The Cost of Prevention vs. The Cost of Cure

While on a long flight home (and thanks for all the comments when I was gone!), I read in its entirety Australian scientist Tim Flannery’s well-reviewed book on global warming, The Weather Makers. Despite a somewhat flat title, the book turns out to be a superb introduction to the subject.

Flannery finds ways to enliven a huge story with charming little facts and observations, and while not avoiding alarming possibilities and bitter truths, also brings up some important bits of good news, some of which can be referenced on-line.

Here’s an important one. As Flannery writes in his chapter on "The Road to Kyoto":

Economist Eban Goodstein has undertaken a detailed analysis of past projections of regulatory costs as they relate to a variety of industries. Goodstein demonstrated that in every case, when compared to the actual costs paid, the estimates were grossly inflated. His examples range from asbestos to vinyl, and in all instances the estimated cost flowing from regulatory was at least double the actual post paid, while in some cases estimates were even more exaggerated.

Is this a case of Industry spin? Actually, no.

This inflation of estimated costs holds regardless of whether industry itself or an independent assessor did the work, which suggests a systematic source of error.

Where could it come from?

Goodstein argues the reason for this discrepancy is that economists find it difficult to anticipate the innovative ways in which industry goes about complying with new regulations.

If you check out Goodstein’s study (which he wrote up for the American Prospect) you’ll find that not only do economists consistently overestimate the cost of complying with regulations, they consistently underestimate the cost of cleaning up damaged environments. Or, as Goodstein puts it:

The message from these cases is clear. On the one hand, treating already polluted water, cleaning dirty soil, and scrubbing oily rocks costs a lot of money, (much) more than expected. On the other, when it comes to reducing pollution emissions at the source, it is almost certain to be (substantially) cheaper than we think it will be. Updating Poor Richard’s Almanack, an ounce of prevention is clearly worth a pound of cleanup.

Published by Kit Stolz

I'm a freelance reporter and writer based in Ventura County.

2 thoughts on “The Cost of Prevention vs. The Cost of Cure

  1. Good point. Could it be that it’s difficult to agree on a definition of “cleaned up” in the aftermath of a disaster? As I recall, suits over the Exxon Valdez are still being hashed out in court…

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