Biodiversity prospecting involves the search for chemicals produced in nature which are employed to escape predators, capture prey, enhance reproductive success, and fight infection. It has also been touted as a tool for conservation.

Several studies, beginning with Farsworth and Soejarto (1985), have valued biodiversity for drug research by multiplying the estimated probability of discovering a commercially valuable substance by the estimated value of the discovery. Values found in these studies range from $44 per untested species to as much as $23.7 million.

However, R. David Simpson, Roger A. Sedjo, and John W. Reid, all of whom are with Resources for the Future, point out that earlier researchers failed to recognize the possibility of redundancy, or, in other words, that other organisms may contain the valuable chemical. Redundancy obviously implies that individuals species are less valuable for pharmaceutical research. Thus, the authors value marginal species on the basis of their incremental contribution to the probability of making a commercial discovery.

Simpson, Sedjo, and Reid derive a demand function for biodiversity in pharmaceutical research, determine the willingness to pay for the "marginal species," and consider the sensitivity of the resulting value for the marginal species to the probability of discovery as well as assumptions concerning overall profitability. Biological diversity is measured by the genetic distance between related species. Using current taxonomic practice they assume that all species within a particular taxon are equally different.

They note that between 1981 and 1993 the U.S. F.D.A. approved an average of 23.8 new drugs per year at a relatively stable rate.=20 The number of approvals ranged from 14 in 1983 to 30 in 1985 and 1991. Because about one-third of all prescription drugs are derived from higher plants, they assume that it is reasonable to expect 10 new drugs per year to be discovered through the investigation of higher plants. A study by DiMasi et. al. (1991) estimated that pharmaceutical R & D expenditures per successful project are $231 million. The Office of Technology Assessment estimated a reasonable upper bound of $359 million. Assuming an expected return of 50% and an R & D cost of $300 million results in expected net revenue of $450 million.

The probability of any given species producing a successful product is about 12 in a million. For all 250,000 species the probability of success is slightly over 95%. The expected cost of evaluating a sample is approximately $3,600. The maximum possible value of the marginal species is thus $9,431. This translates into a maximum willingness to pay of $20 per hectare in western Ecuador. In other areas, with less genetic diversity, the willingness to pay is considerably lower, on the order of a dollar per hectare or less.

This estimate is evaluated at the probability of success that maximizes the value of the marginal species. Other estimates for the probability can reduce the value to 0. In addition if net revenues exceed expected research costs by 25% the value falls to $1,018, and if revenues exceed costs by 10% the value is only $2.20.

The estimates do not take into account option value. In addition, the benefits estimated are private and do not include consumer surplus from new product development.

R. David Simpson, Roger A. Sedjo, and John W. Reid "Valuing Biodiversity for Use in Pharmaceutical Research" Journal of Political Economy, 1996 volume 104 number 1 pages 163-184


Researchers studying experimental prairies found that an ecosystems "productivity" improves as the number of species rises. The researchers burned, plowed, planted by hand and tended 147 plots at the Cedar Creek Natural History Area in Minnesota. Each of the 100 square foot lots grew from 1 to 24 native prairie species. The scientists randomly chose which species would fill out a particular plot's designated number of species. The experimenters were thus able to test how the number of species, rather than the kinds of species, affected the growth of plants on the plots and their use of nitrogen. The more species a plot had, the greater its biomass of plants, and the more nitrogen it took up in its increased growth.

Carol Aesuk Yoon "Ecosystem's Productivity Rises With Diversity of Its Species" The New York Times March 5, 1996

Dr. David Tilman, et. al. Nature February 22, 1996


The 1,140 page Global Biodiversity Assessment, funded by the U.N. Environment Program found that humans are destroying animal and plant species at an "alarming rate". Nearly 10,000 species are threatened with extinction, according to the report, which was released on November 17th, 1995. It estimated the total number of species in the world at 13 million to 14 million. Only about 1.75 million have been identified and given scientific names.=20 More than 7 million varieties of insects have not been classified.

The report, prepared by 1,500 scientific experts from around the world, found that in the last four centuries 484 animal and 654 plant species have become extinct. Nearly three times as many bird and animal species have disappeared since 1810 than in the previous two centuries. The Assessment estimated that extinctions due to the presence of humans on the Earth are 50 to 100 times what they would have been without people.

