort, the cost-benefit impact areas, cost-benefit

analysis tools, and methods of data collection and

types of data sources. The four appendixes include

a reference list, a discussion of the Standards

Definition Statement, a topical grouping by

application area of guidelines, and an application

of these guidelines to a hypothetical standard.

65
3.3.5 Fisher, W. Haider. The Economic Impact that Can be Expected to Follow

the Adoption of "A Proposed Revision of Simplified Practice Recommendation 16-53 American Lumber Standards for Softwood Lumber ." Prepared

by Battelle Memorial Institute for the National Bureau of Standards,

Washington, D.C., 1964, 68 pp.

This report assesses the economic impact of

SPR-16-53, a 1964 proposal to alter the voluntary

standards applied in sizing and grading softwood

lumber. The first chapter orients the proposed

set of standards in time; the general nature of

the softwood lumber industry is examined in

Chapter 2; the nature of the controversy over Proposed SPR-16-53 is taken up in Chapter 3;

and the competitive effects of SPR-16-53 upon

the industry are analyzed in Chapter 4. Chapters

5 and 6 are devoted to deriving and applying a partially-quantified model of the more significant

competitive effects. Certain implicit results

of the entire analysis are summarized in Chapter 7

.

3.3.6 Hatos, Stephen L. U.S. Metric Study Interim Report: Commercial Weights

and Measures . National Bureau of Standards Special Publication 345-3.

Washington, D.C., July 1971, 109 pp.

This publication is one of a series prepared pursuant

to the U.S. Metric Study Act. It explores the impacts

metrication would have on commercial weights and

measures activities. More specifically, the report

concerns: (1) the cost of adapting or changing

commercial weighing and measuring devices to record

and/or indicate in metric units, and (2) the effects

of metrication on state and local weights and measures jurisdictions

.

3.3.7 Kennedy, William J. L. and Morse, Anthony. "Reducing Capital and

Operating Costs through Standardization." Nuclear Engineering International , Vol. 21 (October 1976), pp. 51-53.

This article advocates the adoption of standard plant

designs for nuclear power stations. Among the advantages claimed are reduced costs, shorter schedules

and improved availability. The analysis stresses the

importance of the use of reliability analysis to

identify components and systems toward which design

attention and improved maintenance procedures should

be directed.

66
3.3.8 Lentz, Craig. "ASHRAE Standard 90-75 - Economic Impact on Selected

Industries and the Design Profession." ASHRAE Journal , Vol. 18, No. 6

(June 1976), pp. 33-38.

The purpose of this article is to review the

maximum potential loss or gain in the annual

sales of selected industries based upon full

implementation and enforcement of ASHRAE 90-75

as an energy conservation standard for new

construction only. In addition, some comments

are offered on the impact of the standard on the

design profession.

3.3.9 Lentz, Craig. "ASHRAE Standard 90-75 - Impact on Building Energy Usage

and Economics." ASHRAE Journal , Vol. 18, No. 4 (April 1976), pp. 23-28.

This study identifies the potential energy, economic,

and institutional implications which could be

brought about by the wide-spread adoption of ASHRAE

Standard 90-75, which promotes the energy-efficient

design of new buildings. The methodology and

assumptions behind the study are described as they

relate to ASHRAE 90' s effectiveness in reducing

energy consumption in selected building types.

This is accompanied by discussions on the impact

of ASHRAE 90 on initial investment and operating

costs.

3.3.10 Little (Arthur D.), Inc. An Energy and Economic Impact Assessment of

HUD’s Minimum Property Standards . Washington, D.C.: U.S. Federal

Energy Administration, October 1976, 86 pp. NTIS No. PB-266-236.

This study analyzes the various energy, economic

and institutional impacts which could occur following

the broad adoption of HUD's established Minimum

Property Standards to cover all new residential

construction. The study quantifies those impacts

in the energy and economic sectors and assesses

their impact in the institutional sector.

3.3.11 Little (Arthur D.), Inc. Energy Conservation in New Building Design:

An Impact Assessment of ASHRAE Standard 90-75 . Washington, D.C.: U.S.

Federal Energy Administration, March 1976, 273 pp. NTIS No. PB-252-639.

This report assesses the energy, economic, and

institutional impacts that may result from the

broad voluntary adoption of ASHRAE Standard 90-75

by individual building regulatory authorities.

This standard is the first major voluntary consensus

standard dealing with energy use in new buildings

and is available for optional acceptance by state

and local governments. With strict use of the

67
Standard, annual energy consumption would be

reduced in all building types and locations.

This report contains many findings, observations,

and recommendations concerning the effects of

ASHRAE 90-75 on building energy consumption, its

influences on physical changes in the buildings,

its implications on the owning and operating

costs of buildings, its potential impact on the

nation's energy consumption in construction, its

possible economic impact on several selected

markets and participants within the construction

sector, and its impact on building habitability.

3.3.12 Marshall, Harold E. and Ruegg, Rosalie T. Efficient Allocation of

Research Funds: Economic Evaluation Methods with Case Studies in

Building Technology . National Bureau of Standards Special Publication

558. Washington, D.C., December 1979, 47 pp.

Public and private administrators of research

programs are concerned with maximizing the payoffs

from their research investments; that is, with

allocating their limited budgets most efficiently.

Benefit-cost, rate-of-return, payback, and other

evaluation methodologies are examined in this

study in terms of their usefulness in helping

administrators to decide whether to accept or reject

research projects leading directly to applications;

to plan the scale of these research projects; and to

identify priorities among alternative research investments, all of which may be profitable. Data needs

for applying these evaluation methodologies are outlined. The net-benefits and rate-of-return

methodologies are applied to two case studies

involving research in the Center for Building

Technology (CBT) of the National Bureau of

Standards. The first deals with a heavier asphalt

shingle for roofing, and the second deals with

reduced-sized venting in plumbing. The case studies show high payoffs in these two areas of

research, both for society as a whole and for

CBT's contribution in undertaking the research.

Recommendations from the study are that research

funds be allocated on the basis of anticipated

payoffs determined through these evaluation

techniques, and that benefit and cost data for

evaluating new technologies be collected.

