Cost-Benefit Analysis: The Short-Sighted Model For Determining Value
Our economic gold standard threatens the long-term health of our bodies and planet
By James Maskell
Since the human genome was sequenced at the start of this century, there has been a scramble to explain how genetics lead to disease. A new field of epigenetics has emerged looking at how genes interact with their environment to create or prevent disease.
In the last year, a growing amount of research has shown that the effects our environment has on our bodies even persist from parent to child, birthing a new term: transgenerational epigenetics. It may seem obvious to anyone who has seen the deformed grandchildren of the Vietnamese people the US Armed Forces sprayed with Agent Orange during the Vietnam War, but this is happening in much more subtle ways with a wide spectrum of impact.
The Endocrine Society did a comprehensive review of the scientific literature last year and determined that many of the endocrine disrupting chemicals in our environment, from persistent organic pollutants to bisphenol A to pesticides to phthalates, not only harm those exposed to them, but also are passed between generations with a particularly negative impact on infants.
Although this seems like too little too late for longtime advocates, it is in line with a depressing trend — on average it takes 17 years for new science to be adopted into medicine.
Each of our choices affect all of those around us more than we could ever imagine, let alone measure
As an economist by training, my first thought when I saw this research was what it reveals about the overly simplistic model for how our society determines value: the cost benefit analysis. For generations, CBAs have been used not only to justify or determine sound investments, but also to provide a structure to compare options through measuring the costs and benefits. But one of the downsides of the CBA has always been that it doesn’t account for negative externalities, costs taken on by the commons, or society, that cannot be obviously attributed to the transaction itself.
Various methods are outlined to try and determine the costs of these negative externalities, but by their very nature, externalities, both positive and negative, are hard to quantify and always underestimated. This leads to CBAs assigning too much value (benefit minus cost) to projects with large negative externalities (such as fracking, etc.) and too little to those with large positive externalities (education) leading them to be over-delivered and under-delivered by the market.
This effect is compounded, almost exponentially, when we consider these two factors together. If it’s tricky to measure the negative economic impact of filling a coal miner’s lungs with coal dust over their lifetime in the mine, how do you then measure the transgenerational epigenetic costs to the miner’s family, possibly generations down the line? And what if the symptoms of the first generation impact (e.g. lung cancer) look very different than the symptoms in the next generation (autism or ADD)?
My conclusion is that transgenerational epigenetics has slain the CBA and a new system will be needed to decipher what are good and bad investments, both for the individual and society at large.
In an increasingly interconnected world, it becomes clear that each of our choices affect all of those around us more than we could ever imagine, let alone measure. Based on this, it seems that economic decision making should be based more on whether the majority of obvious externalities are positive or negative, and less about the net present value of the transaction itself.
James Maskell is the creator of Functional Forum, the world’s largest integrative medicine conference. He lectures internationally, and has been featured on TEDMED, HuffPost Live, and TEDx, among others. He is a regular contributor to The Huffington Post, KevinMD, thedoctorblog, and MindBodyGreen. He also serves on the faculty of George Washington University’s Metabolic Medicine Institute.