An example of the costs arising from the elimination of seemingly unimportant species is provided by the day-flying moth, Urania fulgens. The moth, found in South America and Mexico, metamorphoses from a caterpillar that feeds exclusively on a variety of trees and vines known as Omphalea. The heavy defoliation due to the caterpillar causes the trees to produce a protective chemical toxin, making them unpalatable to the moths.=20 The toxic plant compounds have been shown to be effective against the AIDS virus in test-tube experiments.

Associated Press November 13, 1995


In his State of the Union message President Clinton proposed $2 billion in tax breaks to spur the revitalization of as many as 30,000 mildly contaminated urban industrial sites. Under the proposal, companies that choose to develop these sites will be able immediately to write off the cleanup costs from their taxes.

Currently, such costs can be deducted over 5 to 10 years. Deputy Treasury Secretary Lawrence H. Summers, said the cleanup costs would average about $400,000 for each site. This expense has already been factored into Clinton's new budget, and the President trumpteted the proposals a campaign visit to a New Jersey Superfund site on March 11th.

Alison Mitchell "Clinton Asks Tax Breaks For Toxic Waste Cleanup" The New York Times March 12, 1996


Pursuant to a Congressional request the U.S. General Accounting Office found that the four major federal land managing agencies are each taking inventory of abandoned mines on properties they manage, but because they do not use consistent methodologies there is no comprehensive inventory. The Forest Service has estimated the number of abandoned mines on federal lands to be up to 25,000. Nonfederal organizations have determined that 194,500 sites were generally safe; while 231,900 needed landscaping; 116,300 presented minor safety hazards; 14,900 could cause water contamination; and 50 threatened public safety, requiring complex cleanup. The Bureau of Mines believes that in the worst-case scenarios costs would range between $4 billion and $35.3 billion

Nonfederal organizations estimate that costs could exceed $70 billion.

Federal Land Management: Information on Efforts to Inventory Abandoned Hard Rock Mines (Letter Report, 2/23/96, GAO/RCED-96-30

http://www.gao.gov "GAO Reports and Testimony: Search for GAO Report - Directly Through GPO Access

in ENVIRONMENT-L@cornell.edu mailing list March 7, 1996 14:14:37.65 "Federal Land Management: Information on Efforts to Inventory Abandoned Hard Rock Mines"


Headquarters Inc. saved $10,000 in construction costs on a $1 million renovation of a 20,000 square foot facility in Missoula Montana built in the late 1800's as a meat cooling facility . =20 Money was saved on landfill fees and materials. The company recycled 21 tons of steel beams when the price of steel was $90 a ton. Cork, originally utilized as insulation, was reused in peg boards. Storefront glass was salvaged and re-cut for storm windows. Concrete was employed for landscape retaining walls and for fill.

In 1995 builders saved $150,000 by recycling 45,000 tons of debris in constructing the 750,000 square foot Oregon Arena in Portland. It cost contractors $560 to take a 40 yard bin of wood to the landfill, but only $60 to take it to the local wood recycling facility. Recycled materials included metal from the heating ventilating and air conditioning (HVAC) system, concrete, wood, light poles, and land clearing debris.

The benefits of recycling vary inversely with tipping fees, which range from $6 in Utah, to $28 in Austin, and to $80 in Oregon.=20 There are roughly 70 processors that deal with construction materials in the Portland area. Oregon state mandates require that at least three materials must be recycled from a construction job with over $25,000 in permit fees.

An article entitled "Right of Salvage" which appeared in the May 1996 issue of Buildings magazine notes that "green" construction adds approximately $4 per square foot to construction costs. It includes a "Recycling Economics Worksheet" from the Metro Regional Environmental Management Department.

