ASHER MEIR 58.
(photo credit: Courtesy)
What is the value of a human life? This is a question for philosophy and
theology, to some extent for law (in wrongful death suits) but also a question
for economics. We commonly assert that a human life has infinite value, and
certainly few people would accept any amount of money in return for instant
death (What would they do with the money anyway?). But the fact is that almost
every person, almost every day, makes decisions that de facto place some dollar
value on the risk of death or disability.
Did you save $3,000 by buying a
slightly less safe car that gives you a one in a thousand greater chance of
dying in an accident? Evidently, you value your life at around $3 million. Did
you consider taking a job as a construction worker but decide that the extra
$10,000 a year you could make was not enough to make it worth the 0.5% chance of
a fatal accident? Evidently you think your life is worth at least $2 million.
Every time you decide whether to drive faster and arrive earlier yet increase
your accident risk, you are weighing the chance of death against the expense of
Regulators also have to value a human life somehow.
regulations save lives and all of them cost money, so someone has to decide on
Concentrations of toxins in the environment are a good
example. If we had zero air pollution, no one would die from air-borne toxins
but we would also revert to a pre-stone-age existence. But we also don’t want to
give polluters carte blanche to poison the atmosphere.
A recent article
in The New York Times
pointed out that agencies in the US use a range of values
for human life, most of them in the area of $5-10 million. This is the value
that economists have deduced from studying the risk behavior of Americans in the
type of everyday situations we described above. However, a closer look shows
that there are important differences in the way these valuations are
The regulatory decisions are of three kinds. One is where the
regulator has no choice but to decide for the public. The Environmental
Protection Agency decides on safe levels for various toxins, taking into
consideration the cost of the limitations; no individual has any control over
this process and so it is necessary and fair that the agency should make the
In other cases, regulators help people make their own
decisions. For example, the Food and Drug Administration decides on labeling
Providing information on the dangers of a drug costs money
and can save lives. But do these lives have the same value? Consumers have
access to information on drug safety. It is plausible that those who take the
effort to look up this information are the most risk averse; those who need the
FDA label evidently are less interested in investing valuable effort to minimize
In yet other cases, regulators make decisions for citizens who are
perfectly capable of deciding on their own. The Transportation Department has
regulations for auto safety. Since every person can choose which auto to buy,
and since safety information is widely available, it is hard to justify using
the same valuation. Anyone who wants a car with a safer roof can choose to buy
one. There is certainly some value to having the agency weigh the information on
behalf of consumers, but not to the tune of millions of dollars a life
Interestingly, the actual values used by these agencies varies
according to this exact gradation.
The EPA, which must decide for all
citizens, uses the highest value – $9.1 million. Next in line is the FDA, which
helps consumers make their own decisions. They use a figure of $7.9
Finally, the Transportation Department, which decides for
consumers who are mostly capable of deciding for themselves, uses the lowest
figure – $6 million.
So it seems that not only is science being used in
the service of politics, but politics is also serving science and producing
policy guidelines that take into account more involved considerations than
econometrics has tackled.