Environmental Valuation & Cost Benefit News--June, 1996, VolII, #6
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ENVIRONMENTAL DAMAGE VALUATION
AND
COST BENEFIT NEWS
VOLUME III # 6 JUNE, 1996
Font Courier 12 recommended. Delimiters in previous editions
have been eliminated due to translation problems.
CONTENTS
GENERAL
SUPREME COURT RULES ON 17 PUNITIVE DAMAGE AWARDS, SEVEN REMANDED
AS EXCESSIVE
TWO DAMAGE CALCULATION METHODS PRODUCE RELATIVELY CLOSE RESULTS
BENEFITS OF RECYCLING
AN ALTERNATIVE PREFERENCE ELICITATION PROCEDURE: THE STRUCTURED
VALUE REFERENDUM
DIFFERENCES RESULTING FROM ALTERNATIVE CONTINGENT VALUATION
RESPONSE FORMATS
ENERGY
IMPACTS OF POTENTIAL SHIFT TO RENEWABLE ENERGY IN WISCONSIN
LAND
HOW DROP-OFF RECYCLING CAN SUCCEED
NON-ENVIRONMENTAL COST BENEFIT NEWS
COST OF STROKES PUT AT $40.6 BILLION ANNUALLY
LARGE BENEFITS FROM WARMING SURGERY PATIENTS
COST OF SUBSTANCE ABUSE IN NYC $20 BILLION
PUBLIC COST OF TEEN PREGNANCY $7 BILLION
L.A. RIOT COSTS
WELFARE GAIN FROM INFLATION DUE TO RIGID WAGES
APPEALS COURT REJECTS ASBESTOS SETTLEMENT
AN ALTERNATIVE TO STADIUMS CAN BENEFIT ALL
GENERAL
SUPREME COURT RULES ON 17 PUNITIVE DAMAGE AWARDS, SEVEN REMANDED
AS EXCESSIVE
On May 20th the U.S. Supreme Court reversed an infamous punitive
damage award as being so large that it violated the Due Process
Clause of the U.S. Constitution (U.S. Supreme Court. BMW of North
America Inc. v. Gore No. 94-896 May 20, 1996). It struck down a
$2 million punitive award to an Alabama BMW owner, who filed suit
because the company did not tell him that his car had been=20
repainted before he bought it. Actual compensatory damages
awarded by the jury were only $4,000. The award was given
despite the fact that the owner had signed an "Acknowledgment of
Disclosure", which stated that the car may have been damaged.
The plaintiff argued that a large award was necessary in order to
force a change in BMW's national policy of not telling consumers
about refinishing. He claimed that BMW had failed to inform 983
other buyers throughout the U.S. of similar repainting jobs. The
jury multiplied the $4,000 compensatory damage award by 983 in
arriving at punitive damages. The Alabama Supreme Court cut the
award to $2 million.
Although the Supreme Court has stated before that a punitive
award could be so large as to be unconstitutional, this is the
first time it has ever struck down damages sanctioned by a lower
tribunal. The Court said it was wrong for the jury to punish BMW
in all 50 states. It noted that under principles of "comity" and
"state sovereignty" punitive damages can't be awarded "with the
intent of changing the tortfeasors' lawful conduct in other
states". It called the 500 to 1 ratio of punitive to
compensatory damages "breathtaking". The Justices suggested that
even a 35 to 1 ratio (based on the harm not just to the plaintiff
but to other BMW owners in Alabama) was dramatically greater than
would be permissible.
However, the degree to which this case can be applied to other
matters remains to be seen. The Court relied on three
"guideposts" in analyzing the amount of the award
Reprehensibility: Because the harm was "purely economic" and
had no effect on the car's performance or safety the degree of
reprehensibility did not justify such a large award.
Ratio: The ratio of punitive to compensatory damages "must
surely raise a suspicious judicial eyebrow" the Court said.
However, it emphasize that there is no simple formula for
measuring constitutionality.
Comparable civil penalty: The civil penalty for comparable
misconduct in Alabama is only $2,000.
The vote was 5 to 4. The High Court remanded the case to the
Alabama Supreme Court, which must decide whether to require a new
trial or simply to reduce the award.
BMW v. Gore is "clearly the most significant case in punitive
damage jurisprudence to date", according to Gerald Boston, a
professor at Thomas Cooley Law School in Lansing, Michigan. Two
previous High Court cases had considered this issue. In 1991 an
$800,000 punitive award was approved in an insurance bad faith
case where the compensatory damages were $200,000 and the out of
pocket losses were $4,000. However, the Court said this amount=20
was "close to the line" (Pacific Mutual Life Insurance Co. V.