3.3.13 Marshall, Harold E.; Ruegg, Rosalie T.; and Wyly, Robert S. "Cost

Savings from Reduced Sized Venting." Plumbing Engineer (July-August

1977), pp. 35-42 and (Septeraber-October 1977), pp. 45-46, 64-65.

All sanitary drain-waste-vent systems in buildings

require some form of venting to protect the traps

68
of plumbing fixtures against failure. This article

indicates that reduced sized venting (RSV), an innovative type of venting that utilizes pipes one to

four sizes smaller than conventional venting permitted by existing U.S. plumbing codes, satisfies

performance requirements for one and two-story houses.

The report includes life-cycle cost estimates of

potential savings per single-family household and

for the U.S. as a whole over the next 11 years for

several sets of assumptions regarding critical

factors such as RSV ' s rate of diffusion and the

discount rate.

3.3.14 McConnaughey , John S. An Economic Analysis of Building Code Impacts:

A Suggested Approach . National Bureau of Standards Internal Report

78-1528. Washington, D.C., October 1978, 58 pp.

This report suggests an evaluation approach which

can be used by building officials and legislative

bodies faced with making building code decisions.

A method to evaluate many of the potential benefit

and cost impacts of specific building code provisions

is developed. The report also defines and categorizes

the economic impacts of building codes. While no approach to classifying building code impacts will

be fully appropriate for all uses, the definitions

and categories proposed may help to clarify or reconcile some of the differing opinions concerning

the impact of building codes. Finally, the report

illustrates the suggested approach by evaluating

the 1975 National Electrical Code requirement for

the use of Ground Fault Circuit Interrupters (GFCIs)

in residences. Estimates are made of how much it

costs society in order to save one life through

the GFCI code provision.

3.3.15 McConnaughey, John S. "Economic Impacts of Building Codes."

Research and Innovation in the Building Regulatory Process: Proceedings

of the First NBS/NCSBCS Joint Conference , National Bureau of Standards

Special Publication 473 (edited by Patrick W. Cooke). Washington, D.C.,

June 1977, pp. 397-419. Includes 17 bibliographical references.

This paper presents an impact evaluation approach

for building officials faced with making building code

decisions. Types of building code impacts are defined

and categorized. A standardized method to measure

and evaluate the potential benefit and cost impacts

of a specific building code provision is described.

The approach is intended to be a relatively simple,

easy to apply system which uses available, or easily obtainable information. Benefit and cost

impacts of code provisions intended to reduce the

risk of death from a building hazard are examined.
The paper concludes with a case study of the 1975

National Electrical Code requirement for the use of

Ground Fault Circuit Interrupters in residences.

3.3.16 Miller, Michael J. "The Cost Effectiveness of Medical Device Standards.

Food, Drug, Cosmetic Law Journal , Vol. 31, No. 2 (February 1976),

pp. 81-85.

The true cost of medical device standards can be

measured in terms of the professional, industrial

and governmental resources that are diverted from

health care during the development of and compliance

with standards. This article describes some of the

major cost factors that may determine whether or not

resources will be utilized effectively during the

development of and compliance with standards, and

whether or not resources will be utilized effectively

in a way which maximizes device safety and effectiveness without undue loss of innovation. The author

raises serious questions as to whether or not

medical device standards will be an effective form

of regulation in the near future. Because the

relative benefits and costs of medical device

standards are unclear, the author argues that the

FDA should proceed cautiously in utilizing standards

as a regulatory mechanism.

3.3.17 Mitchell, Robert Edward. "Cultural and Health Influences on Building,

Housing, and Community Standards: Cost Implications for the Human

Habitat." Human Ecology: An Interdisciplinary Journal , Vol. 4, No. 4

(October 1976), pp. 297-330. Includes 5 pages of bibliographical

references.

International research and practices are reviewed

in this article with regard to cultural, social,

economic, health, and physical-technological

features of needs, standards, and codes regulating

the residential environment. Housing and building

codes, as well as zoning and subdivision ordinances,

are influenced by nonscientif ic considerations that

have significant cost and other policy implications.

These influences are examined for public health

codes regulating potable water, waste disposal, and

safety in the home, as well as density and congestion for cities, neighborhoods, and individual

dwelling units. Cost-benefit ratios indicate

that many standards can be appreciably lowered.

70
3.3.18 National Center for Productivity and Quality of Working Life. The

Uniform Tire Quality Grading System: A Case Study of the Government

Regulatory Process . Washington, D.C., 1978, 56 pp.

The long saga of the attempt by the Federal

government to help the American consumer to

buy tires more intelligently began in January

1964, when the Senate Subcommittee on Retailing,

Distribution, and Marketing Practices recommended

the establishment of a consumer information system

similar to that in the meat industry. Despite

enactment of the National Traffic and Motor Vehicle

Safety Act in 1966, which required that a tire

quality grading system go into effect no later than

September 9, 1969, there is today still no such

system. This report attempts to explain why such

an apparently straightforward task has taken 13

years, and it aims to draw some conclusions from

this episode about the government regulatory process.

3.3.19 Oster, Sharon and Quigley, John M. "Regulatory Barriers to the

Diffusion of Innovation: Some Evidence from Building Codes.”

Research and Innovation in the Building Regulatory Process: Proceedings

of the First NBS/NCSBCS Joint Conference , National Bureau of Standards

Special Publication 473 (edited by Patrick W. Cooke). Washington, D.C.,

June 1977, pp. 113-135. Includes 22 bibliographical references.

Previous studies have suggested that outmoded

local regulation of residential construction has

impeded technical progress in the industry. This

paper attempts to identify the determinants of differences in building regulation across communities.

Research results indicate that the education of

the chief building official and the level of

unionization in the area are the two major factors

explaining the probability that a jurisdiction

will adopt a construction innovation in its code.

3.3.20 Slome, Benjamin. Computer Technology and Standardization in U.S. Trade

and Production Abroad: A Case Study of the Vernon Product Cycle

Model . Unpublished Ph.D. dissertation, The City University of New

York, 1972, 148 pp.

