Cost-Benefit Analysis and Voluntary Safety Standards for Consumer Products

The purpose of this study is to explore the opportunities for expanding the use of cost-benefit analysis, to discuss the problems standing in the way, and to suggest experiments with it that can serve as benchmarks for further application. The study also recommends the collection of better product-hazard information; such information would be a valuable input if cost-benefit analysis is adopted, and if it is not, it could still serve as a partial substitute for such analysis in the formulation of future standards. Section II treats several topics as a foundation for the subsequent analysis. Section III discusses the relationships among costs, benefits, and the optimal level of product safety, and the difficulties of pursuing cost-benefit analysis. Section IV explores the very limited past use of cost-benefit analysis in developing voluntary standards. Section V addresses a particularly important problem in improving the quality of cost-benefit analysis--that of obtaining better hazard information. The concluding Section VI touches briefly on tradeoffs between devoting resources to cost-benefit analysis and devoting them to other approaches to help ensure the appropriate level of product safety.