Earlier this year, former OIRA Director and leading regulatory scholar Cass Sunstein published an article in the Journal of Benefit-Cost Analysis on why regulators should consider the impact of policy on non-human animals.
This is a topic we have written about at Scioto Analysis before. Non-human animals are often left out of cost-benefit analysis, with impacts of regulations on the lives of non-human animals getting a de facto value of zero in regulatory analysis.
Dave Weimer, a leading scholar of cost-benefit analysis, wrote a prominent article in 2019 on the “value of statistical dog life.” In this article, Weimer conducted a contingent valuation study where he surveyed dog owners on their willingness to pay for vaccines that would marginally decrease the mortality risk for their pets. Using this method, Weimer estimated a value of statistical dog life of $10,000.
While this is a step in the right direction for valuation of non-human animal life, this approach still derives the value from human markets using the value human beings place on non-human animal lives. This makes sense if human beings are the only people who participate in markets and economize their resources. And this is the general argument analysts make who exclude non-human animal costs and benefits from cost-benefit analysis: non-human animals do not take part in markets, so it makes little sense to designate market values to their welfare. Instead, the welfare of non-human animals should be treated as a consideration separate of cost-benefit analysis.
The problem with this reasoning is that non-human animals clearly manage scarce resources and engage in market-like behaviors with one another. Chimpanzees have been observed to engage in grooming and food sharing that mimics markets, with grooming serving as a form of currency. Capuchin monkeys have been able to intuit currency in laboratory settings, even demonstrating behaviors like price sensitivity and demand elasticity. A 2017 Bloomberg article detailed the many ways markets have arisen among non-human animals, ranging from wasps engaging in childcare markets to cleaner fish deciding who to eat dead skin and parasites off based on quality choices.
Sunstein says nonhuman animals pose an important challenge and problem for analysts conducting cost-benefit analysis. Last year, the Office of Management and Budget conducted the largest overhaul of Circular A-4, the federal regulatory guidance document for cost-benefit analysis, in a generation. Unfortunately, the question of how to incorporate benefits and costs of nonhuman animals into federal cost-benefit analysis did not receive any treatment in this revision. Sunstein calls this a “missed opportunity” and I am inclined to agree.
Sunstein goes back to the history of the value of statistical life to illustrate the complexity of valuing the benefits and costs of nonhuman animals. Value of statistical life began as a measurement used to estimate the cost of retraining bombers during the Korean War. Later iterations focused on future wages as a way to estimate the value of life. Most recently, value of statistical life is estimated by using labor market data. Economists are able to estimate the value people place on minute reductions in risk of death by seeing how different occupations at different skill levels are paid. This has led to a value of statistical life estimate that hovers around $10 million.
An analogue to the problem of estimating costs and benefits for non-human animals is the problem of estimating the value of statistical life for children. Children do not participate in the labor force, so we do not have the datasets we have to estimate the value of statistical life for children that we do for adults. This leaves us with options to either assume the value of statistical life for children is the same as it is for adults or find another way to estimate the value of statistical life for children. Often, researchers will use contingent valuation or revealed preference studies of parents to estimate the value they put on children to try to get at the value of statistical life for children as estimated by parents.
The problem with this approach is the assumption of perfect altruism, which we know is not the case with parents or pet owners. There also could be an opposite problem: pets or children could (in a theoretical perfectly rational state) value other things more than minute reductions in risk of death. In this case their guardians could overestimate the value of statistical life for their wards. There is a mismatch between the preferences of pets and children and their caretakers.
Putting aside these methodological problems, many laws have been put in place specifically to protect the welfare of non-human animals. Sunstein raises the examples of the Endangered Species Act, the Animal Welfare Act, and the Marine Mammal Protection Act as three laws that were specifically adopted to protect the welfare of non-human animals. Leaving their welfare out of the calculation of costs and benefits–especially in light of the information that nonhuman animals absolutely engage in market behavior–seems to be fundamentally missing the point of this legislation and leaving key information out of analysis that is supposed to guide policymakers in implementation of the legislation.
Sunstein says in his article that the problem with incorporating non-human animals into cost-benefit analysis is not a problem of quantification, but a problem of monetization. We can create estimates for how many non-human animals will be impacted by a regulation or other policy change. The problem is trying to figure out what the value of those benefits or costs are. Sunstein grapples with the same problems we lay out here. We can use stated preference or other strategies for estimating the value of impacts on non-human animals. Ultimately, though, these strategies depend on human assessment of the value of benefits and costs to non-human animals, not assessment by those who receive the benefits and costs themselves.
With these methodological problems in place, though, what can we do? Sunstein does not proffer much within his article: he mainly focuses on the problem rather than the solution. He does put forth one tool for consideration, though: break-even analysis. Basically, see what the value of non-human animal benefit or cost would need to be to tip the scales in the benefit-cost calculation. Then we can use our intuition to see if that is a reasonable value for the given benefit or cost and apply that reasoning to policymaking.
We consider break-even analysis to be a form of sensitivity analysis, and sensitivity analysis is an excellent tool in any benefit-cost analysis where we don’t know a key input. Maybe we don’t have the answers for the economic value of benefits and costs accrued by regulation to nonhuman animals. In the meantime, sensitivity analysis gives us a technique for incorporating consideration of non-human animals into benefit-cost analysis in light of a dearth of valuation information.