Sunday, January 13, 2013

"Where do you draw the line?"

There is this phrase, "where do you draw the line?" I hate it.

It's a rhetorical question, but unlike most of them, it's asked in a way so that you avoid thinking about the question.

But it is such an important question it has to asked repeatedly.

The answer, of course, is that you always draw the line where costs start to exceed the benefits.

But figuring out the costs is benefits is really, really hard.

And its not just estimating the costs or the benefits: even making sure the list includes all of them is an enormous challenge for most policy issues.

Consider some transportation policies issues. Many of them are going to hinge on the cost of cars, trains, etc. so focus on cars. When you think about the costs of driving you're thinking about the cost of gas and how wear and tears will add up, and maybe even about the pollution we're putting up in the air. But the two biggest costs of driving are the ones that go unseen, for the most part: fatalities and congestion.

Each year Americans buy around 6 million cars, worth about $20,000 each. Meanwhile 30,000 people are slaughtered on the roads. If you value each life at $4 million then the risk of dying is, exactly, just as big a cost of driving as the cost of the car itself. (Studies suggest that when we make public policies decisions we value our lives at about 33% of that level.)

Traffic is terrible. And its only terrible because everyone is driving so much. Suppose you're a commuter in metro Washington or Orlando, and you deal with terrible congestion each and every day that adds 30 minutes to your commute. How much would you pay to get 100+ hours a year at night with your kids and to low your blood pressure by 10 mmHg? Probably a lot. Now add that up for everyone and the toll from congestion is enormous, and generally ignored. It took a lot of smart economists a lot of thought to figure that out.

So "line-drawing" problems are hard. That is the point of asking "where do you draw the line?" But that should never be an argument against thinking about where to draw the line. It has to be drawn somewhere and its worth thinking hard about where.

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