Metro Regional Environmental Management Department Resource Efficient Building: A Handbook for Building Owners, Designers, and Project Managers

Elaine Watkins-Miller, Associate Editor, "Right of Salvage: Building =91green means recycling construction materials and specifying responsibly" Buildings May, 1996 pages 32-36 http://www.buildingsmag.com



When Glen Cove, New York's $40 million incinerator and its towering smokestack were constructed in 1983, its technology was heralded as the solution to the problem of shrinking landfills on Long Island. But the smokestack's emissions, including a light powdery ash that fell on a nearby playground, set of years of litigation. The incinerator operated from 1983 through 1991, when the New York State Department of Environmental Conservation described it as the worst-run incinerator in the state. A new operator, Island Resource and Environmental Company took over in 1992 promising a cleanup. It spent $22 million to improve the facility, and was rewarded with a 20 year contract to run the plant.

The legal battle continued. In addition, many municipalities that had been shipping garbage to the incinerator found it cheaper to contract with carters who sent the waste directly to new landfills in Ohio and Pennsylvania. On March 12th, 1996 the Mayor of Glen Cove, Thomas Suozzi announced that the incinerator would be abandoned and torn down.

Abandoning the incinerator will allow the city to cut its waste disposal costs in half. The city hired a new carter to remove its garbage at $30 a ton, $45 a ton less then the city is paying under the current contract with Island Recycling. Since Glen Cove ships 20,000 tons a year, the overall annual savings would amount to $900,000. Initially, much of the savings will be used to fund a $6 million buyout of the Island Resource contract. But Mayor Suozzi claims that in time the city will make a profit.

In May, the Supreme Court let stand a lower court ruling that gave nearby Smithtown Long Island the power to control the disposal of garbage collected within its borders.

John T. McQuiston "Embattled L.I. Incinerator To Go Way of Shoreham" The New York Times page B6


The UK government decided that the damage caused by all forms of pollution will be featured in official economic data for the first time within the next few months. The Central Statistical Office is beginning a continuous program of environmental "green" accounts.

Larry Elliott "Now It's Official: Pollution Could be Bad for Business" The Guardian March 11, 1996


In 1986 and 1987, the U.S. Department of the Interior promulgated regulations for natural resource damage assessments (NRDA) under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA, more commonly known as Superfund). The National Oceanic and Atmospheric Administration (NOAA) of the U.S. Department of Commerce promulgated NRDA regulations for the Oil Pollution Act (OPA) on January 5, 1996. As a result of public and expert comments, NOAA reframed the concept of compensation in damage claims to place greater emphasis on restoration of public resources.

Natural resource damage claims under CERCLA and OPA have three basic components:

1) the cost of restoring, rehabilitating, replacing, or acquiring the equivalent of, the damaged natural resources

2) the diminution in value of those natural resources pending recovery of the resource to baseline, but-for the injury; and

3) the reasonable cost of assessing those damages

The key difference between the full restoration based measure of damages in the new OPA rule and prior approaches is in the treatment of interim losses. The conventional measure used was the minimum amount of money necessary to make individual members of the public as well off as they would have been but for the discharge. In litigation, monetary compensation provides funds sufficient to make individuals whole. Public trustees cannot compensate individuals. Rather, they must only spend on enhancing or creating natural resources.

The NOAA developed an alternative measure--resource compensation--which they have incorporated into the final regulations for natural resource damage assessments under the Oil Pollution Act. Resource compensation occurs in the form of projects that restore or replace resources where the projects are scaled so that they provide sufficient quantity and quality of additional public resources to compensate the public for the injury. For example, to compensate for recreational beach losses =66rom an oil spill, compensatory projects might include building boardwalks over sand dunes (to provide access to the beach while at the same time protecting, and providing access to, the fragile dune habitat); constructing near shore artificial reefs for snorkeling, diving, or fishing; or restoring/reforesting adjacent upland areas (to increase the stability of the beach habitat).=20 The damage claim becomes the cost of returning the injured natural resources to baseline, plus the cost of compensatory restoration projects, plus the reasonable cost of assessing those damages

Compensation can be based upon contingent choice analysis (surveys), travel cost studies, and habitat equivalency analysis (HEA). HEA calculates the scale of projects to replace injured resources in terms of present discounted quantities of "effective" habitat acres. The analyst must specify a variety of inputs in order to characterize the reduction in habitat "services" during the injury recovery process and the increment in services provided per acre of the replacement projects.