This dissertation contains an interpretation and case study of the model presented by Raymond Vernon

in "International Investment and International Trade

in the Product Cycle," Quarterly Journal of Economics , May 1966, pp. 190-207. The product that is the subject of the case study is the digital computer. The

author finds that for the most part the Vernon

model was successful with regard to its focus upon

the international activities of multinational firms

within the dynamic context of a product cycle.

71
The study, however, also indicates that Vernon's

approach to international economic analysis would

be improved by eliminating its present reliance

upon unwieldy product standardization concepts.

3.3.21 U.S. Department of Commerce, National Bureau of Standards. A Cost

Benefit Analysis of Proposed Federal Input/Output Channel Level

Computer Interface Standards . National Bureau of Standards Internal

Report 78-1487. Washington, D.C., June 1978, 32 pp. Includes 11

bibliographical references.

This report summarizes the results of an analysis

of the cost savings that are expected to accrue

to the Federal Government through use of four

proposed Federal input/output channel level com- puter interface standards. The analysis is based

on the best available data, and the results

are intended to be a best conservative estimate

of the potential Federal Government cost savings

that will occur through use of the proposed interface standards to increase competition in the

procurement of computer peripheral equipment. The

analysis concludes that the Federal Government will

obtain cost savings through use of this standard of over $55 million during the 5-year period beginning

in FY 1979.

3.3.22 U.S. National Highway Traffic Safety Administration. The Automotive

Fuel Economy Standards for Model Year 1981-1984 Passenger Cars . Washington, D.C., June 1977, 141 pp. NTIS No. PB-275-827.

This study evaluates various micro- and macroeconomic

impacts of the average fuel economy standards for

model year 1981-84 passenger cars. Such microeconomic

impacts as cost and price changes for both the

domestic manufacturers and the consumer are analyzed.

Also examined are such macroeconomic impacts as employment, energy consumption and G.N.P.

72
4.0

4.1

4.1.1

4.1.2

ECONOMICS APPLIED TO THE DEVELOPMENT OF STANDARDS

Fire Standards

Chapman, Robert E. "Cost-Effective Methods for Achieving Compliance

to Fire Safety Codes." Fire Journal , Vol. 73, No. 5 (September 1979),

pp. 30-39, 123. Includes 4 bibliographical references.

This article discusses the use of the Fire Safety

Evaluation System developed by the Center for

Fire Research at the National Bureau of Standards

for determining equivalence to the Life Safety

Code. The Life Safety Code, a voluntary code

developed by the National Fire Protection Association, is currently the most widely used guide for

identifying the minimum level of fire safety in

buildings. This paper briefly describes: the

Fire Safety Evaluation System; a computerized

procedure based on this system which permits

identification of the least-cost means of

achieving compliance to the 1973 Life Safety Code;

and the results of the application of this procedure

to a typical 300 bed general hospital.

Chapman, Robert E.; Chen, Philip T.; and Hall, William G. Economic

Aspects of Fire Safety in Health Care Facilities: Guidelines for

Cost-Effective Retrofits . National Bureau of Standards Interagency

Report 79-1902. Washington, D.C., 1979, 103 pp.

This study focuses upon one aspect of the fire

safety problem in health care facilities; the use

of the Fire Safety Evaluation System developed by

the Center for Fire Research at the National Bureau

of Standards for determining equivalence to the

Life Safety Code. The Life Safety Code, a voluntary code developed by the National Fire

Protection Association, is currently the most

widely used guide for identifying the minimum level

of fire safety in buildings. Using the Fire Safety

Evaluation System as a basis, this study develops a computerized procedure which permits the least-cost

means of achieving compliance to the Life Safety

Code in health care facilities to be identified.

Since each of the parameters used in the Fire

Safety Evaluation System has a unique value which

corresponds to strict compliance, it is possible to

quantify the cost savings attributable to the use of

the Fire Safety Evaluation System over strict

compliance to the Life Safety Code. Preliminary

studies of a prototypical hospital indicate that

the use of this computerized procedure can result

in cost savings of 50 percent or more over those

associated with strict compliance to the Life

Safety Code.

73
4.1.3 Chapman, Robert E.; Hall, William G.; and Chen, Philip T. A Computerized

Approach for Identifying Cost-Effective Fire Safety Retrofits in

Health Care Facilities . National Bureau of Standards Interagency Report

79-1929. Washington, D.C. , 1979, 114 pp.

This report focuses on how a computerized version of

the Fire Safety Evaluation System developed by the

Center for Fire Research at the National Bureau of

Standards can be used to determine equivalence to

the Life Safety Code in the least costly manner. The study presents a programmer-oriented discussion

of the mathematical, economic and engineering

considerations that went into the development

of the linear programming algorithm for identifying

cost-effective retrofits. Topics treated in this

report include: a discussion of user options;

program documentation; format statements; flow charts;

sample computer runs; and a complete listing of

the computer program.

4.1.4 Craw, Alexander R. Analyses for Decision in the Office of Flammable

Fabrics: The Level of the Standard . National Bureau of Standards Internal

Report 73-182. Washington, D.C., April 1973, 66 pp.

This report analyzes the level at which a particular

standard for flammable fabrics should be set.

Attention is focused on the children’s sleepwear

problem, and the methodology used is that of decision

analysis. Initially, this approach identifies the

alternative levels for which a choice must be made,

then proceeds to an identification of the outcomes

to be considered. Then a determination of the

probabilities of the possible outcomes is made by

introducing auxiliary variables. The paper concludes

with a summary discussion of the present work in

setting standard levels and recommendations for future

work.

4.1.5 Dardis, Rachel and Thompson, Ruth. "Strategies for Reducing ' Residential Fire Losses." Journal of Consumer Product Flammability , Vol. 6, No. 2 (June 1979), pp. 136-151. Includes 16 bibliographical

references

.

In this article, the net benefits from two

alternative fire reduction strategies are considered.

