Environmental Valuation & Cost Benefit News--June, 1996, VolII, #6


                        COST BENEFIT NEWS

VOLUME III # 6                                         JUNE, 1996

Font Courier 12 recommended. Delimiters in previous editions have been eliminated due to translation problems.













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


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/

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


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


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:


(Annual costs assume a Provincial capital contribution of 50%)


           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)


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.


               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


                                                    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
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



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



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).




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


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


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


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


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


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


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


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

                 Environmental Damage Valuation
                        Cost Benefit News

Editor & Publisher:                                  Kenneth Acks
Associate Editor:                                     Cindy Grant
Assistant Editor:                                 Anthony Benanti
Assistant Editor:                                    Jean Sanchez

Environmental Damage Valuation and Cost Benefit News is produced by Damage Valuation Associates, a professional consulting firm specializing in measuring the economic and financial impacts of environmental hazards.

22 East Olive Street                         250 West 57th Street
2nd Floor                                              Suite 1527
Long Beach, NY 11561                           New York, NY 10107
phone: (516) 897-9728                              (212) 969-0797
fax:     (516) 897-9185                            (212) 582-0593
                   e-mail: kenacks@delphi.com.
                   Copyright 1996 Kenneth Acks


Recent court decisions, proposed legislation, and regulatory orders indicate that measures of costs, benefits, and risks will be required in the future to justify public and private actions.=20 EDV&CBN is an indispensable source of information for estimating these parameters. You need Environmental Damage Valuation and Cost Benefit News because regulations are changed every day, courts continually set precedents, and new data or estimation techniques lead to revisions in accepted wisdom. EDV&CBN will bring you the latest information on valuation of damages from the courts, from government agencies, from the academic literature, and from unpublished studies. We will search daily newspapers, academic journals, legal publications, court decisions, professional newsletters, commissioned studies, and on-line services to provide you with the latest information in this rapidly changing field. We will cover valuation estimates from a wider range of journals than most busy professionals can track by themselves. To subscribe please fill in the form below and send a check payable to Damage Valuation to the above address for $39.95 for internet delivery or $69.95 for first class mail delivery. Subscribe now and receive all back issues from July, 1995.


Street Address___________________________________________________
City, State, Country,Zip_________________________________________
E-mail address___________________________________________________
Binary____________  Ascii ____________  Snail Mail ______________
Mastercard/Visa_____NOT YET AVAILABLE____Expiration Date___/9xx


BACK TO *********************************************************************