Haslip, 499 U.S. 1). In 1993 a $10 million punitive award was
approved in a commercial dispute where compensatory damages were
only $19,000. The Court noted that if the defendant's illicit
scheme had been successful the actual damages would have been in
the millions (TXO Production Corp. V. Alliance Resources Corp.,
113 S. Ct. 2711; 93 233)
In December 1995 the Eighth Circuit struck down a punitive award
as unconstitutional. The plaintiff had been awarded two dollars
in actual damages for invasion of privacy and $500,000 in
punitives (Pulla v. Amoco Oil Co., 72 F3d 648 (1995) 96 53).
Subsequent to the BMW decision the court remanded six other cases
as too large, including
* a $4 million punitive award against an oil driller who
caused "the largest loss of oil from a blowout in U.S.
history". The plaintiff was also awarded $81,000 in actual
damages and $500,000 in attorneys fees (Apache Corp. v. Moore,
891 S.W.2d 671 (Tex. Ct. App. 1994))
* $6 million against the Ford Motor Company for failing to
warn a dealer that black showroom owners don't succeed as
often as whites. The jury awarded $900,000 in economic losses
and $700,000 for mental anguish (Ford Motor Co. v. Sperau No.
1931473 (Ala. 1995)
* $15 million against the owner of a mine for allowing sulfate
and aluminum to contaminate a stream. The compensatory
damages were $40,000 for trespass and nuisance (Combustion
Engineering, Inc. v. Johansen 67 F. 3d 314 (11th Cir. 1995).)
* $30 million against a natural gas supplier for "tortious
interference with contract" and antitrust violations. The
compensatory damages were $269,000. (Oxy USA, Inc. v.
Continental Trend Resources, Inc. 44 F. 3d 1465 (10th Cir.
1995).)
* $2 million against an insurance company that denied a
$14,000 life insurance claim on the grounds that the decedent
had concealed a history of heart problems. The plaintiff
claimed that the agent who sold the policy knew about the
heart condition (Union Security Life Insurance Co. v. Crocker,
No. 1931672 (Ala. 1995).)
* $2 million against an insurance company that refused to pay
commissions to a fired agent after claiming that he had
induced a policy holder to switch companies, even though it
didn't investigate whether this was true. The compensatory
damages were $250,000. (American Pioneer Life Insurance
Company v. Williamson, No. 1921796 (Ala. 1995).)
The following cases were denied "certiorari", suggesting that the
Court did not disapprove of the awards
* $3 million against a client who failed to pay his attorney's
fees and a third party who conspired with him. The lawyer
also recovered $104,237.47 for quantum meruit and tortious
interference with contract (Fraidin v. Weitzman, 93 Md. App.
168 (1992)
* $14 million against an insurance company for refusing to
defend a manufacturer against claims that its interior plaster
finish caused pitting. The jury awarded $2.8 million in
compensatory damages Liberty Mutual Insurance Co. v. Chemstar,
Inc., No. 92-55472 (11th Cir. 1994).)
* $5 million against Honda in a products liability case
involving an All Terrain Vehicle that flipped over backwards.
The plaintiff suffered multiple facial fractures and reduced
short-term memory. The jury awarded $19,000 for medical
expenses and $700,000 for pain and suffering (Honda v. Oberg,
880 P.2d 8 (Oregon 1995).)
* $2.25 million against an individual for repeatedly seeking
audits of a family trust that failed to turn up any=20
wrongdoing. Compensatory damages were $284,000 (Wolfberg v.=20
Greenberg, No. 92-6023 (10th Cir. 1995).)
* $78,500 against a union for failing to inform a member of
job referrals, preventing him from distributing flyers at=20
work, and trying to have him removed from a union meeting. The
plaintiff received $200 in compensatory damages and $28,298.20
in attorney fees under the Labor Management Reporting and
Disclosure Act. (Construction & Laborers' Union v. Murray, 149
I.R.R.M. 2457 (9th Cir. 1995).)
* $3 million against a law firm for malpractice, even though
the partner who committed the malpractice did most of his work
for the client before he joined the firm and other partners
weren't aware of the malpractice. The jury awarded $1.2
million in compensatory damages (Hyatt Regency Phoenix Hotel
Co. v. Winston & Strawn, 907 P.2d 506 (Ariz. App. 1995).)
* a $7.5 million judgement against an asbestos manufacturer
where the compensatory damages of the three plaintiffs were
$255,000, $138,000 and $102,500 (Owns-Corning Fiberglas Corp.
v. Pickering, 638 N.E. 2d 1127 (Ill. App. 1994).)