Carol Adaire Jones "The New Restoration-Based Measures of Compensation In Natural Resource Damage Assessment Regulations: Methodological Challenges" Association of Environmental and Resource Economists Newsletter, May, 1996 Volume 16 #1 pages 5-8

Jones is Chief, Resource Valuation Branch, Damage Assessment Center, National Oceanic and Atmospheric Administration Station 10218, Silver Spring, MD 20910 Fax: (301) 713-4387 E:Mail cjones@nos.noaa.gov. The paper was prepared for presentation in the session on "Environmental Valuation in the Federal Government: Current Activities and Future Research Needs" at the 1996 Allied Social Sciences Association meeting January 5-7, 1996

also see the following works available from Ms. Jones:

Oil Pollution Act Natural Resource Damage Assessments: Final Rule, 61 Fed. Reg. 440 (January 5, 1996)

"Habitat Equivalency Analysis: An Overview", Policy and Technical Paper Series, Number 95-1 Damage Assessment and Restoration Program, NOAA, U.S. Department of Commerce

Carol A. Jones and Katherin A. Pease "Restoration-based Measures of Compensation in Natural Resource Liability Statutes, Damage Assessment and Restoration Programs", NOAA, U.S. Department of Commerce, 1995


The American Physical Society warns that the most economically exploited sources of helium will be depleted in 21 years unless steps are taken to halt the declining inventory. The Society calls helium one of the world's most valuable resources, which could be "squandered at incalculable cost to future generations". The Federal Government currently operates a combined stockpile and buffer stock into which commercial producers deposit helium when demand is low.

After World War I the US banned the export of helium to deprive potential enemies of fire resistant airships. It later created a strategic helium stockpile which now contains 32 billion cubic feet. The helium operation is $1.4 billion in debt, but most of the debt derives from interest on the $252 million advanced to create the reserve.

There is pressure in Congress to sell the reserve. Critics contend government involvement is unnecessary. Congress has legislated the Bureau of Mines out of existence, and has ordered the shutdown of the bureau's helium separation plant near Amarillo Texas, which produces about 10 percent of the nation's helium. The remainder is produced by commercial gas companies.=20 President Clinton has proposed closing down the helium reserve program. Representative Christopher Cox, a California Republican and key sponsor of the legislation, believes that market forces can resolve the shortage.

The US has reserves of helium mixed with natural methane in Texas, Wyoming and a few other states. America is virtually the world's only source of natural gas containing 0.3 percent or more of helium. In Russia and Poland, two of the other main sources of helium, natural gas generally contains 0.1 percent or less of helium, and is much more expensive to separate.

Although American producers recover about 3.3 billion cubic feet of helium from natural gas each year, another 3.2 billion cubic feet are thrown away because gas companies lack financial incentives to separate, refine and store it. The helium is wasted because when demand for natural gas is heavy, as is normally the case in winter, large amounts of helium are withdrawn from gas wells along with the natural gas. But, if there is little commercial demand for helium refiners have no economic incentive to extract and save it. Gas companies can then avoid the expense of extracting it.

The Bureau of Mines' Excell helium refining plant is acknowledged to be outdated, inefficient and expensive, but it holds and unfair financial advantage over private competitors. All government agencies must purchase their helium from the Bureau of Mines, which sells the gas for $55 per thousand cubic feet, nearly 10 percent more than the price charged by private firms.

The present world growth rate in demand for helium is about 10 percent per year. The researchers calculated that at these rates of increase the helium reserves would be exhausted in 21 years.

Only 10% of American helium is utilized for airships and weather balloons. Toy balloons consume trivial amounts. Major uses are purging and pressuring the fuel tanks of NASA and Defense Department spacecraft, high temperature welding, and cryogenic applications like magnetic resonance imaging machines (MRIs). Because it is the only element that remains liquid at a tiny fraction of a degree above absolute zero, helium is vital as a medium for chilling other elements to temperatures at which they lose all resistance to electricity, becoming superconductors at the huge accelerator laboratories studying nature's fundamental particles, such as the Fermilab Tevatron at Batavia Ill. Astronomers depend upon helium for cooling infrared and microwave sensors in their telescopes. About one-third of America's helium production is exported.

