Cato Books: “Dealing with Chemical Danger”

September/​October 1999 • Policy Report

Frequent media reports alert us to the dangers of eating Alar‐​treated apples, drinking srtificially sweetened coffee, ingesting certain laxatives, swimming in backyard pools, and pumping automotive gasoline… How are we to sort through all the rhetoric that surrounds questions of science and health?” asks Peter VanDoren in Cancer, Chemicals, and Choices: Risk Reduction through Markets, a new book published by the Cato Institute.

For decades now, experts on health, risk, and environmental concerns have recommended two policy prescriptions: more research and more government regulation based on that research. According to VanDoren, editor of Cato’s Regulation magazine, that approach is wrong.

“Policy problems relating to health risk from chemicals embody value choices and will not be resolved through more scientific investigation,” writes VanDoren, a political economist who taught at Princeton, Yale, and the University of North Carolina before joining Cato.

Conventional risk policy suggests that we ask scientists to tell us how exposure to chemicals affects human health and then let the government regulate exposure using the information provided by the scientists. But, VanDoren warns, “the belief that more scientific research will answer our policy questions is misguided.”

Scientific research will not answer our policy questions for a variety of reasons, according to VanDoren. “The public (and, hence, policymakers) worries about small levels of increased cancer risk resulting from chemical exposures,” but studies of minuscule levels of risk are prohibitively expensive, and some issues cannot be resolved scientifically. Such issues include which compounds should be analyzed in light of limited budgetary resources; how regulators should use research data, given the well‐​known design flaws of most studies; and whether we should be more concerned with the need to protect the public from carcinogens or the need to allow products to be developed and sold in the marketplace.

“In the case of chemical exposures that are private goods, government (to the extent that it does anything at all) should limit its activities to the provision of information so individuals can decide for themselves which risks to bear. Command‐​and‐​control regulations inhibit the development of robust private information markets because people think that if a product is for sale, the government must have checked it out to ensure that its benefits are greater than its harms.”

Experts in the health and risk fields hail Cancer, Chemicals, and Choices as must reading for policymakers, researchers, and the general population. “A gracefully written primer on how markets can be harnessed to manage the risks of chemicals,” says John Graham of the Harvard Center for Risk Analysis. “Technically sophisticated, yet argued in language accessible to the layman, this book will fundamentally redirect the policy debate,” says Michael C. Munger of Duke University.

Simon Takes on Journalists

Why do the media incessantly report bad news, when every indication of material well‐​being is improving? And why do people seem to have an insatiable appetite for bad news? Julian L. Simon, an economist at the University of Maryland and a senior fellow at the Cato Institute before his untimely death in 1998, attempts to explain the discrepancy between the facts and public beliefs in his book Hoodwinking the Nation.

In the opening chapter, Simon points out that most people in the United States believe that our environment is getting dirtier, that we are running out of natural resources, and that population growth is a burden and a threat. As Simon writes, “Ten minutes spent questioning grade‐​school children will confirm that even our youngest citizens hold these beliefs.” Backed by his usual extensive research, Simon argues, “It is also sure by now that these beliefs are entirely wrong.”

Instead of just showing that Americans are wrong about many “facts,” Simon explores why there is so much “false bad news” about the environment, resources, and population. He says that government reports are often the basis for environmental news scams and doomsday analyses. For example, he shows how a misleading government report caused people to worry that urbanization was causing our farmland to vanish (now known as the “urban sprawl” problem and trumpeted by Vice President Gore). Simon found there was no truth to the claim, and he recounts the story in detail. He also reveals how bipartisan the misuse of statistics is, arguing that both Bill Bennett and Al Gore have distorted statistics in the service of their own policy and political goals. Journalists know little about statistics and science and thus gather data in ways that lead to inaccurate conclusions.

Simon also examines the psychological and cultural mechanisms that make people more receptive to bad than to good news. People often view the present and future as half empty and the past as half full.

Cato Mencken Fellow P. J. O’Rourke said of Simon and the book: “Julian Simon had a brilliant insight into the economics of doomsaying. The reason for the surplus of environmental [doomsayers] is the political, psychological, and professional premium paid to the purveyors of folly. Journalists, activists, intellectuals, and would‐​be holders of political office profit by creating false alarms. No doubt all business causes some pollution, but the business of environmentalism has fouled the marketplace of ideas to the point where truth is an endangered species.”

In the foreword to the book, Ben J. Wattenberg of the American Enterprise Institute writes: “Hoodwinking the Nation is a devastating critique, suffused with the outrage that so often served as Julian’s trademark. Julian loved to make bets. Fifty years from now readers who peruse Earth in the Balance by Albert Gore and Hoodwinking the Nation by Julian Simon will giggle at one of them. Let’s bet which.”

Creating Stable Money

Market discipline is the best means the world has found to ensure that capital is well used,” writes Treasury Secretary Lawrence H. Summers in the Cato Journal (vol. 18, no. 3). “As capital market integration increases, countries will be forced increasingly to more pure floating or more purely fixed regimes.”

Strengthening weak domestic financial systems through market liberalization and the reduction of imprudent borrowing and lending practices is the key to global prosperity, Summers writes. The economies of Mexico, Russia, and Thailand faltered because of crony capitalism, while such nations as Hungary and Argentina have taken off since implementing market liberalism.

Other papers in the Cato Journal, based on Cato’s 16th Annual Monetary Conference, examine the future of the euro. In “The Impending Collapse of the European Monetary Union,” Charles Calomiris of Columbia University predicts that politics will impair the new currency. He foresees “soft‐​currency” member states threatening to quit the European Monetary Union unless their massive government expenditures can be accommodated. Robert Mundell, one of the architects of the euro, disagrees. In “The Euro: How Important?” Mundell writes: “The dollar‐​euro exchange rate is going to become the most important price in the world. By 2010 we will be back to a world where we get more fixed exchange rates, and the International Monetary Fund will be dragged back to its original function.”

In his essay “Is Inflation Too Low?” William Poole, president of the Federal Reserve Bank of St. Louis, says that both the “logic” and “evidence” suggest that “the appropriate goal for monetary policy should be price stablity, that is, a long‐​run inflation rate of approximately zero.”

Cato chairman William A. Niskanen calls for the IMF’s abolition. “My views on this issue have evolved from no more funding without IMF reform—to no more funding, period—to no more IMF. The IMF has not proved to be generally effective in promoting the type of economic policies that are necessary to avoid a financial crisis.”

In the previous issue of the Cato Journal (vol. 18, no. 2), leading economists offer new evidence on the relationship between economic freedom and wealth creation. James Gwartney, chief economist of the Joint Economic Committee of Congress; Randall Holcombe, an economics professor at Florida State University; and Robert Lawson of the Buckeye Institute for Public Policy Solutions conclude that “a decrease of 10 percent in government expenditures as a share of GDP will produce an increase in the GDP growth rate of about 1 percent.”

Other papers examine the rule of law, international development, and the relationship between freedom and human welfare.

Both issues of Cato Journal are available for purchase by calling Cato Institute Books at 1–800-767‑1241 or via the online Cato Bookstore.

This article originally appeared in the September/​October 1999 edition of Cato Policy Report.