* a $4.125 million award against an asbestos manufacture in a
class action suit where the compensatory damages were $2.5
million (Owens Corning Fiberglas Corp. v. Brennan 61 F3d 910
(9th Cir. 1995).)
* $4 million against an asbestos manufacturer where the
compensatory damages were slightly over $1 million (Owens
Corning Fiberglas Corp. v. Rekdahl, No. B068259 (Cal. Ct. App.
1995).)
* $8.25 million against Owens Corning where the compensatory
damages were just over $4 million (Owens Corning Fiberlas=20
Corp. v. Dudley, No. 94-02059 (Fla. App. 1994).)
Experts claim that these cases give little guidance for other
contests, as they exhibit "no rhyme or reason". However, the
Court does seem to accept larger awards when physical injuries
occur, or where the harm is serious. All in all, lower courts
will probably be more likely to lower awards.
Separately, an Illinois trail court ruled that a $500,000 cap on
non-economic damages passed by the legislature violates the equal
protection, right to a jury trial, separation of powers, and open
courts provisions of that state's constitution.
John W.R. Murray "U.S. Supreme Court Rules on 10 Punitive Damages
Awards" Lawyers Weekly USA June 3, 1996 pages 1, 14
"Supreme Court Decides Seven More Punitive Damages Cases" Lawyers
Weekly USA June 17, 1996 pages 1, 16
"Damages Cap Is Unconstitutional" Lawyers Weekly USA June 17,
1996
TWO DAMAGE CALCULATION METHODS PRODUCE RELATIVELY CLOSE RESULTS
In "Contingent Valuation and Revealed Preference Methodologies:
Comparing Estimates for Quasi-Public Goods", Richard T. Carson,
Nicholas E. Flores, Kerry M. Martin and Jennifer L. Wright
(CFM&W) conduct a "meta analysis" of 83 studies which compares
"contingent valuation" (CV) and "revealed preference" (RP)
valuation methods. Contingent valuation estimates are derived
=66rom surveys, while revealed preference methods utilize
statistical analyses of home sales, travel costs, and/or
"averting behavior". Revealed preference estimates are affected
by the definition of the good, the relationship specified by the
researchers, and other assumptions, such as the value of time and
the number of sites analyzed. "Meta analysis" utilizes
statistical techniques to formally combine the results of other
statistical investigations. The 83 studies generated 616
comparisons.
The works examined by CFM&W provide a wide range of valuations,
ranging from a recreational fishing day on the Blue Mesa
Reservoir in Colorado to a statistical life. There is a
significant amount of variation in goods considered, in
implementation of valuation techniques, and in other factors.
The contingent valuation studies were obtained from a
bibliography of over 1,600 contingent valuation papers listed in
Carson et. al. (1994) conducted between 1966 and 1994. Due to
potential biases arising from reliance upon only the published
literature, the authors included unpublished dissertations,
conference papers, and government reports.
Carson, Flores, Martin and Wright report three sets of results.
One set utilizes the full sample. The second trims off the
smallest 5% and the largest 5% of the CV/RP ratios. The weighted
sample uses the mean CV/RP ratio for each study as the study's
observation
The table below presents the results
Mean Median 95% Correlation
Confidence Coefficient
Interval Pearson/
Spearman
Complete 0.89 0.747 0.813-0.960 0.83/0.78
Trimming smallest=20
& largest 0.774 0.747 0.736-0.811 0.91/0.88
Weighted 0.922 0.936 0.811-1.034 0.98/0.92
The authors also regress the CV/RP ratios from the trimmed
dataset on a set of dummy variables representing the technique
used. The estimated coefficients suggest the CV estimates run
about 20% to 40% lower than their RP counterparts, and that
estimates for Health goods are closer than others.
The authors conclude that Contingent Valuation estimates are
"smaller but not grossly smaller", than their Revealed Preference
counterparts. For the complete dataset, 1.0 is just outside the
upper end of the 95% confidence interval for the mean CV/RP
ratio. For the trimmed dataset one can clearly reject the
hypothesis that the mean CV/RP ratio is 1.0. For the weighted
dataset the mean ratio is not significantly different from 1.0.
In every case the correlation coefficient estimates are
significant at < 0.001, thus providing support for the
covergent validity of the two basic approaches to nonmarket
valuation of quasi-public goods. Based on the available CV/RP
comparisons, arbitrarily discounting CV estimates by a factor of
two or more, as some, including the influential National Oceanic
and Atmospheric Administration, have proposed, appears to be
unwarranted, and, in fact, make these estimates diverge from
observable behavior. CV/RP ratios are greater than 2.0 in only 5
percent of the complete sample and 3 percent of the weighted
sample.