"Helium Will Not Fill the Demands of the Future, Physicist Caution" The New York Times February 6, 1996 page C1



U.S. wind turbine manufacturers are projecting that sales of models designed and built under the U.S. Department of Energy's Turbine Development Program, will total $330 million by the end of 1996. Brian Smith of the National Renewable Energy Laboratory claims that "it seems like a pretty good return on a $12 million research program". Turbines developed with the assistance of the program, their manufacturers, and sales estimates include the following:

Model              KW Manufacturer          Location        Sales
                                                         ($ mill)

AOC 15/50          50  Atlantic Orient      Norwich, VT       5.2
EHD vertical axis 300  FlowWind Corp.       San Rafael, CA    N/A
500 XST           500  New World Grid Power Palm Springs,CA  42.0
AWT-26/27         275  R. Lynette & Assoc.  Redmond, WA      80.0
North Wind 250    250  New World Power      Moretown, VT     10.0
Z-40              550  Zond Systems         Tehachapi, CA   182.0

The machines were developed with help from two parts of the Turbine Development Program. The Near-Term Product Development (NTPD) project ($6.2 million) produced the first three turbines, and the Value-Engineered Turbine (VET) project ($2.7 million) produced the last three turbines. An additional $2.7 million is committed to testing. Industry subcontractors have invested $8.7 million in cost sharing. The NTDP program is designed to produce power for 5 cents/kWh in a 5.8 m/s (13 mph) average wind.

Tom Gray "U.S. Firms See Sales Gains From Advanced Turbines" on infoterra@cedar.univie.ac.at March 8, 1996 13:48:34.29 internet mailing list from tomgray@igc.apc.org http://www.igc.apc.org/awea/ American Wind Energy Association 122 C Street NW Fourth Floor, Washington DC 20001 (202) 383-2500 Wind Energy Weekly


According to data from The American Wind Energy Association (AWEA) total installed wind power capacity around the world is projected to be 18,500 MW by 2005, up from 5,000 MW at present.=20 Over 1,300 MW of new capacity was installed in 1995, up 35% from 1994. The AWEA predicts that wind capacity additions will grow slowly until about 2000. Over the next 10 years about 2,700 MW is expected to be installed in the U.S. Almost two-thirds of all new installations last year, nearly 900 MW, were accounted for by Germany and India. Only 41 MW were installed in the U.S. In the last 10 years, the U.S. share has dropped from about 90% to 30%.

American Wind Energy Association 122 C Street NW Fourth Floor, Washington DC 20001 (202) 383-2500

"More Money in FY 97 Budget" Energy Conservation News May 1996 page 3 Editor: Kevin Gainer, BCC Newsletter Group Norwalk CT 06855 (203) 853-4266


According to Successful Government-Industry Partnership: the U.S. Department of Energy's Role in Advancing Energy-Efficient Technologies by the American Council for an Energy Efficient Economy, U.S. manufacturers have already realized additional revenues of $3.5 billion from the sale of low-emissivity windows, electronic lighting ballasts and high efficiency supermarket refrigeration systems, three of the most important energy-saving technologies that the Department of Energy (DOE) helped to develop.

Consumers and businesses will save about $10 billion over the lifetime of these technologies based upon products already produced and installed in the U.S. In all three cases the DOE spent modest amounts of money to help develop new technologies and to remove barriers inhibiting their adoption, working in partnership with private firms. The DOE claims that federal energy efficiency and renewable energy programs will create 20,000 jobs, cut energy bills by $20 billion annually, and decrease greenhouse gas emissions by 30 million metric tons of carbon equivalent by 2000.

"More Money in FY 97 Budget" Energy Conservation News April 1996 page 3 Editor: Kevin Gainer, BCC Newsletter Group Norwalk CT 06855 (203) 853-4266

American Council for an Energy Efficient Economy (1001 Connecticut Avenue NW, Suite 801, Washington, DC 20036 (202) 429-8873


Cornell University is investigating lake-source cooling as a means to cool campus equipment and buildings. Initial studies have shown that the concept is economically feasible, as the technique would use one tenth the power of conventional chiller technology and significantly cut energy costs.

