Sound accounting, yet vaguely creepy reading. The NYTimes explains why “As U.S. Agencies Put More Value on a Life, Businesses Fret“:
As the players here remake the nation’s vast regulatory system, they have been grappling with a subject that is more the province of poets and philosophers than bureaucrats: what is the value of a human life?
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The answer determines how much spending the government should require to prevent a single death.
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To protests from business and praise from unions, environmentalists and consumer groups, one agency after another has ratcheted up the price of life, justifying tougher — and more costly — standards.
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The Environmental Protection Agency set the value of a life at $9.1 million last year in proposing tighter restrictions on air pollution. The agency used numbers as low as $6.8 million during the George W. Bush administration.
[…] __
The trend is a sensitive subject for an administration that is trying to improve its relationship with the business community, much of which has bitterly opposed the expansion of regulation. The White House said the decisions on the value of life were made by the agencies. The agencies, for their part, referred any questions to the White House.
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“This administration utilizes the best available science in assessing the benefits and costs of any potential regulation, drawing on widely accepted methodologies that have been in use for years,” Meg Reilly, a spokeswoman for the Office of Management and Budget, which oversees the rule-making process, said in an e-mail.
[…] __
The current rise in the value of life is based on the work of Professor Viscusi, who wrote his first paper on cost-benefit analysis as a Harvard undergraduate in the early 1970s. He won a prize and found a career.
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The idea he and others have since developed in a long string of studies is that differences in wages show the value that workers place on avoiding the risk of death. Say that companies must pay lumberjacks an additional $1,000 a year to perform work that generally kills one in 1,000 workers. It follows that most Americans would forgo $1,000 a year to avoid that risk — and that 1,000 Americans will collectively forgo $1 million to avoid the same risk entirely. That number is said to be the “statistical value of life.”
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Professor Viscusi’s work pegs it at around $8.7 million in current dollars.
p.a.
How do insurance companies set the worth of the various body parts we have the potential to lose?
Church Lady
I wonder if I got killed in a car accident by another driver, and it was determined to be their fault, and my family sued the other driver, could their attorney use these government figures to say that my life was worth that?
Is all life worth the same amount? Is the life of a college graduate worth more than someone with just a high school diploma? What about someone that dropped out? How about the value of a homemaker vs. either someone that works or a retiree? Is someone younger worth more than someone older? It’s an interesting idea and when I have more time I should look up information on Professor Viscusi’s work.
Sasha
Love the call-out in the title. One of my favorite science-fiction short stories.
scav
@Church Lady: Just so long as everyone’s clear that the top ranking goes to white fetuses and, after that, fully-grown dick-swinging Caucasian CEOs and MBAs, they don’t really care.
Katie in California
While it sounds creepy, it is necessary, and it’s much better than the old-school “value of lost earnings” insurance-style accounting done before.
[Note- the old-school version is what they used for the 9-11 payments: a lawyer gets more than a janitor, a young person gets much more than a retired person, and babies not at all. That’s not how we want the EPA to make decisions: instead, value all lives equally]
But given that you’re valuing all lives equally, and given a project that might save lives (new guardrails on a highway), there should be some way to decide if it’s worth it. The money *can* be spent somewhere else. Spending $10M on a road that rarely has fatal accidents means other, more dangerous roads are neglected. Spending $10M on a road also means that money is locked into one type of infrastructure– perhaps it should go to better water treatment, or a new clinic.
However, spending $100k on that same road can be worth it… if you have a way to compare that spending to other types of spending. The $8M value lets you compare.
Bizono
As I was grimly reminded this week by a report whose brother recently became an amputee, the US military provides benefits according to which limb you lost in battle.
marcopolo
@Church Lady: As I recall there was a lot of discussion about these issues in the aftermath of 9/11 as the victim compensation fund was determining how much to pay various claimants. Here is an example of a matrix that was developed as a result of that situation. And here is the written explanation of how the matrices were developed.