The study also provide excellent bibliographical leads for
valuation studies.
Richard T. Carson, Nicholas E. Flores, Kerry M. Martin and
Jennifer L. Wright "Contingent Valuation and Revealed Preference
Methodologies: Comparing Estimates for Quasi-Public Goods" Land
Economics February, 1996 Volume 72, Number 1 pages 80-99
BENEFITS OF RECYCLING
Lake, Bateman and Parfit use a dichotomous choice contingent
valuation survey to measure the benefits of curbside recycling
for the village of Hethersett, South Norfolk, United Kingdom.=20
Dichotomous choice models present specific dollar values in
contrast to open ended surveys where respondents can answer with
any amount. Whereas most other contingent valuation studies
involve hypothetical goods or policies, the scheme that is the
subject of this sttudy was already operational, and the
respondents had a great deal of information about the good.
Respondents were asked about overall benefits, and the degree to
which they recycled. The authors found that socio-economic
factors played a significant role in determining whether or not
people say they would pay for the scheme.
The authors find a mean household willingness-to-pay of 35.69=A3,
resulting in an aggregate benefit of 50,000=A3 per annum in this
community of 1,400 households. The survey indicates that 190
pounds of recyclables will be collected, which produces an
estimated benefit of 260=A3. The net cost is 124=A3, but 65=A3 in the
best case. The net benefit is thus 136=A3, but up to 195=A3in the
best case.
Ian R. Lake, Ian J. Batement and Julian P. Parfitt "The Benefits
of a Recycling Scheme: A Case Study" Journal of Environmental
Management (1996) Volume 46 pages 239-254
AN ALTERNATIVE PREFERENCE ELICITATION PROCEDURE: THE STRUCTURED
VALUE REFERENDUM
The Structured Value Referendum (SVR) is a voting based
preference elicitation method. SVR enhances the ability of
voters to respond in a manner that reflects their true
preferences by providing them with additional information
regarding alternatives and consequences. In the Journal of
Policy Analysis and Management Timothy McDaniels discusses the
steps involved in developing an SVR, as well as its advantages.
Victoria, the capital of British Columbia, is known for its
beauty and cleanliness despite the lack of sewage treatment
facilities. The Capital Regional District, which includes
Victoria and surrounding communities, compensates for the lack of
sewage treatment facilities by screening liquid wastes. However,
environmentalists pressed the government to build treatment
plants. The estimated cost of the plant was $600 million.
McDaniels believes that the plants are clearly unnecessary. The
U.S. National Research Council, as well as local environmental
engineers, and health authorities had reached similar
conclusions.
Two sets of alternatives were presented to voters. One set
called for construction of treatment facilities, while the other
involved nontreatment through liquid waste management programs.
The liquid waste programs included source control to keep
chemicals from ever entering the liquid waste stream, curbing of
illegal shoreline outfalls, limitation of storm water damage,
expanded ocean monitoring, and systems for watching shorelines.
A considerable amount of time was spent on framing questions,
presenting options, and displaying costs and benefits clearly.
The ballots looked like this:
WHICH LIQUID WASTE MANAGEMENT OPTION DO YOU WANT TO SEE IN PLACE
WITHIN 5 YEARS?
(Annual costs assume a Provincial capital contribution of 50%)
PLEASE VOTE FOR ONE OPTION ONLY AND MARK
YOUR CHOICE WITH AN X IN THE BOX PROVIDED
Total Capital Cost New Annual Cost Annual Cost Per
$100,000 of
Property Value
OPTION Preliminary Treatment (existing) and new Liquid
A Waste Control Programs
$0 $650,000 $4
OPTION Preliminary Treatment and new Liquid Waste Control
B Programs
$379 Million $37 Million $231
OPTION Secondary Treatment and new Liquid Waste Control
C Programs
$518 Million $54 Million $336
An educational campaign featured a televised two day workshop,
open houses, a newspaper insert, and extensive media coverage
through television, radio, newspapers and magazines. Information
on alternative uses for the money such as hospitals, a rapid
transit system or subsidized housing was also presented.
At least three alternative voting schemes can be used: 1)
conventional (single vote plurality) balloting, in which the
voter picks a preferred alternative, 2) approval plurality
voting, in which the voter selects all acceptable alternatives,
and 3) preference voting, in which the electorate ranks
alternatives. Approval voting was favored due to its theoretical
superiority and cognitive simplicity.