The system would draw water from the bottom of Cayuga Lake, about 200 feet down, where the temperature is about 40 degrees Fahrenheit year round. The water would pass through a heat exchanger on the shore, naturally cooling recirculated water piped from the campus. The lake water would be returned to its source without touching the recirculating water. Preliminary estimates suggest that the project would cost $50 million or more. Electric power savings of about $1.5 million per year would be realized, and $15 - $20 million in capital costs for new and replacement chillers would be avoided. The proposal would also eliminate the use of chlorofluorocarbons (CFCs).

"Cornell Investing in Lake Source Cooling" Energy Conservation News April 1996 page 5 Editor: Kevin Gainer, BCC Newsletter Group Norwalk CT 06855 (203) 853-4266

Cornell University 840 Hanshaw Road, Ithaca, NY 14850 (607) 255-3651


The Nuclear Regulatory Commission has given Northeast Utilities, New England's largest utility 30 days to show that two of its nuclear power plants in Connecticut--Millstone 3 and the Connecticut Yankee plant are properly equipped for emergencies or face a potential shutdown. The commission said that the reactors are not in compliance with their licenses.

Earlier this year the company acknowledged that from the plant's opening in 1970, Millstone 1 technicians routinely removed all the fuel rods when they refueled the reactor, whereas they were supposed to remove only a third of them. The rods were then stored in a pool that could have overheated if cooling equipment failed. Eventually, the water could have boiled away, causing a meltdown, possibly worse than the one at Three Mile Island.=20 Commission officials also said today that workers at the plant often did not wait long enough for the fuel rods to cool before moving them into the spent fuel pool.

William T. Russell, director of the Office of Nuclear Regulation, said that the safety problems at Millstone 2 are more significant than the issues at Millstone 1. For example, the filters used to keep debris from clogging the emergency cooling system are the wrong size; a system for sampling air in the reactor building during an emergency has pumps that may be too small, and a pump for supplying cooling water to some equipment in the plant cannot be protected against flooding. Potential wrongdoing by the company in not property reporting the problems is also being investigated. In 1993 the agency found the company guilty of harassing an engineer who pointed out significant safety problems. Other former plant workers say that they lost their jobs for exposing problems.

Keeping Millstone 1 shut costs $5 million to $6 million a month, mostly for replacement power, the cost is $8 million to $10 million at Millstone 2. The utility is one of the nation's largest, and has been known as one of the most successful, nuclear operators.

Matthew L. Wald "Safety Deadline Set By Nuclear Agency For 2 Power Plants" The New York Times March 9, 1996 pages 1, 26

Andrew C. Revkin "Utility Defends Safety Of Its Nuclear Plants" The New York Times March 10, 1996




National Corporate Health Services Inc (NCHS) has developed WellTrac Software, which forecasts risks of medical events and costs associated with the risks. The program evaluates the costs and benefits of identifying and managing illnesses. It facilitates analyses of multiple financial and medical risk management scenarios through a variety of "what if" simulations. Clients can use the software to develop cost-based incentive programs for employees and thus reduce total medical expenses.

NCHS points out that a large corporation was able to reduce its health care budget nearly 17% and generated over four and a half dollars in savings for each dollar invested in wellness programs.

A 10 year study by the University of Michigan Fitness Research Center, begun in 1985 for a midwest manufacturer, is showing that if enough "high risk" employees improve their health habits by engaging in wellness and preventive care programs, a company's health care costs can be significantly lowered. Savings for a company with 8,000 employees could approach $20 million over a three year period, according to the study.

The Well/trac Model translates the Framingham Heart Study (FHS) risk factor findings from research literature to a user-friendly software system which can predict the risk of cardio vascular disease. The program uses epidemiologic and econometric information. It determines the financial impact of the medical risk by projecting units of service, type of service, provider type, and regional charge variance. It allows for Diagnostically Related Groups (DRGs) and differences in regional costs. Risk is disaggregated by sex, smoking status, cholesterol level, age, and other factors.

The system determines how many cardiac events can be expected in the next 20 years, whether the risk of these events can be controlled, and the expected cost of these events.