The first strategy is the proposed standard for

upholstered furniture while the second strategy

is the installation of smoke detectors in

residential homes in response to state or local

requirements. Costs and life-cycle benefits

are estimated for a single year (1980) and for a tenyear period 1980-1989. The results indicate that

74
the smoke detector requirement is a cost

effective strategy compared to the proposed

mandatory standard for upholstery furniture. A

brief summary of this article may be found in

Rachel Dardis and Ruth Thompson, "Analyzing the

Effectiveness of Alternative Fire Protection

Strategies," Fire Journal (September 1979), pp. 7-10.

4.1.6 Helzer, Susan Godby; Offensend, Fred L.; and Buchbinder, Benjamin.

Decision Analysis of Strategies for Reducing Upholstered Furniture

Fire Losses . National Bureau of Standards Technical Note 1101.

Washington, D.C., June 1979, 138 pp. Includes 29 bibliographical

references

.

Decision analysis is used to evaluate alternative

strategies for reducing residential upholstered

furniture fire losses. Three alternatives are evaluated: no-action, mandatory smoke detector

installation, and the proposed upholstered furniture

standard under consideration by the Consumer Product

Safety Commission. Quantitative models are developed

to assess fire losses and costs under each alternative.

The alternatives are evaluated on the basis of minimizing

the total cost plus loss to society over time.

Subject to the assumptions set forth in the report,

the analysis shows that the detector alternative and

the proposed standard are essentially equivalent

and preferred to the no-action alternative. The

proposed standard is more effective in saving lives,

whereas the detector alternative is less costly to

implement. The sensitivity of the results to key

assumptions and input parameters is tested. The

results are shown to be particularly sensitive to the

cost of the proposed standard, the loss of life value

assignment, and the upholstered furniture replacement

pattern.

4.1.7 Lie, T. T. "Economic Design for Fire Safety." Build International , Vol. 7, No. 4 (July/August 1974), pp. 289-304. Includes 8 bibliographical references.

A method is discussed by which the fire loss expectation for buildings, both life and property losses, can be evaluated. The influence of various factors

such as building size and height, installation of

sprinkler and detection systems, and fire resistance

of the building are shown. An example is also given

of how, in principle, optimum fire safety measures can be determined. Fire safety measures are re- garded as optimum if: (1) they provide an adequate

level of safety to people, here assumed to be

equivalent to a certain specified loss expectation;

75
and (2) the sum of property loss expectation and

expenditures for fire safety measures is minimized.

4.1.8 Smith, Betty F. and Dardis, Rachel. "Cost Benefit Analysis of Consumer

Product Safety Standards." The Journal of Consumer Affairs , Vol. 11,

No. 1 (Summer 1977). Includes 27 bibliographical references.

This article investigates the role of benefit-cost

analysis in evaluating consumer product safety

standards and applies such analysis to an evaluation of flammability standards for children's

sleepwear. The cost of safety standards includes

the costs of standard development and enforcement

and the changes in producer and consumer surpluses

due to product regulation. The benefits from safety

standards are the reduction in product accidents

and the direct and indirect costs of such accidents.

The cost of the 0-6X Children's Sleepwear Standard was based on the change in consumer surplus since

it was assumed that supply was perfectly elastic.

The benefits were due primarily to the reduction

in burn injuries: Cost-benefit ratios ranged from

0.62 to 0.84 assuming that the standards provided

100% protection. No allowances were made for the

reduction in consumer choice nor for pain and

suffering avoided.

4.2 Energy Conservation Standards

4.2.1 Heim, Warren P. Insulation Standards for Vermont Residences . Report

No. DVE-7. Hanover, N.H.: Thayer School of Engineering, Dartmouth

College, January 1975, 35 pp. Includes 13 bibliographical references.

Residential insulation standards for the State of

Vermont are developed in this study using optimum

insulation amounts based on long-term projected

energy prices and late 1974 construction prices.

A form that a homeowner can fill out to determine

how much energy could be saved if his house were

well insulated is developed. The form is based on the aforementioned standards and can be used in a survey to see if such standards are actually

necessary

4.2.2 Hirst, Eric and Carney, J. Energy and Economic Effects of Residential

Energy Conservation Programs . Oak Ridge, Tenn. : Oak Ridge National

Laboratory, 1977, 7 pp.

A detailed simulation model of residential energy

consumption is used to evaluate energy usage and the

direct economic effects of several conservation

programs including thermal standards for new

76
construction. Research results indicate that

standards could save energy and money; estimates

of both types of savings are given and analyzed

for each program.

4.2.3 Marshall, Harold E. and Petersen, Stephen R. "Economics and the Selection

and Development of Energy Standards for Buildings." Energy and Buildings , Vol. 2 (1979), pp. 89-99. Includes 12 bibliographical references.

Energy conservation standards for new buildings will

play a major role in federal and state conservation

policies in the coming decade. This article discusses

economic efficiency considerations that can be incorporated into the selection and development of such

standards. Three types of energy budgets—fixed

energy budgets, partially variable energy budgets,

and economically efficient energy budgets (EEEB)

are examined for use as standards. Research and

operational requirements for developing and

implementing energy budgets are described. The

three energy budget standards are evaluated in

terms of economic efficiency, administrative

feasibility, equity, and consistency in design

requirements. The EEEB appears optimal in that

it ranks highest overall with respect to these

four criteria.

4.2.4 Marshall, Harold E. and Ruegg, Rosalie T. "Energy Conservation through

Life-Cycle Costing." Journal of Architectural Education , Vol. 30,

No. 3 (February 1977), pp. 42-51.

This article provides cost information concerning

alternative energy conservation designs for old

and new buildings. Specifically, it deals with

the cost over time of introducing energy conservation techniques as compared with the cost savings

over time from reduced energy bills. The article

examines retrofitting existing residential buildings

for energy conservation, the design of envelope

features and subsystems for new building energy

conservation, and energy standards for buildings,

all in terms of life-cycle cost (LCC) analysis.

The study also gives an overview of methods for

estimating the LCC of alternative energy conservation techniques.