What seems a little odd to me is the identification of Professor Viscusi as a seminal thinker about all of this. Isn’t the entire field of actuarial accounting all about the value of human life under various situations?
Edited: Heh and Katie answers the question I asked before my post makes it up. :) Viscusi developed a different means of looking at the value of life.
Redshift
The country would be in a better state if news organizations routinely followed up statements like the above with “but it’s well-known that the Bush administration regularly suppressed facts and scientific evidence in making their decisions, and appointed administrators hostile to their agencies basic mission.”
Mike in NC
That’s too easy: whatever the Koch brothers decide is acceptable to their bottom line.
Martin
@p.a.: Mostly based on the cost of lawsuits. If juries have awarded workplace injury damages of $150K for the loss of a finger, the insurance compensation will be based loosely on that. These numbers then get plugged in with the likelihood that employees at a company would lose that body part, and from that the cost of the coverage gets adjusted. The company then negotiates with the insurer over the costs, the claim amount paid may then go down as a result with the warning that the company would be on the hook if the employee sued for more. That kind of thing.
There is nothing in a large group policy set in stone except for minimum mandatory coverage by the state. Anything you want the insurance company to cover or not cover is open to negotiation. When you see people complaining that company policies will cover Viagra but not birth control, that was a deliberate decision by the company. Insurers are more than happy to reverse that for group policies of any size. Individual and small group is different – that’s much more of a one-size-fits-all deal.
jl
I am not sure what is supposed to be creepy, estimating the ‘value of a life’ or that business are fretting over increasing the estimates recommended for use in cost benefit analyses.
I am an economist, so perhaps my mind is warped, but I do not think the concept of the ‘value of a life’ is creepy if properly understood.
Another term that is used is ‘value of a statistical life’ which I think is better because it emphasizes that it is a statistical construct that is appropriate to use in some situations and not in others.
As the extract from the link in the post says, most estimates come from everyday situations or employment. Using data on employment, relative wages and risk of death, you try to estimate the increase in wage attributable only to the difference in risk of death in the two jobs. If you are using product safety data, can you estimate the value of safety from the difference in the price in similar types of cars due to differences in safety equipment that change the risk of death while driving.
Note that what is actually happening when you look at how the statistics are calculated, is that you are estimating the value of relatively small changes in the probability of death, around a very small baseline probability of death we experience in every day life.
So what is really estimated is the value of small marginal value changes in the probability of death. This estimate is then ‘blown up’ to calculate a reference value for a probability of death for a person. This appropriate to use in cost benefit analysis where an underlying assumption is that cost and benefits are spread widely and evenly among the (large) population affected by a project.
The value of a statistical life is really only valid when applied to relatively small variations in risk of death around relatively low values. To avoid extreme extrapolation outside the data cloud, we are talking about risks ranging from very low to a farmer or lumberjack on the high end.
Now, anyone who has a heart attack or a stroke is experiencing much larger variations of the risk of death (as function of medical treatment delivered) around a much higher overall average risk of death following the heart attack, than even a farmer, construction worker fisherman or lumberjack would put up with.
So the idea that a value of life of 8 million bucks says that, say, if a person has a catastrophic accident, there is a justification for ending treatment after you spend 8 million is totally wrong. As would be the idea that if I pay this lumberjack an expected value of 8 million dollars should he survive, it is OK to send him or her in to situations where there is a fifty fifty chance of death. That is gross and elementary misuse of statistics.
It is like saying, OK, I look at the chart here on tire pressure and gas mileage, and it says here that if I put an extra 10 pounds of pressure I can save a little gas. Gosh darn, I think I will put in an extra 200 pounds of pressure and save a hella lot of gas. That approach to the statistical estimate is likely not to work out well for you.
It is important to understand the data used to estimate the value of life, and use a little common sense about the dangers of extrapolation when thinking through the implications of these estimates.
