Valuing Risk to Health: Children Are Not Little Adults

When it comes to environmental health risks, children often have the worst of many worlds. Facing the same concentration of a pollutant, children's exposure may be greater than that of adults. Because they have a higher metabolism rate than adults, children take in more food, water, and air for their body weight. Next, they engage in activities—like crawling on the floor and playing in dirt—that may bring them into closer contact with toxins. Also, because their bodies are still developing, children can be more vulnerable to pollutants and less able to detoxify and excrete them. Finally, children also have more years of life ahead of them than adults, so they have longer to develop chronic diseases from exposure to environmental toxins.

Only in the past 20 years have policymakers faced up to these issues. In the mid-1980s, the scientific community began insisting that environmental regulations designed to protect adults (primarily adult men) were not adequate to protect children. Governments all over the world, including in the United States, are now recognizing the need to develop standards that specifically protect children. For example, the 1996 Food Quality Protection Act (FQPA), which amended federal pesticide law, explicitly required that a tenfold safety factor be used in setting pesticide tolerances in food because of their uncertainty about the impact on children. In the mid-1990s, the administrator of the U.S. Environmental Protection Agency (EPA) directed that risk assessments for all environmental regulations consider the specific needs of children. This summer, environmental ministers from the European Union member states are meeting to draft an action plan for legislation, research, implementation, and evaluation of new programs to protect children from environmental hazards.

Health benefits valuation plays an important role in enabling environmental agencies and ministries to evaluate prospective and current programs. Environmental programs address health risks as different as cancer and asthma. Benefits valuation provides a common measure—based on people's preferences regarding different diseases and mortality risks—by which a wide range of physical outcomes can be compared. Environmental policymakers often want to gain a quantitative understanding of how the benefits of a program compare with its costs. Monetary valuation of health benefits makes this possible.

Techniques for determining adults' preferences for various health improvements and expressing them in monetary terms are reasonably well established, if controversial. However, these techniques cannot be directly applied to children nor can they be adapted simply.

Economists have used two basic approaches to valuing reductions in risk to adults' health. The human capital approach looks at direct financial costs associated with illness—primarily medical expenses and lost wages. This approach is relatively easy to implement, but provides an incomplete measure of the value of protecting health. A theoretically more satisfying measure is willingness to pay (WTP) to reduce health risks. WTP measures are based on the trade-offs individuals make, or are willing to make, between protecting their health and other things they need or want.

Both approaches have obvious flaws when applied to children. Human capital measures can be even more incomplete or challenging to use because it can be more difficult to estimate the value of the time young children lose to illness because they are not engaged in the labor market. Estimates of WTP are conventionally based on adults' actions or statements reflecting their judgments about the worth of protecting their own health. As anyone who has chased after a three-year-old running toward a busy street knows, however, children do not have mature judgments about their own health.

Government agencies in the United States and other industrialized countries have been working with economists to develop more appropriate measures of the benefits of environmental regulation to children's health. In 1999, EPA brought together in a workshop leading economists working on environmental health valuation to identify major problems and research needs. A follow-up conference was held in 2003 at which economists presented research on family decisionmaking regarding children's health, valuing protection of fetal and infant health, variation of health valuation estimates by age, and valuation of the benefits of asthma reduction policies. In conjunction with the 2003 conference, EPA published its Children's Health Valuation Handbook. Because valuation of children's health is a rapidly developing area of knowledge, the Handbook is specifically designed to be an easily updateable reference tool, rather than a prescriptive guide. And in fall 2003, the OECD (Organisation for Economic Co-operation and Development) Environment Directorate held a workshop to help it design guidance for its member countries.

While these efforts have resolved many questions, several basic ones are still being debated. One of the most basic is whose benefits should be counted. The goal of any effort to value the benefits of a public program is always to reflect its full value to all in society who benefit from it. In valuing benefits from programs that protect adult environmental health, standard practice is to measure only the direct benefit to affected individuals. Counting the preferences of others who care about affected individuals' well-being would lead to double counting under certain circumstances. In the case of children, some economists argue that what should be counted is not only the direct benefit to children themselves, but also the benefit to others, such as parents or even general taxpayers, who care about children's health outcomes. One thing everyone agrees upon is that the value to the child itself of improved health is an important part of total benefits. The problem is how to accurately measure these benefits, which is true for both WTP and human capital measures.

At first glance it may seem difficult to apply the human capital approach to reduction in risk to children's health, because children don't work and their life outcomes are highly uncertain. But at a population level it is possible to project expected longevity, income, and disease rates and to estimate how they change in response to illness induced by environmental hazards. Because children's environmental health policy is often concerned with chronic disease, birth defects, or permanent disabilities over an entire lifetime, there may be greater uncertainty about these estimates than for an adult population. More attention may also need to be given to economic trends. For example, there is some evidence that exposure to neurotoxins, like lead, in early childhood is associated with an increased risk of not graduating from high school. But the economic consequences of not graduating from high school are greater today than they were in 1950 and can be expected to be even greater in the future.

With WTP measures, the problem is who should speak for children. EPA's practical solution is that their parents should. On its face, this seems like a commonsense solution. After all, parents bear the emotional, financial, and time costs of caring for their ill children. They are personally affected when their children are ill. But it is difficult to know what is captured in parents' valuation of children's health. Several empirical studies have resulted in the consistent finding that parents' WTP to reduce children's health risk is two times adult WTP to reduce their own health risk. No one yet knows quite what this result means. Do they perceive children's health to be twice as valuable as their own, or are parents counting the impact on their children and the impact on themselves? One possibility is that adults' retrospective preferences for protecting their own health as children should be used or that it is worth reexamining a bit more deeply whether, after all is said and done, adults' WTP to protect their own health may not be a reasonable measure of the benefit of protecting health in childhood.

Even if there were agreement on whose benefits count and whose assessment of those benefits should be measured, serious questions remain about how to get reliable estimates of those measures. Research is being developed along several lines. A significant amount of work is being done to better understand parents' WTP to reduce their children's health risk (see sidebar next page). Other work is examining methods of valuing prevention of disease with long latency periods, such as cancer. The OECD is sponsoring studies in several member countries to examine how values differ across countries. In the United States, the Department of Health and Human Services and EPA are planning a major long-term epidemiological effort, the National Children's Study. Steps are being taken to assure that this study includes questions relevant to understanding the trade-offs parents make to protect their children's health.