D. Hiep Truong


This broad authority to assess risk, however, leaves too much discretion to administrative agencies. Even more disturbing is the fact that different agencies assess the same risks differently, which leads to inconsistent results. The Environmental Protection Agency (EPA), for example, in determining the cancer risks from pesticides on food, produced an estimated risk of cancer mortality ten times greater than the Food and Drug Administration (FDA). To use a law and economics model, valuing equivalent (or identical) risks differently leaves open the possibility of economic misallocation. For example, if one agency has determined the proper level of risk, and assuming that both agencies must regulate the risk to reduce it to its optimal level, the second agency is either over- or under-regulating.

If an agency over-regulates, the agency is merely addressing a threat whose benefits are so marginal that the spending no longer justifies the cost of the additional regulation. But if an agency under-regulates, potential lives may be lost that could have been saved by more regulation. Unless agencies recognize that inconsistencies may occur if they fail to examine their regulations in a broader context, an agencies’ regulation of one environmental risk may actually increase the danger posed by a collateral risk. For example, if an agency decides to close a nuclear power plant to reduce the risk of radiation poisoning, there may actually be an increase in the potential damage from acid rain as people burn more fossil fuels to compensate for the nuclear power plant closing.