According to the authors SVR offers several advantages over
contingent valuation. It performs well with respect to the
following criteria set forth by Fischoff and Furby when they
questioned the reliability of contingent valuation in 1988:
1) referenda provide a familiar and legitimate base for public
decisions
2) SVR can be readily understood by voters because it is
considered within a specific decision context and is
characterized in terms of well structured alternatives that
provide different levels of performance on key objectives
3) the payment mechanisms for the good, usually through the tax
system, is clear cut
4) the transactions are not hypothetical
5) many more people are involved
6) voters are likely to take the exercise seriously, and
7) judgments do not require unreasonable precision.
SVR also offers advantages over conventional referenda in
eliciting preferences accurately and efficiently through superior
framing and education.
In the Victoria Referendum Option A received 57 percent of the
votes, while options B and C got 21 and 22 percent respectively.
The vote cost one million Canadian dollars. Costs for SVR are
generally much higher that expenses incurred when fielding
contingent valuation surveys.
Timothy L. McDaniels "The Structured Value Referendum: Eliciting
Preferences for Environmental Policy Alternatives" Journal of
Policy Analysis and Management Volume 15, Number 2, pages 227-251
(1996)
DIFFERENCES RESULTING FROM ALTERNATIVE CONTINGENT VALUATION
RESPONSE FORMATS
Several contingent valuation studies have found that the
open-ended (OE) format yields lower estimates of willingness to
pay (WTP) than does the close-ended or dichotomous choice (DC)
format. In addition, a number of recent analyses comparing
hypothetical and actual payments found that contingent valuation
evaluated through both DC and OE overestimate WTP. Dichotomous
choice surveys offer respondents specific or posted prices, while
open ended surveys allow individuals to answer with any amount.
In order to explain the discrepancy Brown, Champ, Bishop, and
McCollum (BCB&M) estimate Willingness To Pay (WTP) under four
conditions, which can be described by the following 2 by 2
matrix.
HYPOTHETICAL/OPEN HYPOTHETICAL/CLOSED
ACTUAL/OPEN ACTUAL/CLOSED
The good evaluated by the authors is a project to remove
abandoned unpaved roads along the North Rim of the Grand Canyon.
This good was chosen because it was considered a good measure of
nonuse value, since respondents were considered unlikely to visit
the North Rim. In addition, this good could actually be
purchased. Third, the benefits are well defined, eliminating
"hypothetical bias", meaning that a survey can never truly
reflect actual circumstances. Finally, the good could be
purchased in small and varying amounts.
They present a review of previous studies which provide several
useful estimates of willingness to pay for a variety of goods
rom a candy bar to acid rain reduction. CV COMPARISONS OF
DICHOTOMOUS CHOICE AND OPEN ENDED WTP
Mean WTP
Author(s) Year Good Dicho Open Ratio
Choice Ended
Bishop,Welsh & Heiberlein 1994 Deer hunting $37 $32 1.16
Boyle, et. al. 1993 Moose hunting $701 $484 1.45
Desvouges, et. al. 1995 Small oil spill $240 $129 1.86
Duffield and Allen 1988 Trout fishing $91 $29 3.19
Gilbert, Glass and More 1991 Protect Wilderness $10 $7 1.47
Johnson,Bregenaer &Shelby 1990 River recreation $53 $33 1.62
Kealy and Turner 1993 Candy bar $1 $1 1.12
Acid rain reduction $18 $8 2.20
Kristrom 1990 Preserve forests $395 $202 1.96
1993
Loomis,Cooper, & Allen 1988 Elk Hunting $40 $14 2.80
Loomis,Lockwood & DeLacy 1993 Preserve forests $224 $100 2.24
Seller,Stoll & Chavas 1985 Lake recreation $42 $9 4.78
The differences between close ended and open ended formats were
far greater for hypothetical than for actual payments. The
ratios of dichotomous choice to open-ended mean WTP ranges from
1.12 to 4.78. In the hypothetical experiment conducted by BCB&M
the mean WTP was $47, 2.5 times the OE estimate of $19, while in
the actual payment experiment the DC mean was $7.22, 1.6 times
the OE mean of $4.62. Open ended hypothetical payments ranged
=66rom $0 to $640 and actual payments from $0 to $250. Sixty
percent of hypothetical respondents and 82 percent of actual
respondents bid $0.
The authors evaluate several explanations for the difference
between dichotomous choice and open ended formats. The first
explanation is that dichotomous choice circumvents much of the
potential for strategic response bias. Dichotomous choice format
reduces incentives to overstate or understate their WTP. The
authors feel that this theory is unlikely to explain the
differences they observed because their survey used a donation
payment vehicle. A second reason advanced involves the cognitive
difficulties faced by respondents in assigning a specific number
rather than saying that something is above or below a number
given in the survey. Because actual DC and OE payments in the
BCB&M study were closer, the authors reject this hypothesis. The
third explanation relies on preference uncertainty. The final
theory is that respondents have two objectives. First, they may
want to truthfully express their WTP. Second, they may wish to
influence the outcome. The authors favor the latter two
explanations.