So, as an economist, I find it creepy that businesses are fretting.
Martin
FYWP! That was a perfectly appropriate use of the V-word.
Loneoak
OT: Dan Savage reads Balloon Juice daily!
Edit: Hi Dan!
jl
@Church Lady: Most estimates of the value of statistical life try to adjust for the things you mention. So far, the effort has not been very successful to adjust out things like the differences in education, overall economic environment (poor country versus rich country), etc.
I think the estimates are more reliable than ‘within an order of magnitude’, but probably not much more.
Twinky P
Can I cash in now? I got kids to feed.
cyntax
So corporate America is making more profits than any other time in history, and while they still won’t raise our wages, they will complain if our lives are going to be valued higher? Good to know.
This really is an us vs. them thing isn’t it?
freelancer
@Martin:
Velociraptor?
khead
Massey offered the families $3 million to settle after the Upper Big Branch explosion.
wenchacha
Well, there’s just about no amount of money most people would accept to pick tomatoes and lettuce and other back-breaking fruits and vegetables.
That is how agribusinesses determined the proper amount to pay migrant farm workers: just about no amount of money.
Gustopher
As I grow older, and I get to know more people, my estimate on the value of human life goes down, not up.
Martin
@freelancer: Ѷîåģȑä.
Jack
I know it seems creepy, but it is exactly this kind of analysis we would do when it comes to trade off of our civil liberties and rights versus “fighting terrorism”. The problem is we can’t put a monetary value on either, so instead we freak out and eliminate the rights and liberties in the name of “safety”.
Not to mention the actions of the Immigration and Customs Enforcement agency in seizing domain names supposedly to fight child pornography but in reality to protect the supposed “rights” of large corporations, with NO judicial review. First Amendment violations, anyone?
And also, not to mention all the other amendments violated, like protection against search and seizure without a warrant signed by a judge and subject to review, and… and… and…
Sigh. Perhaps Egypt is in better shape than us.
elmo
Eiiyyaaaiiiggghhhhh! Great thread title, really, but yeesh, that story gave me the awful creeps for years. Still does, if I think about it, and now I’m thinking about it! Eiiyagh!
I’ll be over here in the corner now, shuddering.
TheF79
I was going to chime in on the distinction between “value of life” and “value of a statistical life,” but jl nailed it very well. The number they use for regulatory purposes is really the aggregated value of our willingness to trade small amounts of risk in exchange for monetary compensation. So all of you who hopped in your car to drive to work today took on some non-neglible risk in exchange for a paycheck (or education, or a bottle of milk, or whatever).
Trudy Cameron has a recent paper arguing that our (i.e. economists’) insistence on the “Value of Statistical Life” terminology has needlessly confused the issue. I forget her exact suggestion, but it was something like “willingness to pay(trade? swap?) for a micro-risk reduction.”
These numbers are important, because for many environmental regulations, the reduced statistical mortality is the primary benefit of policy interventions. For example, the mortality reduction benefits of the SO2 cap and trade were something like 10x larger than the benefits of reducing acid rain iirc.
Herbal Infusion Bagger
“Professor Viscusi’s work pegs it at around $8.7 million in current dollars.”
Not to be creepy about it, but that number seems *way* high.
In the UK, the value of a Quality-Adjusted Life Year (QALY) used there is UKP 20-30K. In the US, I’ve heard values for QALYs of $50K-140K. Assuming a 35-year remainder of life, that’d put the monetary value of a life at ~$5 million.
Using $9.1 million seems very high.
catclub
@khead: “Massey offered the families $3 million to settle after the Upper Big Branch explosion.”
Of course, Massey could also argue that their bodies are wrecks with limited expected lifespans – from working in Massey mines! So of course they should not get full value.
catclub
@Loneoak: Did you notice that Dan has also done yeoman’s work in pre-emptively sabotaging Rick Santorum’s presidential hopes?