4.2.5 Petersen, Stephen R. The Role of Economic Analysis in the Development

of Energy Standards for New Buildings . National Bureau of Standards

Interagency Report 78-1471. Washington, D.C., July 1978, 38 pp.

The Federal Government and a number of states are currently developing energy conservation standards

77
for new buildings. This report suggests that

economic considerations be incorporated directly

into this standards development process. A lifecycle benefit-cost approach to standards development can provide a systematic and objective framework for standards specification. Differences in

climate, building type, energy cost, and operational

requirements can be directly incorporated into the

standard as they affect energy-related benefits and

costs. The study shows that the life-cycle costs

associated with any given overall conservation goal can be reduced by developing an economically

balanced standard. In addition, it suggests that

a standard which has as its goal the minimization

of life-cycle costs will likely lead to greater

effective energy savings than alternative approaches.

Specific suggestions for the incorporation of

economic analysis into the standards development

process are made.

4.2.6 Prais, S. J. "The Electric Lamp Monopoly and the Life of Electric

Lamps." Journal of Industrial Economics, Vol. 23, No. 2 (December

1974), pp. 153-158.

This article presents an economic analysis of the British standard of 1000 hours for the life of the electric

light bulb. The author derives an optimization rule

which states that the least-cost life depends on the

ratio of the replacement cost to the operating cost

per unit of time. Indeed, the optimal life is

approximately nine times this ratio. The 1000-hour

standard life is criticized on two counts: (1) It

is generally too short; and (2) it should not be the same for all wattages, but rather should be longer

for larger-watt bulbs. This methodology could be

used to develop economically optimal standards

for light bulbs.

4.2.7 Weber, Stephen F. "Economic Analysis of Alternative Envelope Designs

for New Residences in the United States." Energy: The International

Journal , Vol. 5, No. 1 (January 1980), pp. 63-68. Includes 7 bibliographical references.

An economic evaluation is conducted for selected

energy-conservation investments in the envelope

design of new single-family housing in the U.S.

Alternative investment levels in the four major

components of the building envelope are evaluated:

(1) attic, (2) walls, (3) floor, and (4) windows.

The analysis is conducted for five cities of widely

diverse climate conditions and for the major forms

of energy used for heating and cooling in the U.S.

For each investment level, the internal rate of

78
return (IRR) is calculated on an incremental basis,

that is, in comparison with the next lowest level

of investment for that component. This marginal

IRR is used to rank alternative levels of investment

for all four components so that economically optimal

envelope designs can be selected for each city and

energy type. Two points of view are considered in

the selection of optimal designs: that of an individual home-buyer and that of a public policy

planner.

4.2.8 Weber, Stephen F. "Resource Impact Factors and Optimal Energy Conservation Standards for Buildings." Energy and Buildings , Vol. 1, No. 2 (October 1977), pp. 117-130. Includes 13 bibliographical references.

The effects of using "Resource Impact Factors" (RIFs)

in the determination of an optimal energy conservation performance standard for buildings are assessed

in this article. RIFs may be generally defined as indices constructed to reflect the full social costs

of using various energy types. The major elements

which RIFs should take into account are discussed

as well as the appropriate method of formulating

them. A cost minimization model for determining

the optimal standard is used in conjunction with

a range of RIF values so that a comparison can be

made between a standard that is optimal from the

private point of view (without RIFs) and one that

is optimal from the social point of view (with

RIFs). The comparison is made in terms of the amount

of energy saved by each standard in climates of

differing severity.

4.2.9 Weber, Stephen F. The Effect of Resource Impact Factors on Energy

Conservation Standards of Buildings . National Bureau of Standards

Building Science Series 114. Washington, D.C.: Government Printing

Office, 1978. Includes 28 bibliographical references.

This report addresses the question of the proper value

for energy to be used in the development of optimum

(i.e., cost-effective) energy conservation performance

standards for buildings. This study finds that the

appropriate value for energy is its social value,

which should be determined through the development

and application of Resource Impact Factors (RIFs).

Some guidelines are provided for the formulation

and development of RIFs. A life-cycle cost

minimization model for determining the optimum

conservation standard is employed to show how the use of RIFs would generally lower the maximum

allowable energy consumption allowed by the

standard, although this effect steadily diminishes

79
as the RIF value increases. Moreover, the additional energy savings resulting from using RIFs are shown to increase as the severity of the climate

increases. Finally, geometric and algebraic measures

are derived for the net gain in economic efficiency

that would result from using RIFs in developing

energy conservation performance standards.

4.3 Other Standards

4.3.1 Chapman, Robert E. and Colwell, Peter F. Economics of Protection Against

Progressive Collapse . National Bureau of Standards Internal Report

7 4-542 . Washington, D.C., September 1974, 35 pp.

Public and government concern about the progressive

collapse of buildings caused by abnormal loading

has resulted in the development of draft standards

to provide protection against progressive collapse.

From society's viewpoint, standards for protection

against progressive collapse should result in a level of protection which is more efficient (i.e.,

the net social benefits from protection should be

increased). An economic model utilizing the principles

of benefit-cost analysis is developed which establishes

a methodology for determining the efficiency of

various levels of protection against progressive

collapse. An application of the model to a partial

evaluation of a specific standard demonstrates some

of the capabilities of the model. Recommendations are made for a complete evaluation of this standard and for

the further refinement of the model.

4.3.2 Clark, Roy E. and Roat, Candace L. Metrication and Dimensional

Coordination: A Selected Bibliography . National Bureau of Standards

Special Publication 458. Washington, D.C., April 1977, 36 pp.

The United States changeover to the use of the SI

(international metric) measurement language presents

our construction industry with the need to review and

adapt many product standards and practices for the use

of metric measurement units. These adaptations and

changes can bring substantial benefits to the industry

in the form of permanently recurring cost savings. A

practice of potentially great benefit would be the incorporation of dimensional coordination in the new metric standards for sizes of building products.

For such benefits to be realized, however, the

involved issues must be effectively addressed and

the requisite decisions made and implemented. This

report aids construction industry consideration and

resolution of metrication decisions by providing a guide to the best available sources relevant to the

issues

.