Thomas C. Brown, Patricia A. Champ, Richard C. Bishop, and Daniel
W. McCollum "Which Response Format Reveals the Truth about
Donations to a Public Good" Land Economics May 1996 Volume 72
Number 2, pages 152-166
ENERGY
IMPACTS OF POTENTIAL SHIFT TO RENEWABLE ENERGY IN WISCONSIN
Wisconsin spends $6 billion dollars of its $8 billion energy bill
on fossil fuels. Wisconsin Act 414 calls for the state to
encourage energy conservation and the use of "indigenous,
sustainable resources". The Wisconsin Energy Bureau hired
Regional Economic Models, Inc. to measure and value impacts of
import substitution through the promotion of renewable energy.
REMI modeled direct and first round indirect expenditures.
Technology costs were identified by industry. Energy resource
availability and cost were projected. The firm calculated
exogenous adjustments for imports as well as for electric price
changes. The model projected impacts of several alternatives,
and included procedures to avoid double counting. The direct
impacts resulted from the use of local rather than imported
resources, from changes in jobs per dollar of energy output, and
=66rom shifts in the cost of energy.
The study concluded that, on average, Wisconsin would create
three times more jobs and personal income through the use of
renewable energy rather than fossil fuels, that electric costs
would rise by 0.3%, and that $100 million per year in energy
payments for imported fuels would be avoided.
"Fueling Wisconsin's Economy with Renewable Energy" REMI
Information Update The Newsletter of Regional Economic Models,
Inc. 306 Lincoln Avenue Amherst, MA 01002 Spring, 1996 Issue 11
(413) 549-1169 Fax: (413) 549-1038 E-mail remi@crocker.com
Steve Clemmer, Wisconsin Energy Bureau (608) 266-7554 E-mail
clemm@mail.state.wi.us
LAND
HOW DROP-OFF RECYCLING CAN SUCCEED
In 1994, Gershman, Brickner & Bratton, Inc. (Falls Church,
Virginia), Burroughs Consulting (Lutherville, Maryland), and
Recycling Concepts (Covington, Kentucky) studied 18 drop-off
recycling programs for the U.S. Environmental Protection Agency.=20
Their goal was to determine the quantities of recyclable
materials diverted, the cost of diverting those materials, and
the impact of several variables upon diversion and cost.
Twelve of the programs achieved less than 4 percent diversion
rates, while recycling percentages for six others ranged from
7.89 percent in Largo, Florida to 15.61 percent in Santa Monica,
California.
In Santa Monica, a middle income community of approximately
87,000, the drop off service area includes 35,000 high density
multi-family households that do not receive curbside collection.
The 150 square block area contains 104 drop off zones with three
color coded collection containers, each of which is open between
8 a.m. and 8 p.m. A survey team checks the zones twice a week.
If the container is full, a collection crew will service it, if
it is 75% full a crew will come the following day. Materials
collected include newspapers, various types of glass, aluminum
cans, plastic containers, mixed paper, and corrugated containers.
Statistical analysis showed a positive correlation between the
percentage of the population completing high school and diversion
percentage. Site characteristics and program design, including
cleanliness, operation and layout, safety, distance from homes,
convenience and access periods, all appear to influence diversion
levels. The average population served in the six successful
programs was relatively small.
The study also found that successful programs were not the most
costly. Overall average expenditure per ton was $75. Costs in
the six most successful communities ranged from $51.36 in Blue
Ash, Ohio to $155.30 in Freeport Maine. Average costs in the six
successful communities was about $10 per ton higher than the
average for all communities. Costs in all programs ranged from
$15.52 for a buy back program in Tampa Florida to $463.69 in
Vancouver, British Columbia, but the range narrows to $41.35 -
$95.24 when six outliers are excluded.
The study also found that spending more money for public
education or administrative services did not increase diversion
rates; that total costs were not affected by the types or number
of recyclables targeted for recovery; that no connection between
the number or types of targeted materials and diversion was
observable; and that the presence of other opportunities for
residents to recycle, such as container deposit systems, did not
make success less likely.
Elizabeth Wood "Making drop-off recycling succeed" Resource
Recycling January 1996 page 44
Elizabeth Wood, is a project manager with Gershman, Brickner &
Bratton, Inc., solid waste management consultants based in Falls
Church, Virginia Resource Recycling is located at 1206 N.W. 21st
Avenue, Portland, OR 97209-1609
The project was funded under the U.S. EPA's Municipal Innovative
Technologies Evaluation Program and by the American Forest &
Paper Association, American Plastics Council, Environmental
Products Corp., National Soft Drink Association, Southeastern
Public Service Authority, and WMX Technology and Services Inc.