I think I saw it in Yahoo news – the big time.
kindness
Off thread thought, sorry.
How come no one here is talking about what is going on in Wisconsin now?
jl
@Herbal Infusion Bagger: QALYs and value of a statistical life, or willingness to pay, are not usually directly comparable. There are so many ways of estimating a QALY that it is difficult to know what it means unless you read how it was calculated.
The problem with most estimates of QALY is that they separate value of different health states from all other goods and services other than the persons health state. You cannot compare, say, the value of a new preventive care program measured in QALYs with the value of, say, a great new product like florescent truknutz, or 3D TV service measured on dollars.
What one means by ‘value of a QALY’ is also ambiguous. Do you really mean threshold value? 50 to 100 K for QALYs in the US is consistent with its use as determining what the average value of health programs are in a society as measured in QALYs, in order to determine whether some new program, measured in QALYs should be considered cheap, average or expensive compared to accepted standards of care.
Actually the whole point of QALYs is to avoid using concepts like value of a statistical life in public health and medicine.
Alan
OT: Gee, who would’ve thought FNC would make shit up?
Loneoak
@catclub:
Yes, I’ve been a Savage Love reader/listener since forever.
He had a great line in the most recent podcast, btw. Audible sponsors the podcast, so Dan recommends books to listen to. He suggested Palin’s new book (read by the ‘author’) for use in BDSM play as “nipple clamps for the brain.” I had lulz.
catclub
@Loneoak: It would be great for him to get a presidential medal of freedom for saving the nation from a santorum (uck) presidency.
Just Some Fuckhead
Cost of a kidney: $85,000
Cost of a Chinese baby: $23,000
Cost of a human life: $8.7M
Fetus: Priceless
cyntax
@Just Some Fuckhead:
Win.
Martin
@Herbal Infusion Bagger: Not based on what juries likely award in such cases here. And it varies a lot on the age of the person.
A young woman without kids might result in around a $3M award for wrongful death. An older woman with kids would be double that amount or more. Married men and men with kids clock in quite a bit higher.
If you assume that the average worker is 45, married with kids, then you’d expect to see jury awards probably in the $8M-$10M range.
Karen
Actually, death can be more valuable than life.
I don’t know if they still do it but Walmart used to take out outrageous insurance policies out on janitors and low paid stockroom workers. If my boss took a million dollar policy out on ME I’d wonder if he was planning to arrange an “accident” for me so I’d actually be valuable.
Martin
@Just Some Fuckhead:
FetusEmbryo: PricelessTimes change…
Maude
OT
AP has the headline about WI Dem legislators fled the state.
dollared
You guys really don’t get Republican accounting.
The value of a human life is zero. 40 years at McDonalds @ $16,000/year = $720,000. Subtract from that 1)the public education cost (12 years x $9,000/year = $108,000 + $90,000 per pupil cost of unfunded teacher pensions = 198,0000), the 2)annual healthcare subsidy under Obamacare/Medicare (80 years at ($10,000/yr =$800,000), 3)the free charity called Social Security ($20,000/year for 15 years = $300,000), and 4) the cost of convening the Death Panels and carrying out the sentence ($25,000 for Judge Hans Spakovsky’s per diem alone, plus $10,000 for the evangelical baptism, the doctor, the injection and the wooden casket = $35,000), and you get a total cost of $1.333 million. So each citizen actually owes The Producing Class $613,000 at birth. The parents can prepay (checks payable to Grover Norquist, who handles the distributions to his mailing list), or their children can work at Koch Industries from age 10 until they work off their debt, at which point they can transfer to McDonalds.
Silver
It all depends on who does the killing, really.
Muslim killing a white American: Priceless
Muslim killing a brown American: Still expensive
American killing an abortion provider: Justified
American killing a coal miner: Clearly the fault of the regulators, therefore we need to get rid of safety rules.
American killing a brown person in a foreign country: We don’t care.
