What is YOUR life worth? In Dollars that is. $600,000 to $13.5 Million depending on …

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.

5 thoughts on “What is YOUR life worth? In Dollars that is. $600,000 to $13.5 Million depending on …

  1. Life value and war? When the British fought the War of Jenkin’s Ear what was it worth? What adjustment to that worth do you make to ackowledge that Jenkin’s was a bully and a lout who started the fight and justly deserved what happened to him?

    Railroad safety equipment often adds costs per life that are in the millions and will probably only save one life per decade. The complexity in added training and operational costs often makes accidents more likely.

    Speeding automobiles are often a lesser hazard than those vehicles limping along at the legal limit and slowing down traffic unnecessarily because of archaic and arbitrary speed limits.

    The cost of a back-up alarm on a truck affects the income of the hearing aid salesman.
    Do we deduct a penalty for saving a life but impairing the general peace and quiet of an entire neighborhood with a burglar alarm on a car or business even though some municipalities require them to be installed.

    You want a strong but inexpensive defense? You can’t get any more inexpensive than FREE and when a journalist summarized the darned politician’s lengthy gobbledygook with the phrase “Perdikardis alive, or Rizzouli dead” the State department decided to formally adopt that as the official response.

    • Great historical reference FoolsGold! http://en.wikipedia.org/wiki/Ion_Perdicaris Also several good points though I don’t think they weaken the case that we need to assign values if we want to adopt rational spending policies. True that it’s difficult to value certain things, but value them we *must*. The only issue is whether the process is rational and somewhat consistent with some set of standards or continues along the irrational, nonstandard, inconsistent approaches generally used, where political lobbying trumps all reason. This is why we see people fretting over the imaginary health problems from pink slime while they ignore the real health problems from unvaccinated kids.

      • Many of our diseases are politicized. Once lobbyists are at work rational and consistent approaches are doomed. Look at all the rational approaches that were made to safety at sea conventions, all the standardized electronics, all the treaties, all the economic evaluations of expenditure versus lives saved and then look at how all the clear rational thought was negated by one man turning off the safety alarms and intentionally steaming into shallow, rocky waters at full speed at night without his eyeglasses on.
        On a level of individual freedom we may want to say I am free to choose my own fears and evaluate my own safety but governmental expenditures should indeed be subject to a rigorous and consistent analysis.
        Just as Evidence Based Medicine has trouble deciding what is the appropriate evidence to consider and what is its value, Evidence Based Public Policy has a problem in evaluation of evidence and impact.

  2. Ahh, the law of diminshing returns… Having been subjected to many a law created to protect those in society who really bring in to question Darwins theory of evolution, we subscribe to let nature take its course and thicken the gene pool…!

  3. FG I think you’ve ID’d the challenge right here: On a level of individual freedom we may want to say I am free to choose my own fears and evaluate my own safety but governmental expenditures should indeed be subject to a rigorous and consistent analysis.

    The founders recognized that part of this problem is eliminated by small government. Now, in the era of MASSIVE Government, we have actually diminished accountability. People are now mostly upset with Wall Street abuses (justifiably), but forget that that problems generally arise when economic incentives are not aligned properly with the public good. Wall Street greed and Government waste are part of the same serious problem, and we are NOT doing much to fix it. “More regulation” has simply replaced “Less Regulation” when many times the answer is simply “FULL and RUTHLESS economic accountability”.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s