80
4.3.3 Crouch, Robert L; Eckert, Ross D.; and Rugg, Donald D. Monitoring

Groundwater Quality: Economic Framework and Principles . Santa Barbara,

Calif.: General Electric Company, September 1976, 107 pp. NTIS No.

PB-260-919

.

This report discusses the economic considerations in

selecting an optimal groundwater quality monitoring

system. Section I argues that poor specification

of the property rights in groundwater is a major

cause of excessive pollution. Section II examines

groundwater adjudication and legislation and notes

that government intervention through the authority

of PL 92-500 will take the form of governmentestablished and -enforced groundwater quality standards.

Section III discusses the overall costs and benefits

to society involved in groundwater quality monitoring.

Section IV discusses monitoring needs for the establishment of quality standards and their enforcement,

and develops a benefit-cost framework for the

analysis of groundwater quality monitoring. Section

V examines an alternative regulatory approach based

on "waste relocation rights" for property owners. These rights would protect property owners’ groundwater from pollution by others through specifying

allowable pollutant levels. They would be transferable in the marketplace (like mineral rights)

and enforcement of them would be carried out in

the courts.

4.3.4 Hyden, John William. A Computer Simulation Analysis of Surface Water

Quality Management Policies Under Dynamic Economic and Hydrologic

Conditions . Unpublished Ph.D. dissertation, Clemson University,

August 1973, 304 pp. NTIS No. PB-243-842.

The purpose of this study is to determine the

optimal economic wastewater treatment standards

for individual users in a river basin. The specific

case used in this study consists of a series of

firms located along a river, such as municipalities,

wet process industries, or recreational facilities,

which have the river as their only source of raw water supply, and as the ultimate discharge point

of their wastewater. The economically optimal

wastewater treatment standards are defined as the

minimization of the sum of costs imposed on the

individual users for wastewater treatment and of

those resulting from damages caused by waste

discharges of the upstream users. It is shown

mathematically that the optimum occurs when, for

all users, the marginal treatment cost equals the sum of the respective downstream marginal damage

costs. Analyses of the effectiveness of a given

water quality management policy in maintaining

81
reasonable economic efficiency as various conditions

change are presented in a prototype, computer

simulation program, in order to consider such an approach in river basin planning activities.

4.3.5 Jocoby, Henry D. and Steinbruner, John D. Clearing the Air: Federal

Policy on Automotive Emissions Control . Washington, D.C.: National

Science Foundation, 1973, 223 pp. NTIS No. PB-263-937.

This study reviews the history of the federal efforts

to control automotive emissions, and surveys the

existing knowledge about the technical issues that

loomed so large. Various policy options are developed and an attempt is made to evaluate each

in terms of possible outcomes. It explores some of

the barriers to speedy adoption of advanced engine

designs, and plots the details of a plan for

implementing the more desirable emissions control

policy. Two chapters consider many of the details

that must be taken into account in an analysis of

automotive control policy and its expected outcome.

Chapters 6 and 7 present a set of outcome calculations in the dimension of health effects. Chapter 8

develops an analytical structure for estimating the

benefits to health of marginal changes in emissions

standards and presents some preliminary estimates.

4.3.6 Stollman, Jeffery et al. Economic Impact Analysis of Anticipated

Hazardous Waste Regulations on the Industrial Organic Chemicals,

Pesticides, and Explosives Industries . Washington, D.C.: U.S.

Environmental Protection Agency, January 1978, 291 pp. NTIS No.

PB-279-645.

This report presents an analysis of the economic

impacts of alternative regulatory levels for

hazardous waste management in the industrial organic

chemicals industry. The analysis consists of three

segments: Industry Profile, Price Effects Analysis,

and Economic Impact Analysis. The Industry Profile

delineates the products, producers, and plant

characteristics in the industry. It also includes

a discussion of sales trends, innovation, and

industrial organization of the various industry

subcategories. The Price Effects Analysis

discusses the pricing practices in the various

industry segments, and includes estimates of

product price elasticity where available. The

Economic Impact Analysis delineates the impacts

of two levels of regulation on the following:

industry capital availability, industry entry and

exit, industry structure, product prices, general

inflation, GNP, foreign trade, regional economics,

employment, and national energy use.

82
4.3.7 Voornees (Alan M.) and Associates, Inc. An Analysis of the Economic

Impact of Motor Vehicle Use Restrictions in Relation to Federal

Ambient Air Quality Standards . McLean, Va. , September 1973, 76 pp.

NTIS No. PB-227-923.

The major purpose of this study is the development

of a cost-effectiveness methodology for evaluating

transportation control strategies as a means of

achieving ambient air quality standards, using

Baltimore and Boston as case studies. The main

body of the text concentrates on the methodology,

leaving discussion of how the estimates of the

emission reductions, costs, and benefits were formed to

the technical appendix. The methodology presented

calls for the explicit identification of air

pollution reductions potential of alternative control

strategies as well as the costs incurred by public

agencies, users, and other groups of interest. The

costs and effects are presented in graphic form

which clearly indicates the relative average cost

per unit of emission reduction for each alternative,

thereby making it possible to order the strategies

in terms of desirability on the basis of costeffectiveness.

