1

Agricultural BioterrorismSome Law and Economics Issues

By

Fred Boadu

Professor

Department of Agricultural Economics

Texas A&M University

College Station, Texas

Law and Economics Framework

The application of the theories and

empirical methods of economics to the legal

system across the board – to common law

fields such as tort, contract, and property to

the theory and practice of punishment, to

civil, criminal and administrative procedure,

to the theory of legislation, and to law

enforcement and judicial administration.

Richard Posner, Law and Economics, 1975

2

Three Main Objectives

Brief Constitutional Structure

Legal Aspects of Agricultural

Biosecurity

Law and Economics and

Biosecurity Research

U.S. Government Structure

Federal

Legislature - Makes Laws - Statutes

Executive - Executes the Law –

Regulations

Judiciary - Interpret Law

State

3

Institutional Deepening Imperative

“We must calibrate an approach to security that incorporates prevention and protection into our lives in a way that respects our

liberty and our privacy, and fosters our prosperity”

(Secretary Chertoff, Address at New York University, 04/26/2005).

Basic Laws

Agricultural Bioterrorism , 7 U.S.C. § 8401

Registration of Food Facilities, 21 U.S.C. § 350d

Maintenance and Inspection of Records, 21 U.S.C. §350c Virus-Serum-Toxin Act, 21 U.S.C. §§ 151-159 Homeland Security Act, 6 U.S.C. §§ 101-557 Animal Health Protection Act, 7 U.S.C. §§ 8301-8317 Animal Enterprise Terrorism, 18 U.S.C. § 43

Source: The National Agricultural Law Center

4

Major Regulations

Bioterrorism Act, FDA Food Safety Regulations, 21 C.F.R. Parts 1,20 Animal and Plant Health Inspection Service, (animals) 9 C.F.R. Parts 1-199 Animal and Plant Health Inspection Service, (plants) 7 C.F.R. Parts 300-399 Department of Homeland Security, 6 C.F.R. Parts 1-99 Possession, Use, and Transfer of Biological Agents and Toxins, 7 C.F.R. Part 331

Homeland Security Act (HSA).

Homeland Security Presidential Directive, (HSPD) – 5

Defines the ‘National Response Plan (NRP)’

HSPD-9 - developed guidelines for agriculture and food emergencies including animal/BSE and plant response plans.

5

National Response Plan

An incident is of National significance:

1. Federal department or agency acting under its own authority has requested the assistance of the Secretary;

2. The resources of State and local authorities are overwhelmed and Federal assistance has been requested by the appropriate State and local authorities;

3. More than one Federal department or agency has become substantially involved in responding to the incident;

4. The Secretary has been directed to assume responsibility for managing the domestic incident by the President.

State Level Regulation

“the governor shall direct homeland security in this state and shall develop a statewide homeland security strategy that improves the state's ability to:

detect and deter threats to homeland security;

respond to homeland security emergencies; and

recover from homeland security emergencies.”

Chapter 421.002 (a) of the Texas Government Code

6

Agriculture

Texas Animal Health Commission (TAHC), originally

known as the Livestock Sanitary Commission established by the Texas Legislature in 1893.

TAHC is a member of the State’s Emergency Management Council (EMC)

Some Legal Aspects of TAHC Actions

Quarantine

Condemnation/Slaughter

Transportation

7

Legal Challenges to TAHC Actions

equal protection clause;

due process clause;

takings clause;

commerce clause.

Law and Economics and

Biosecurity Research

Risk and Transaction Cost Economics

Regulatory Economics

Regulatory Impact Analysis

8

Regulatory Economics Literature

“Regulatory origin” – why agencies make specific decisions. Examples of theories are:- public interest theory – Mitnick (1980); Levine (1981); Stewart (1975) “expertise model”- Capture theory - Stigler (1971); Kolko (1965) Peltzman(1976).

“Regulatory process” - how regulatory agencies make decisions. Examples of theories are:- agency-dominance – Wilson (1974);- congressional dominance – Weingast (1984); ‘budget’ –Fiorina and Noll (1978)- External signals – Noll (1976).

Regulatory Impact Analysis

What is the Importance of Circular A-4?

Agencies must conduct regulatory impact analysis of economically significant regulations under Executive Order 12866.

■ Under the “Regulatory Right to Know Act,” OMB must issue guidelines to agencies to standardize:

□ measures of costs and benefits; and

□ the format of accounting statements.”

Circular A-4 Implements EO 12866

9

There are Four Main Elements in Regulatory Analysis

■ The Need for Federal Regulatory Action

■ Alternative Regulatory Approaches

■ Alternative Analytical Approaches

■ Accounting Statement

Analytical Approaches

Benefit-Cost Analysis – do BCA if valid monetary values are available

● Cost-Effectiveness Analysis – must prepare CEA if primary benefits are public health and safety outcomes

● Distributional Effects

10

Basic Concepts in Estimating B & C

Valuation of B & C depends on ‘opportunity costs’

“Willingness to Pay” (WTP) is opportunity cost (how much an individual is willing to forego to enjoy a particular benefit).

Use proxies where markets do not exist

� hedonic price equations using multiple regression

� revealed preference methods

� stated preference methods – ex. Contingent valuation

� benefit transfer methods

� Use real discount rates of 3% and 7%

Cost-Effectiveness Analysis (CEA)

CEA measures the impacts of a regulation as a ratio of monetary costs to a non-monetary benefit measure.

Examples of non-monetary benefits are – number of illnesses averted, life years saved.

For alternative regulatory options, use incremental CEA – the additional cost incurred by the next most effective option to produce an additional unit of health outcome.

11

Example – Truncated CEA for BSE Rule

13,091195,2380.00%57.89%(3) (1) + (2)

168,737182,14756.76%57.89%(2) SRM removal -30-months age cutoff

13,41013,4102.63%2.63%(1) Prohibit Nonambulatory disabled cattle

Incremental Cost $, 000

Cumulative Cost $, 000

% Incremental Reduction

% Reduction in Exposure

Regulatory Alternative

Risk Mitigation Scenarios – Harvard/FSIS

Regulatory Alternatives Tot. Potential Human Exposure

Mean ID50S % Exposure

Base Case – Importing 10 Infected Cattle 751. Ban on Non-Ambulatory Cattle to Food 73 2.6

2. No SRMs from Cattle ≥ 30 Months 0.22 99.7

3. No SRMs from Cattle ≥ 24 Months 0.18 99.8

4. No SRMs from Cattle ≥ 12 Months 0.18 99.8

5. Ban non-Ambulatory +No SRMs ≥ 30 Mo.. 22 99.7

6. Ban non-Ambulatory + No SRMs ≥ 24 Mo. 0.18 99.8

7. Ban non-Ambulatory +No SRMs ≥ 12 Mo. 0.18 99.8

12

The Rule requires Producers to Remove…

Spinal Cord and Dorsal Root Ganglia (DRG)

..and 80” of uncoiled Ileum from portion marked with white arrow

The Distal Ileum – Part of Intestine