How should the government react to evidence that it is not properly protecting its citizens against outbreaks of E. coli? To start, the U.S. may wish to review how the United Kingdom responded to an outbreak of mad cow disease (bovine spongiform encephalophy, or BSE) more than a decade ago.

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The British took radical steps and destroyed more than 4 million cows; photos of the burning carcasses covered the front pages for weeks. With concern over the spread of BSE, nearly all meat disappeared from grocery story shelves. (U.S. beef was already gone because the Europeans had concluded that six growth hormones used to promote growth in cattle pose a risk to consumers and had banned imports of beef from cattle given such hormones.) The BSE problem was caused by feeding cows things they shouldn't have been eating. As of 2000, 80 people had died from a variant of BSE. The cost of additional consumer protection, compensation payments and assistance to the cattle industry cost more than £5 billion. The British government clearly determined the benefit to consumers was worth the cost to the cattle industry.

Here in the United States, there is concern about the level of government regulation in the meat-processing industry following an outbreak of E. coli a few years ago. In a recent report, the New York Times found that some meat processing companies had skirted the regulations at some of their plants, with horrific consequences for a young woman now paralyzed from eating contaminated beef patties.

Since I and many others are not going to give up our burgers, this failure raises the question of whether the government should tighten its regulation of food processors. Yes, it probably should.

But how do we decide where to draw the line on government regulation? Are companies engaging in other unsafe practices that the government should regulate? How much should the federal government spend to prevent the spread of E. coli-related diseases and, in so doing, what other diseases might the government fail to address?

The government faces some difficult budget choices, especially given that it does not have unlimited resources (the federal deficit this year is $1.6 trillion).

Here are some facts to consider. The Times story about the paralyzed young woman pointed out that the government conducts sporadic inspections of meat processing plants. The Centers for Disease Control and Prevention reported in 2007 that 40 people had been infected with E. coli from eating the same brand of frozen beef patties, although no one had died. More than 21 million pounds of beef were recalled because of the outbreak.

In 1982, the CDC first recognized the strain of E. coli (Escherichia coli O157:H7) that causes people to get sick, and it has monitored outbreaks ever since. For example, following the 2006 appearance of E. coli in bagged spinach, the CDC reported that 73,000 people had been infected and 62 died from the illness. Earlier this summer, the CDC reported that 65 people in 23 states have been infected with a strain of E. coli from eating raw refrigerated cookie dough.

Clearly, there is danger in not regulating the processing of beef and other foods. A quick search reveals food crises around the world, ranging from chickens to fish to grapes to Coca-Cola and Perrier over the past few years.

Is the government using its regulation resources wisely? Answering that calls for a cost-benefit analysis.

It would not be cost-effective for the government to eliminate all risks from food contamination. Thus, there needs to be a way to determine which steps bring benefits that outweigh the costs of the government action. (Of course, there will always be cases where Americans accept any expense because that is the right thing to do. No one questioned the costs incurred to save 18-month-old Baby Jessica when the child fell into a narrow well in Texas.)

Consider the following.

When determining the cost of regulation, the government must consider the best alternative uses of its funds. For example, if inspections of meat-packing plants are increased, will that unacceptably draw resources from vegetable-inspection teams?

In determining benefits, the government attempts to compute the impact on all members of society. That is, in determining whether to introduce additional regulation, the government would take into account benefits to consumers as well as the costs to producers and to the government from implementing the regulation. The Office of Management and Budget (OMB) regularly reports to Congress on these costs and benefits.

Academics have tried to identify the cost-effectiveness of various federal regulations by measuring the cost of regulation per life saved. A study by OMB economist John Morrall from 2003, for example, showed that government regulations to make cigarette lighters childproof cost $100,000 per life saved while the cost of regulations for solid waste disposal reached $100 billion per life saved.

Cost-benefit analysis is almost always controversial, especially when it involves determining the value of a life lost or impaired. The government created the September 11th Victim Compensation Fund to compensate those who survived or lost family members in the 2001 terrorist attacks. Kenneth Feinberg, who is now the Obama administration's special master for compensation, was the special master for this program. Families received an average of $1.8 million, with the payment largely depending on the worker's annual compensation. Such a method was not without controversy, as it implicitly valued the life of a highly paid worker above that of a low-paid one. Also, families of undocumented workers didn't receive any payments, and families of highly paid workers were not fully compensated for lifetime earnings, as the award capped annual future earnings at about $230,000. Moreover, the government does not compensate all victims of all disasters, as those who were victims of Hurricane Katrina can attest.

The government should not take its regulatory job lightly, especially in areas of consumer safety. And when cases such as the recent one concerning meat-packing plants come to light, the government must step in. However, the public must understand that directing more resources to meat inspection might mean fewer resources for, say, spinach inspection. Making that choice implies that providing one safe food is more important than providing another. The determining factor is not just the size of the market, but the scope of the consequences should disaster strike.


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