83
AUTHOR INDEX

Aaronson, Susan, 3.1.4

Acton, Jan Paul, 2.4.1

Akehurst, R. L., 2.4.2

Aldine Publishing Company, 1.2.1

American Standards Association,

2 . 1 . 1 , 2 . 1.2

American Telephone and Telegraph

Company, 1.1.1

Anderson, Lee G., 1.1.2

Ayoub, Mahmoud A., 2.3.5

Bailey, Martin J., 2.4.3

Baram, Michael S., 2.2.1

Baumann, Harry, 3.3.1

Baumol, W. J., 3.2.1

Berbeco, George R., 2.2.3

Bergman, Edward Monroe, 3.3.2

Bishop, Richard C., 3.2.2

Blomquist, Glenn, 2.3.1

Bolt, Beranek, and Newman, Inc., 3.1.1

Bouland, Heber, 3.1.16

Broussalian, V. L., 3.1.2, 3.1.3

Brown, David B., 2.3.2

Buchbinder, Benjamin, 4.1.6

Bucklin, Louis P., 3.3.3

Calabresi, Guido, 2.3.3

Campbell, Rita Ricardo, 2.3.4

Canada, John R. , 2.3.5

Cannon, James A., 2.3.6

Carney, J. , 4.2.2

Caves, Richard E., 2.2.2

Chapman, Carol A., 2.1.3, 2.1.4

Chapman, Robert E., 4.1.1, 4.1.2,

4.1.3, 4.3.1

Chase, S. B., Jr., 2.4.14

Chen, Philip T., 4.1.2, 4.1.3

Chugh, Lai C., 2.2.3, 3.2.3

Clark, Elizabeth M., 1.3.1

Clark, Roy E., 4.3.2

Colantoni, C. S., 2.2.4

Colwell, Peter F., 4.3.1

Committee on Public Engineering

Policy, 1.3.2

Conley, Bryan C., 2.4.4

Cooke, Patrick W., 3.3.15, 3.3.19

Cornell, M., 2.4.5

Cornell, Nina W., 2.3.7

Crane, Garry M., 2.1.5

Craw, Alexander R. , 4.1.4

Crouch, Robert L. , 4.3.3

Culyer , A. J. , 2.4.2

Dardis, Rachel, 3.1.4, 4.1.5, 4.1.8

Dasgupta, Ajit K., 1.2.2

Davis , 0 . A. , 2.2.4

Dewhurst, R. F. J., 1.1.3

Doern, G. Bruce, 3.1.5

Dorfman, N. S., 3.2.4

Dorfman, Robert, 2.1.19

Downing, P. B., 3.2.17

Eckert, Ross D., 4.3.3

Edwards, Corwin, 2.1.18

Epple, D., 2.3.8

Faucett (Jack) Associates, Inc., 2.1.14

Fiorello, Marco, 3.3.4

Fischhoff, Baruch, 1.2.3, 1.3.3

Fisher, Anthony C., 3.2.5

Fisher, W. Haider, 3.3.5

Foldesi, Tamas , 2.1.6

Fromm, Gary, 2.3.9

Frontard, R. , 2.1.7

Fujii, Edwin T., 2.3.10

Ghosh, D . , 2.4.6

Goldman, Thomas A., 1.2.4

Grabowski, Henry G., 2.3.11,

3.1.6, 3.1.7

Grant, Eugene L. , 1.1.4

Hall, William G., 4.1.2, 4.1.3

Hanemann, M. , 3.2.3

Harberger, Arnold C., 1.2.5

Harrison, David, Jr., 3.2.6, 3.2.7

Hatos, Stephen L. , 3.3.6

Hayzelden, J. E., 2.4.7

Heim, Warren P., 4.2.1

Helzer, Susan Godby, 4.1.6

Heraenway, David, 2.1.8, 2.1.9

Hendrickson, Paul L. , 2.3.12

Hirst, Eric, 4.2.2

Hockenbery, Kimberly A., 1.2.11

Hyden, John William, 4.3.4

Ireson, W. Grant, 1.1.4

JRB Associates, Inc., 3.1.8

Jaffin, Stanley, 3.3.4

Jocoby, Henry D. , 4.3.5

Jones-Lee, M. W., 2.4.8

84
Kahn, Alfred E., 2.2.5

Kean, John, 2.1.10

Kearney (A. T.), Inc., 3.2.8

Kennedy, William J. L., 3.3.7

Kunreuther, Howard, 2.3.13

Lave, Lester B. , 2.3.14, 2.3.15,

3.1.9, 3.2.9

Lees , D. , 2.4.6

Lentz, Craig, 3.3.8, 3.3.9

Lie, T. T. , 4.1.7

Lievano, Rodrigo Joseph, 3.2.10

Lin, Ying-Nan, 3.1.4

Linnerooth, Joanne, 2.4.9

Little (Arthur D.), Inc., 3.1.10, 3.2.11,

3.3.10, 3.3.11

Lowrance, William W. , 1.3.4

Luft, Harold S., 1.2.6

MacAvoy, Paul W. , 2.2.6

Mahapatra, S., 3.2.3

Maler , K. G., 3.2.12

Marshall, Harold E . , 1.1.5, 3.3.12,

3.3.13, 4.2.3, 4.2.4

Matuura, S., 2.1.11

McConnaughey , John S., 1.2.11, 3.3.14,

3.3.15

McDonald, Craig L., 2.3.12

Melinek, Stanley J., 2.4.10

Mellinger, Glen D., 2.3.16

Melnitsky, Benjamin, 2.1.12

Mikesell, Raymond F., 1.2.7

Miller, Michael J., 3.3.16

Mishan, E.J., 1.2.8, 2.4.11

Mitchell, Robert Edward, 3.3.17

Montador, Bruce, 3.3.1

Morse, Anthony, 3.3.7

Muelhause, Carl 0., 3.1.11

National Academy of Sciences, 3.2.13

National Center for Productivity and

Quality of Working Life, 3.3.18

National Commission on Product Safety,

3.1.12

Needleman, L. , 2.4.12

Newnan, Donald G., 1.1.6

Noll, Roger G., 2.3.7

Oates , W . F . , 3.2.1

Offensend, Fred L., 4.1.6

Oi, Walter Y. , 2.3.16, 2.3.18

Oster, Sharon, 3.3.19

Owen, Henry, 2.3.7

Pachauri, R. K. , 3.1.13

Parkinson, Thomas L. , 2.1.13

Payne, John W., 1.3.5

Pearce, D . W. , 1.2.2

Peltzman, Sam, 2.2.7, 3.1.14, 3.1.15

Pennington, John, 3.1.16

Peskin, Henry M. , 1.2.9

Petersen, Stephen R., 4.2.3, 4.2.5

Peterson, Frederick M. , 3.2.5

Phucas, Charles B., 2.1.14

Plager, Sheldon J. , 3.2.14

Posner, Richard A., 2.2.8

Poulson, Barry W. , 2.1.15

Prais , S . J. , 4.2.6

Prest, A. R. , 1 .2 .10

Pustay, Michael W., 2.2.9

Quigley, John M., 3.3.19

Raiffa, Howard, 1.3.6

Rasmussen, Norman C., 1.3.9

Raviv, A. , 2.3.8

Rawie, Carol Chapman, 2.1.16, 2.1.17

Reck, Dickson, 2.1.18

Renner, John, 2.1.22

Research Triangle Institute, 3.1.17