Copies of the final report, Evaluation of Diversion and Costs for
Selected Drop-Off Recycling Programs are available from Dianne
DeRose, Solid Waste Association of North America (Silver Spring
Maryland (301) 585-2898).
NON-ENVIRONMENTAL COST BENEFIT NEWS
HEALTH
COST OF STROKES PUT AT $40.6 BILLION PER YEAR
The medical bills and lost earnings of Americans who suffer
strokes each year total approximately $40.6 billion. Each year
500,000 Americans suffer strokes and 150,000 die from them. The
average cost was $103,576. Lost earnings accouted for up to 58%
of total economic costs. Strokes are the third leading cause of
death after heart disease and cancer.
Researchers under the direction of doctor Thomas N. Taylor from
the University of Iowa presented the results at a stroke
conference sponsored by the American Heart Association. They
tallied the financial toll by looking at the lifetime cost of
strokes that occurred in 1990
Associated Press January 27, 1996
LARGE BENEFITS FROM WARMING SURGICAL PATIENTS AT LITTLE COST
When doctors keep operating rooms chilly for their own comfort
the patient's risk of infection rises dramatically and healing
slows. Heavily gowned surgeons in operating rooms typically
sweat under bright lights. But, anaesthesia lowers body
temperatures to approximately 94.5 degrees. Heating intravenous
fluids and covering patients with blankets cost only $30 but
patients having colon operations suffered only one-third (6% vs.
19%) the usual surgical wound infections. They healed faster and
were sent home an average of one week sooner. Even patients who
avoided infections typically stayed in the hospital two days
longer.
Associated Press May 18, 1996
COST OF SUBSTANCE ABUSE IN NYC $20 BILLION
According to a study by the Center for Addiction and Substance
Abuse at Columbia University one of every five New York City tax
dollars is devoted to coping with the effects of smoking,
drinking and drug use. All in all, substance abuse cost New York
City $20 billion in 1994. Many of these expenses were borne by
the Federal and state governments through programs like Medicaid
Private businesses incurred higher security costs and lost
productivity. Public social welfare programs spent nearly $1.1
billion on city residents who abuse drugs and alcohol.
The overall totals include the cost of prosecuting drug dealers,
and the cost of financing the hospital stay of a poor patient
with emphysema, other criminal justice costs, medical bills,
social welfare programs, and property damage. Only a small
fraction of the total went to prevent or treat abuse. The study
did not quantify such costs as the reduced quality of life,
impaired education systems, and the flight of families to the
suburbs. In addition, partly due to drug addition and
alcoholism, mothers are reluctant to let children play
unsupervised in parks.
Tobacco accounted for $4 billion of the total. Costs from
tobacco included medical care for smoking related illnesses and
fire damage. It has inflicted by far the largest health care
costs.
Christopher S. Wren "Cost of Substance Abuse Put at $20 Billion"
The New York Times, February 29, 1996
PUBLIC COST OF TEEN AGE PREGNANCY ESTIMATED AT $7 BILLION PER
ANNUM
A study sponsored by the Robin Hood Foundation of New York City
and edited by Rebecca Maynard, professor of Education and Social
Policy at the University of Pennsylvania found that teen-age
child bearing costs the nation $2.2 billion annually in welfare
and food stamp benefits, $1.5 billion in medical care outlays,
$900 million in increased foster case expenses, $1 billion for
addition prison construction, and $1.3 billion in tax revenues
=66rom reduced productivity. The research looked only at the
impact upon mothers under 18, who gave birth to 175,000 children
each year. Approximately 500,000 children each year are born to
girls 15 to 19, 72% of whom are unmarried. Had the age range
been expanded, the costs would have risen.
To determine the effects of teen pregnancies, the researchers
looked at the differences between welfare payments to teen-age
mothers, as well as variations in the use of publicly financed
health care, abuse and neglect cases that resulted in a child
being placed in foster care, and prison incarceration rates for
children of teenagers, and older mothers.
Previous studies had compared the lives of women who gave birth
during their teen years with women who did not, but failed to
control for differences in economic, educational and social
backgrounds.
President Clinton requested $30 million in his 1997 budget for a
program to prevent teen-age pregnancy. Two years ago he proposed
spending $400 million.