Contact: Christine Adamo, National Corporate Health Services, Inc. P.O. Box 333, Brielle, NJ 08730-0333 (908) 223-5575 Fax: (908) 223-6683


A study by the New England Medical Center in Boston and the Rand Corporation in Santa Monica appearing in The Journal of the American Medical Association found that outcomes for patients treated by Health Maintenance Organizations and those treated by doctors in traditional medical practices were similar. Costs at the HMO's were far lower. The study has been called the first comprehensive case-by-case comparison between the two kinds of systems. Patients moderately sick with high blood pressure or adult diabetes had similar results whether they were treated by primary care doctors and family practitioners or specialists. The report covered 1,720 patients served by 354 doctors and 13 nurse practitioners in three cities during 1992. It focused upon diabetes and hypertension. A 1986 study of rheumatoid arthritis by the University of California at San Francisco reached similar conclusions but studied fewer patients and did not analyze costs. HMO doctors hospitalized 40 percent fewer patients than the fee-for-service physicians, and ordered 12 percent fewer drugs.

Dr. Sheldon Greenfield The Journal of the American Medical Association November 7, 1995


Newly available blood thinning medicines which are improved versions of heparin should allow many of the 400,000 Americans who suffer dangerous clots associated with deep vein thrombosis each year to be treated at home, rather than spend a week in the hospital, according to two studies from Canada and the Netherlands. Patients given low-molecular-weight heparin largely avoided hospitalization and did just as well. Patients in the Canadian study averaged one day a week in the hospital, compared with a week for people on regular heparin. A day in the hospital typically costs more than $1,000. Low-molecular-weight heparin is likely to be priced at $60 to $100 a day compared with $5 for heparin.

Separately, artificial flavorings which have become a staple of junk foods from barbecue potato chips to caramel candy may actually be good for people because they contain salicylates, chemical cousins of aspirin. A new study found that the average person takes in the equivalent of one baby aspirin (about 80 milligrams) a day from the artificial flavorings put in processed foods, which is the amount frequently recommended to ward of heart attacks. The researchers claim that this may explain why fewer people have been dying from heart attacks over the past 30 years. The number of attacks dropped before other factors such as less smoking, lower consumption of saturated fats, better medicines, and more exercise have come into play. The study was conducted by Lillian M. Ingster and Dr. Manning Feinleib of the National Center for Health Statistics in Hyattsville, Maryland, and presented at a conference sponsored by the American Heart Association.

Associated Press, March 13th and 14th, 1996


In "Carcinogens and Anticarcinogens in the Human Diet" a 20 member panel of the National Research Council of the National Academy of Sciences confirmed that there were many natural and synthetic cancer causing chemicals in foods, but said their importance as cancer-causing agents was minimal compared with the overconsumption of calories and fat. The findings were based on a review of existing studies. The report said that about one-third of the 1.35 million new cancer cases in the nation each year could be traced to diet, but chemicals are apparently not responsible for many of these. Approximately 6,000 synthetic and natural chemicals are deliberately or inadvertently added to foods, and hundreds of thousands--perhaps a million--are naturally present in foods. Coffee aroma alone contains 1,000 different compounds. Relatively few naturally occurring chemicals have been tested. One natural carcinogen is caffeic acid, found in coffee, apples, lettuce, peaches, tomatoes, pears potatoes and citrus fruits. Broccoli contains arsenic.

The reported noted that studies strongly suggest that a diet rich in fruits and vegetables should be pursued to fight cancer, as anticarcinogens in these foods are far more powerful than natural and synthetic carcinogens. The committee said "it is of utmost importance to continue recommending that the public consume diets rich in fruits and vegetables but low in fat and calories." The consumption of vitamins and minerals in a moderate, varied balanced diet--not as dietary supplements--continues to be our best strategy for cancer prevention in people.

If people consume more anticarcinogens the damages produced by pollution, and the benefits of remediation, may be lower. In any case, this study indicates that the cost of chemicals on food may be close to zero. To be sure, many would argue otherwise.

Jane E. Brody "Chemicals in Food: A Panel of Experts Finds Little Danger" New York Times February 16, 1996 pages A1, A20


Kenneth Clark, Derek Leslie and Elizabeth Symons estimate the costs of business cycles and unemployment by asking: what proportion of consumption would representative households whose head is currently employed be prepared to give up in order to avoid the risk of unemployment? They are asking what a representative agent would require in increased consumption to be indifferent between a risky consumption path and a constant consumption stream. An alternative measure is simply the loss of output resulting from lower production.

