Posted: September 9th, 2015

Association for Public Policy Analysis and Management

Association for Public Policy Analysis and Management
Trouble in Happyville
Author(s): Paul R. Portney
Source: Journal of Policy Analysis and Management, Vol. 11, No. 1 (Winter, 1992), pp. 131-132
Published by: Wiley on behalf of Association for Public Policy Analysis and Management
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Accessed: 08-09-2015 00:47 UTC

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PaulR. Portney
About a year ago, I circulated the following hypothetical problem to my
colleagues at Resources for the Future, economists and noneconomists alike.
Their responses were quite interesting and, in some cases, surprising. I
thought it might be interesting to try the experiment on a larger and more
diverse group of readers. Several referees mercifully agreed and I hereby
invite you to ponder the following.

Is ItSafeto Drinkthe Water?
You have a problem. You are Director of Environmental Protection in Happyville, a community of 1000 adults. The drinking water supply in Happyville
is contaminated by a naturally occurring substance that each and every
resident believes may be responsible for the above-average cancer rate observed there. So concerned are they that they insist you put in place a very
expensive treatment system to remove the contaminant. Moreover, you know
for a fact that each and every resident is truly willing to pay $1000 each year
for the removal of the contaminant.
The problem is this. You have asked the top ten risk assessors in the world
to test the contaminant for carcinogenicity. To a person, these risk assessors-including several who work for the activist group, Campaign Against
Environmental Cancer-find that the substance tests negative for carcinogenicity, even at much higher doses than those received by the residents of
Happyville. These ten risk assessors tell you that while one could never prove
that the substance is harmless, they would each stake their professional
reputations on its being so. You have repeatedly and skillfully communicated
this to the Happyville citizenry, but because of a deep-seated skepticism
of all government officials, they remain completely unconvinced and truly
frightened-still willing, that is, to fork over $1000 per person per year for
water purification.

First, what are the annual benefits of removing the contaminant from the
Happyville drinking water system? (For you noneconomists, benefits are generally measured by willingness-to-pay). Are they $1,000,000? Zero? Some
number in between? This is not a trick question, nor should you read more
into it than I intend. I am simply interested in knowing what you think the
“benefits” side of the benefit-cost ledger should look like.
Second, suppose that: (1) the contaminant was not naturally occurring (as
hypothesized above), but rather the result of industrial contamination; (2)
our estimate of $1000 per person for annual willingness-to-pay for purification
Journal of Policy Analysis and Management, Vol. 11, No. 1, 131-132 (1992)
? 1992 by the Association for Public Policy Analysis and Management
Published by John Wiley & Sons, Inc.

This content downloaded from on Tue, 08 Sep 2015 00:47:17 UTC
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in Happyville
132 / Trouble

was based on a state-of-the-artcontingent valuation study (a survey designed
to elicit individuals’ valuations of environmental programs);and (3) a lawsuit
had been brought against the source of the contamination.
If your answer to the first question was $1,000,000 in annual benefits, would
you be willing to support a judgment of $1,000,000 in annual damages against
that source, again assuming that the world’s best risk assessors told you they
could find no evidence of carcinogenicity?

Send me your responses at the address listed at the start of the “Insights”
section. Please try to keep these responses brief; while the issues I raise are
complicated ones, it will be impossible for me to plow through, much less
summarize neatly, a large number of long answers. You may respond anonymously or with your name; I would prefer that you identify your disciplinary
training even if you prefer not to give your name. All responses will be kept
confidential, of course, although I do intend in a future issue to summarize
the responses I get.
Thanks very much from the residents of Happyville!
PAULR. PORTNEYis Vice Presidentand Senior Fellow at Resourcesfor the

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