Rhoads, Steven, 2.4.13

Roat, Candace L. , 4.3.2

Roberts, Marc J., 2.2.2

Rosen, S . , 2.4.15

Rowe, William D., 1.3.7

Ruegg, Rosalie T. , 1.1.5, 1.2.11,

3.3.12, 3.3.13, 4.2.4

Rugg, Donald D. , 4.3.3

Russell, M. , 2.2.10

Sav, G. Thomas, 1.2.11

Schelling, T. C. , 2.4.14

Scherer, Frederic M., 2.1.19

Schilling, A. Henry, 2.3.12

Schlottmann, A., 3.2.15

Schmalensee, Richard, 2.2.11

Schultze, Charles L., 2.3.7

Seal, W. , 2.4.6

Seskin, Eugene P., 1.2.9, 3.2.9

Settle, Russell Franklin, 1.1.2,

2.1.20, 3.1.18

Shelton, R. B. , 2.2.10

Silberston, Aubrey, 2.1.21

Slome, Benjamin, 3.3.20

Slovic, Paul, 2.3.13

Smith, Betty F., 4.1.8

Snow, A. , 3.2.4

Spengler, J. J., 2.3.19

85
Spillenkothen, Roy, 2.1.22

Starr, Chauncey, 1.3.8

Steinbruner, John D., 4.3.5

Stigler, George J. , 2.2.12

Stollraan, Jeffrey, 4.3.6

Sugden, Robert, 1.1.7

Swaminuthan, M. , 2.2.4

Terleckyj, Nestor E., 2.4.15, 3.1.3

Thaler, R. , 2.4.15

Thomas, Lacy Glenn, 3.1.7

Thompson, Ruth, 4.1.5

Toth, Robert B., 2.1.23

Turvey , R. , 1.2.10

U.S. Atomic Energy Commission, 1.3.9

U.S. Congress, House of Representatives,

Select Committee on Small Business,

Subcommittee No. 5, 2.1.24

U.S. Department of Commerce, National

Bureau of Standards, 3.3.21

U.S. Environmental Protection

Agency, 3.2.16

U.S. Federal Trade Commission,

2.1.25

U.S. General Accounting Office, 3.1.19

U.S. National Highway Traffic Safety

Administration, 3.3.22

U.S. Office of Management and

Budget, 1.2.12

Van Horn, Andrew J., 1.3.1

Verman, Lai C., 2.1.26

Vernon, John M. , 2.3.11, 3.1.6, 3.1.7

Viscusi, W. Kip, 3.1.20

Voornees (Alan M.) and Associates,

Inc. , 4.3.7

Watson, W. D. , Jr., 3.2.17

Weber, Stephen F., 4.2.7, 4.2.8, 4.2.9

Weidenbaura, Murray L. , 2.2.13, 2.2.14

Weingast, Barry, 2.3.7

Weisbrod, Burton A., 2.1.20

Williams, Alan, 1.1.7

Wilson, Forrest, 1.1.5

Witmer, T. Richard, 2.1.18

Wright, Charles L. , 2.2.15

Wu, Roland Y. , 3.1.21

Wyly, Robert S., 3.3.13

Yandle, Bruce, Jr., 2.3.20

Zockhauser, Richard, 2.4.16

86
NBS-1 14A (REV. 0-7 8 )

U.S. DEPT. OF COMM.

BIBLIOGRAPHIC DATA

SHEET

1. PUBLICATION OR REPORT NO. NBSIR 80-2015

3, ftedptent's Accession No,

4. TITLE AND SUBTITLE

ECONOMICS APPLIED TO STANDARDS : A GUIDE TO THE

LITERATURE

5. Publication Date April 1980

7. AUTHOR(S)

Stephen F. Weber and Barbara C. Cassard

8. Performing Organ. Report No.

9. PERFORMING ORGANIZATION NAME AND ADDRESS

NATIONAL BUREAU OF STANDARDS

DEPARTMENT OF COMMERCE

WASHINGTON, DC 20234

;;

11. Contract/Grant No.

12. SPONSORING ORGANIZATION NAME AND COMPLETE ADDRESS (Street, City, State, ZIP)

Same as item it 9

13. Type of Report & Period Covered Final

15. SUPPLEMENTARY NOTES

I | Document describes a computer program; SF-185, FIPS Software Summary, is attached.

IS. ABSTRACT (A 200-word or less factual summary of most significant information. If document includes a significant bibliography or

literature survey, mention it here.)

This report provides a guide to the available literature on the application

of economics to the analysis of standards and standardization. One hundred

eighty-nine relevant articles, reports, and books were found and organized

into four major categories of interest: (1) General methods of economic

evaluation; (2) Economics useful for standards analysis; (3) Evaluation of

specific developed standards; and (4) Economics applied to the development

of standards. The significant findings within each of these categories are briefly discussed in the text. The annotations which accompany the

bibliographical entries provide more detailed information. The text includes

a discussion of the approach followed in the literature search. An author

index is also provided.

17. KEY WORDS (six to twelve entries; alphabetical order; capitalize only the first tetter of the first key word unless a proper name;

separated by semicolons) Benefits; benefit-cost analysis; benefit-risk analysis;

bibliography; costs; economics; evaluation; literature search; regulation;

standards; standardization.

18. AVAILABILITY [^-Unlimited

I I For Official Distribution. Do Not Release to NTIS

I I Order From Sup. of Doc., U.S. Government Printing Office, Washington, DC

20402, SD Stock No. SN003-003-

[~X Order From National Technical Information Service (NTIS), Springfield, VA. 22161

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(THIS REPORT)

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