The Environmental Protection Agency (EPA) is conducting a study on the efficiency of its expenditures on environmental protection programs. You have been hired to work on the analysis. You are presented with the following information:
(i) The $10 million spent to reduce ozone air pollution is estimated to save 1 person from death and 500 from illness during episodes when ozone exposures are particularly high per year; once ozone levels are reduced, there are no lasting effects. Those affected are primarily those with lung problems, such as asthma, who can be of any age.
(ii) The $20 million spent to reduce children's exposure to asbestos in schools is estimated to save 10 children per year from getting cancer when they are middle-aged. Of those 10 cancer cases, 4 are expected to result in death, and 6 in survival after treatment.
(iii) The $5 million spent to reduce lead in household drinking water is estimated to save 10 people from death and 500 from other complications (learning and behavioral problems) per year from lead exposure. Of those affected, 70% are children.
(iv) Spending $2 million to encourage people to wear seatbelts is expected to save 50 people from death and 200 from other injuries per year. People of all ages are affected.
The study is designed to determine if money should be reallocated among programs. Getting increased funding is not an option.
(a) If the value of a human life is estimated at $3 million, and the value of avoiding a serious injury or illness as $50,000, which, if any, of these programs has positive net benefits?
(b) If the criterion for funding a program is maximizing the lives saved per dollar spent, regardless of illnesses, which program best meets this criterion? Why?
(c) If the criterion for funding is maximizing the number of healthy years that people will have per dollar spent, which program is likely to provide the greatest benefit? Why?
(d) If a major criterion for public funding is that a public good is involved, in contrast to a risk over which individuals have control, which program is most likely to merit funding? Why?
(e) Would you reallocate funding among these programs? If so, in what way? Why have you chosen the reallocation that you have? If you have not reallocated funding, why have you decided to stay with current funding?