A Bereaved Dad Takes a Close Look at the Flaws in Underride Regulatory Cost/Benefit Analysis

Jerry Karth submitted some additional comments on the proposed underride rule–with reflections on what was learned through the Underride Roundtable. These comments have now been posted on the Federal Register: Additional Comments on Underride Rulemaking by Jerry Karth, May 19, 2016

Jerry submitted his original public comment regarding the proposed underride rulemaking on February 16, 2016. Here is an excerpt from that which addresses NHTSA’s preliminary cost/benefit analysis:

I would like to respond to the utilitarian logic approach that NHTSA has appeared to have applied to this issue. Their utilization of a cost/benefit analysis (called for by Executive Order 12866) is sadly lacking moral and ethical depth on the benefits side.

This type of logic was applied in 2000 by the Philip Morris Company in the Czech Republic when they funded a research study on the costs/benefits of smoking in the Czech Republic. http://www.mindfully.org/Industry/Philip-Morris-Czech-Study.htm The study concluded that it would be more beneficial for the people of the Czech Republic to smoke than not. What was this startling conclusion based on? A cost/benefit analysis.

The results are summarized in Figure 1:

Figure 1: The public finance balance of smoking in the Czech Republic in 1999 is estimated at +5,815 mil. CZK

Income and positive external effects 21,463 mil CZK
  Savings on housing for elderly 28,mil CZK
  Pension & soc. expenses savings due to early mortality 196 mil CZK
  Health care costs savings due to early mortality 968 mil CZK
  Customs duty 354 mil CZK
  Corporate income tax 747 mil CZK
  VAT 3,521 mil CZK
  Excise tax 15,648 mil CZK
Smoking related public finance costs 15,647 mil CZK
  Fire induced costs 49 mil CZK
  Lost income tax due to higher mortality 1,367 mil CZK
  Days out of work related public finance costs 1,667 mil CZK
  ETS related health care costs 1,142 mil CZK
  Smoking (first hand) related health care costs 11,422 mil CZK
NET BALANCE +5,815 mil. CZK

The study concluded that $1,227 was saved in pensions, health care, and housing every time a smoker dies. [Photo and caption from http://www.mindfully.org/Industry/Philip-Morris-Czech-Study.htm ]

$1,227 ?

That’s how much a study sponsored by Philip Morris said the Czech Republic saves on health care, pensions and housing every time a smoker dies.

photo: American Cancer Society full-page SF Chronicle advertisement 2aug01

In comparison, let’s look at how this approach could be applied to the underride issue. This type of cost/benefit analysis could lead us to conclude that it is not beneficial to require stronger underride guards because the benefits of keeping weak and ineffective standards for underride guards are greater than the cost of upgrading them to the best possible protection. What might those benefits be?

  1. Save the trucking industry money by holding down manufacturing and installation costs.
  2. Save the consumer money by holding down shipping costs.
  3. Reduce medical costs by killing people at a younger age (and avoiding costly medical costs of the elderly population).
  4. Preserve the Social Security fund by decreasing the number of people who draw from their account due to early Death by Motor Vehicle.
  5. Improve the job market due to the decrease in the workforce from the elimination of workers through Death by Motor Vehicle.

In both cases, the conclusions lack common sense. I hope that we can agree upon that.

In other words, this kind of analysis could potentially require that we decide whether we are willing to fork over money to protect people from Death by Motor Vehicle. It forces us to choose between saving a life or saving costs. When that life is one of your loved ones, what would you choose?

In contrast, a cost-effectiveness approach may be a better solution because it compares the relative costs and outcomes (effects) of two or more courses of action. “Cost-effectiveness analysis is distinct from cost-benefit analysis, which assigns a monetary value to the measure of effect.” https://en.wikipedia.org/wiki/Cost-effectiveness_analysis In this situation, the desired outcome of both courses of action would be an underride guard which did not fail upon collision with a vehicle. The two solutions could be compared based upon cost, but a performance standard of a successful crash test would guarantee that lives would be saved.

Cost.Benefit Analysis

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