Steven A. Holmes "Public Cost of Teen-Age Pregnancy Is Put at $7
Billion This Year" The New York Times page A19
L.A. RIOT COSTS
The Los Angeles riot of 1992 resulted in 52 deaths, 2,500
injuries and at least $446 million in property damages. Denise
DiPasquale and Edward L. Glaeser examine the causes of the riots
using international data, evidence from the race riots of the
1960s in the U.S. and Census data. They find some support for
the theory that the opportunity costs of time and potential
sacrifices inflicted by punishment influence the incidence and
intensity of riots. Ethnic diversity also appears to be a
significant determinant of rioting, but they find little evidence
that poverty matters.
Denise DiPasquale and Edward L. Glaeser "The L.A. Riot and the
Economics of Urban Unrest" NBER Working Paper 5456 February 1996,
Contact Denise DiPasquale ddipasqu@midway.uchicago.edu Social
Sciences Collegiate Division, 225 Gates-Blake Hall, 5645 South
Ellis Avenue, Chicago, IL 60637 (312) 702-8555 Fax: (312)
8234-0289
=46rom Social Science Research Network ERN Labor Abstracts 7/10/96
ERN1@PUBLISHER.SSRN.COM Reference LABOR: WPS96-153
SMALL WELFARE GAIN FROM INFLATION DUE TO RIGID NOMINAL WAGES
If nominal wages cannot fall, then inflation may help to move
real wages to optimal levels. Lebow, Stockton, and Wascher find
only limited evidence of downward rigidity. They estimate that
reducing inflation from four percent to zero would mean that an
additional =BD to 1=BE percent of people would have constrained wages
due to nominal rigidity. The associated welfare loss is
approximately five-hundredths of a percent of aggregate output.
David E. Lebow, David J. Stockton, and William L. Wascher
"Inflation, Nominal Wage Rigidity, and the Efficiency of Labor
Markets" Federal Reserve System Working Paper 95-45
Contact: Ms. Karen Blackwell, FEDS Secretary Mail Stop 77,
Federal Reserve Board, Washington, DC 20551 (202) 452-2900 Fax:
(202) 452-3810 E-MAIL: fedspapers@frb.gov
APPEALS COURT REJECTS ASBESTOS SETTLEMENT
A proposed $1.3 billion settlement for people exposed to asbestos
has been rejected by a federal appeals court. The U.S. Court of
Appeals for the 3rd Circuit said the settlement wrongly
encompasses two classes of victims whose interests conflict.=20
Those who are exposed to asbestos but not yet sick would want to
preserve the available pool of money, while those who are already
sick would immediately gain.
The settlement, which encompassed about 20 percent of all
asbestos related claims, would have set caps on the amount of
money an individual victim could recover, and on how many claims
could be paid in a year. The case involved 20 asbestos
manufacturers. The court estimated that 250,000 to one million
people were exposed to the products.
"Across The USA Legal Briefs: Pennsylvania" Lawyers Weekly USA
June 3, 1996 page 21
AN ALTERNATIVE TO STADIUMS CAN BENEFIT TEAMS, CITIES, AND FANS
Roger Noll, a visiting fellow at the Brookings Institution,
writes that "even at a time when major league sports have become
a cartoon of financial excess the proposed new home for the
Yankees is breathtaking in its audacity". Excluding land value,
a multipurpose mausoleum on Manhattan's West Side would cost a
billion dollars". Noll contends that the Yankees have little
economic effect on New York City except for the area within 100
yards of the Stadium. Few tourists come to New York just to see
the Yankees. Nearly all spending is simply shifted from other
forms of entertainment, like restaurants and movies. Taxes on
tickets and concessions do not come close to covering debt
service.
Even if the Jets football team agreed to play their home games on
the West Side total attendance would be approximately 4 million.
Studies "invariably conclude" that stadiums provide no
significant economic benefits. A team does increase income in a
community slightly but the increase never offsets financing and
operating costs. Because teams have relatively few (but very
highly paid) employees, sports venues usually cause overall
employment to fall, due to resulting cutbacks in other
entertainment businesses.
Because stadiums are bad investments, teams themselves are never
willing to pay for them. New York City would generate more cash
by putting the money in a savings account.
Noll suggests that a far cheaper way to keep the Yankees is to
bribe them. A new stadium could give the "Bronx Bombers" an
additional $10 million in profits each year. So, instead of
spending $80 million annually to finance and operate a new
stadium, New York could just hand the Yankees $10 million. Or,
even better, the city could pay $100,000 for each game won, with
a million dollar bonus for winning the pennant. The fans would
benefit, "as they would be less likely to have a team than
collapses down the stretch".
Roger G. Noll "Wild Pitch" The New York Times April 11, 1996
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