Or, you can always go back and look at the Israeli/Palestinian exchange rate for a decent idea. Not all lives are equal in value. Life is cheap in the Muslim world remember, and there’s so many Chinese and Indians that we can afford to lose a bunch without worrying.
Southern Beale
I’ve blogged about this topic a lot, notably when I wrote about “The Value of Things.” This underscores a problem with our entire economic system, our way of callibrating everything in financial terms. Some things can’t be done that way. Some things are irreplaceable.
This comes up a lot when dealing with environmental issues. We tend to look at a piece of forest in terms of its timber value or potential recreational/tourism dollars generated, but we have no way of calculating a forest’s value in terms of watershed, filtering the air and water, lessening the severity of storms, etc. These things are irreplaceable. There is no dollar value that can be put on them
Ditto with a human being. I suppose you can do that stupid exercise where they calculate the value of the minerals in the human body but that doesn’t come close to representing the person’s value to the world, to their community and family, etc.
It’s just totally warped how we do things. It turns everyone and everything into a commodity. It dehumanizes and devalues everything.
KG
If the value of a human life is $8.7m, how about we give everyone a direct deposit for that amount? You want to talk about economic stimulus, there you go.
Yeah, yeah, yeah, I know, chaos would ensue as prices either spiked or everyone quit their jobs to write the next great American novel or run off to Vegas/Europe/Tahiti or whatever… but a guy can dream, can’t he?
jl
@Southern Beale:
“This underscores a problem with our entire economic system, our way of callibrating everything in financial terms. Some things can’t be done that way. Some things are irreplaceable.”
It also has to do with the misuse of economic theory for ulterior motives.
A good cost-benefit analysis text I read (I think that is the title ‘cost-benefit analysis’ but forget the author) had an exercise: a negligent neighbor digs a well next to his property and covers it up so no one can see it. You fall in and dying of shock and exposure down at the bottom of the well. How much can you ask the neighbor to spend to get you out?
One correct answer is ‘you can ask as much as it takes to get you out’
Similar correct answers exist for the coal company that blow up the mountain across the street and threatens your life with a landslide.
There are theorical thought experiments, like the Coase Theorem, that say that for economic efficiency it does not matter how rights to property and life are allocated, the efficient solution will always emerge regardless.
But the thought experiment that gives that very simple answer requires very strong assumptions that are almost never satisfied in the real world. Though a certain school of legal economics that began at University of Chicago Law School (! Nobama alert !) like to pretend that the required assumptions usually hold.
KG
@KG: damn, now I’m thinking way too much about this… what would be the effect of my scheme be? Obviously, a lot of people would be able to get out of debt (good bye, credit cards, student loans, and mortgages) and have a ton of money left over. But then what?
jl
@KG: Well, whatever. You have me sold on it. I bravely volunteer to get this experiment off the ground. Please send me the money in small bills.
thnx, will looking for your shipment and I will exercise utmost discretion about this most sensitive matter.
KG
@jl: is it ok if all the bills have the same serial number?
I think we spitballed about something like this a while back. Something along the lines of what would happen if we gave everyone a credit to have debts forgiven. Which actually might be a better idea, give everyone a credit of up to $100,000 for debt forgiveness.
Jeanne ringland
@elmo: Don Saker wroth an answering story called The Cold Solution.
The article on Wikipedia about the original are interesting, that the story is good physics but lousy engineering because there is no margin of error.
I wonder how I missed this short story entirely.
elmo
@Jeanne ringland:
Thanks for the points, I’ll have to check out the Wiki page, because that story just — oog, I dunno — ugh. Which is a tribute to how well-written it was, that more than 30 years after first reading it can still give me that cold awful feeling in the pit of my stomach and in the back of my throat.
Just Some Fuckhead
By this math, Messicans ain’t worth a damn.
Continental Op
Astounding Science Fiction. John Campbell was still editor. Campbell was wierdly right wing. Even more so than Heinlein.