I’m bumping up this old post about the value of life in dollars because it’s a VERY interesting topic, and I’ll try to update this with more information eventually since there must be new studies. WHAT ARE YOU WORTH?
Most importantly I want to stress how important it is that we DO in fact value lives in this fashion. Many people foolishly cringe at the notion of placing value on lives, suggesting that “life is priceless” and therefore we can’t do this.
The problem with that naive view is that WE DO THIS ALL THE TIME! We just do it indirectly. In fact in wars we spend a LOT of money to kill a LOT of people in an effort to make the world a safer place (or protect our own national interests). In that case we are actually placing a negative value on certain lives. e.g. the US spent billions to kill Bin Laden, which meant the value on his life was actually a negative number! The argument in that case is that killing Bin Laden, costly as it was in blood and treasure, would save many thousands of lives in the future. Reasonable people can disagree on the merits in that type of case, but clearly we should be using some sort of standard metrics rather than whim and politics as we decide how to allocate resources to lives and to deaths both in war and in life affirming endeavors.
Whenever you take risks or subject your family or others to risk you effectively create a value relationship. Drive over the speed limit to work in the morning? By doing that you have both broken the law AND you have subjected yourself and others to the increased risk of faster driving speeds. Yes, YOU DID! No big deal because we do this type of thing all the time, but it’s important for people to start recognizing the risk / reward / convenience / money relationships we create every day as we go about our daily lives. The bureaucracy is absolutely right to work out equations that look at the costs and benefits of life saving measures, because without these we apply funding willy – nilly (as is often the case), leading to very inefficient spending patterns that are created from political spending.
The BEST example of this cost effectiveness approach writ very large and brilliantly is the Copenhagen Consensus, an effort by statisticians, scientists and economists (including several nobel prize winners) to allocate limited resources in a more intelligent fashion. It’s incredibly to me ho unwilling most people are to apply this type of approach, but I think the root of the challenge is that folks don’t realize how poorly we currently allocate resources. Military spending, for example, is much larger than most Americans understand and the things purchased often have pathetic returns on the investments. Yet both democrats and republicans favor the ongoing massive spending for political reasons. As Ron Paul very cleverly noted in a presidential debate we need a strong defense, not an expensive one. Of course there are even more examples of waste on the entitlement side of Government spending and literally millions of wasteful efforts on the private side of spending, but that’s fodder for other posts.
——— from my 2006 post ———–
This cost allocation study Notes that the EPA is willing to spend almost twice what the Dept of Transportation is willing to spend to keep YOU alive. The numbers seem old so there may be some adjustments, but interesting is this:
In policy and regulatory analyses, EPA uses a value of $4.8 million to represent the cost of a premature death. This value is the mean of estimates from 26 studies dating back to the mid 1970s that have attempted to place a value on the cost of premature deaths. Estimates from those studies range from $0.6 million to $13.5 million, reflecting the large uncertainties in trying to estimate the public’s willingness to pay to avoid premature death.
The Department of Transportation has adopted a value of $2.7 million per premature death, based on a comprehensive 1991 study by the Urban Institute
People are reluctant to accept this type of “dollar valuation” analysis even though it’s commonplace in legal settlements and is a VERY APPROPRIATE way to allocate public funds. Note that the 4.8 million dollars the EPA spends to save a life would save thousands of lives if spent in alternative ways. One can argue that the complexity of this type of analysis undermines the rationale behind using this “lives for dollars” game, but it’s a weak argument. Yet even with this appropriate method of trying to allocate dollars to lives and then allocate them most effectively, we tend to apply funding in odd ways and squander billions due to political budgeting.