Previous estimates by Lucas (1987),using US post-war consumption data, found that the cost of macroeconomic fluctuations around their trend growth paths was only 1/10 of 1% of GNP whereas the cost of a 7% inflation rate was estimated at approximately 1% of GNP.

When the authors replicated the Lucas method using UK post-war consumption data, they estimated a slightly higher loss from unemployment, at a maximum value of 1/4 of 1% of GNP. The authors also note that Lucas' estimates are dependent on a smoothing procedure used to calculate consumption risks. More importantly, fluctuations in aggregate consumption do not accurately mirror individual experience and the authors believe a micro level approach is more fruitful. Their results suggest that the cost of fluctuations for the =91typical' individual is much higher--at around 1-2% of employed consumption, depending on the degree of risk aversion assumed. However, there is considerable variation around the average value. Assuming a risk aversion coefficient of zero, the loss is zero, if the coefficient is 2, the net adjusted recession cost is 1.63%.

Kenneth Clark, Derek Leslie and Elizabeth Symons "The Costs of Recession" The Economic Journal 104 January, 1994 pages 20-36



The U.S. government could save more than $1.15 billion in travel costs every year by cutting back on regulations and paper work, according to the Subcommittee on Oversight of Government Management. The savings could be achieved if government adopted the best travel procedures used by private companies.=20 Allegations of excessive travel by officials like Energy Secretary Hazel R. O'Leary were "only the tip of the iceberg" according to Senator William S. Cohen. The General Accounting Office estimated that processing costs at several Federal agencies were $37 to $123 for each travel voucher compared with $10 to $20 at the best private companies. Some improvements have already been adopted. Currently, up to 60 steps are necessary to approve expenses for each trip by a Federal employee.

Reuters "Senate Panel Tells of Waste in Travel" March 10, 1996


Using Swedish data Forslund and Johansson examine 50 alternative national road investment programs in terms of expected time savings and reduced accident rates. They estimate a general production function with regionally specific accessibility characteristics to reconcile production function and cost benefit approaches. Gains from investments are as follows

 Time gains               42%
 Reduced accident risks   26%
 Reduced vehicle costs    12%
 Other cost reductions    20%

The authors value savings in commuting time at 30% of the wage level, shopping trips at 25% of the wage level, leisure trips at 20%, travel as part of work at nearly 200%, truck driving time at 135.6%, and time for cargo at 29%. Average gains considering the number of persons per car, the composition of trip categories, the types of trucks, the value of cargo, etc. is valued at 82% of the wage level for personal cars, 192% for trucks including cargo, and 32% for bus travelers.

Ulla M. Forslund and Borje Johansson "Assessing Road Investments: Accessibility Changes, Cost Benefit and Production Effects" The Annals of Regional Science (1995) 29 pages 155-174


Previous social science research on the consequences of teenage employment indicates that government programs providing teenagers with work experience should have provided significant benefits. Seven studies indicated that teenage employment is beneficial, especially if it is not excessive, and if it provides meaningful skills. However, a National Research Council review of 28 programs funded under the Youth Employment and Demonstration Projects Act and the Job Training Partnership Act determined that work experience had few if any benefits. Using information on brother pairs from the Panel Study on Income Dynamics, Foster determines that conventional analyses of the returns to teenage employment greatly overstate the benefits poor minority teenagers receive from working. It appears as if earning of such teenagers are not raised. The authors find that earnings of working teenagers in general are over $5,000 more as adults. Adjusting the differentials for family background cuts the difference to $1,922. Gains for nonpoor blacks are $1,500, but earnings for poor blacks decline by a statistically insignificant $1,000.=20 Foster rejects hypotheses that low benefits result from poor implementation or government involvement.

E. Michael Foster "Why Teens Do Not Benefit from Work Experience Programs: Evidence from Brother Comparisons" Journal of Policy Analysis and Management (1995) Volume 14, Number 3 pages 393-414

                 Environmental Damage Valuation
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