Re: The Price Of Life

1

Much as the Bush Administration's approach to the EPA has been one of their trademark combinations of extremism and lethal fuckupery, I think this particular calculation isn't unique to the EPA or entirely a product of the Bush outlook. There's a long and really complicated history of how human lives came to have specific monetary value in legal and civic disputes in the US--one good book on the subject I like a lot is Viviana Zelizer, Pricing the Priceless Child. Once you step down the path of having to assign a single life a specific cash value, then I think almost any method is going to seem creepy in some respect, and is going to be subject to fluctuations where we seem to be saying that lives are now worth less than they once were.


Posted by: Timothy Burke | Link to this comment | 07-14-08 6:21 AM
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Actually, those sort of calculations from job-risk statistics and explicit surveys will make a statistical life more valuable. People always seem to overestimate job dangers and demand a lot of compensation for taking on explicit additional risk as opposed to implicit additional risk (like say, the increased chance of dying in a car accident from taking on a longer commute). Survey values for a statistical life derived using these measures can be pretty damn huge, since no one wants to take on a 0.1% chance of dying for less than several thousand a year when it's explicitly stated as a 0.1% additional chance of dying.

For a quick-n-dirty earnings potential calculation:
$40,000 a year (about median income) divided by .08 (8% discount rate)
= $5 million value for a statistical life, assuming someone just started working

So, yeah, this will actually improve things. Not to mention, earnings potential calculations for a human life's value will also dip during an economic downturn, since fewer people are employed and many others are getting paid less.


Posted by: Po-Mo Polymath | Link to this comment | 07-14-08 6:25 AM
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Ergh.. by "this will actually improve things", I meant "this method of calculation will result in higher value for life, and thus tighter environmental regulations relative to most other methods".

Ambiguous antecedents are allowed when I've been in the office since 5:30 in the fucking morning and am still about to get screwed on this deadline (due entirely to my own stupidity/laziness, but still).


Posted by: Po-Mo Polymath | Link to this comment | 07-14-08 6:29 AM
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What PMP says in 2-3 is pretty much correct. The EPA methodology also has the further advantage of separating the statistical value of life from earnings potential, which can lead to some uncomfortable conclusions about elderly people, the disabled, the less educated, etc.

One shortcoming of the payroll risk premium methodology, which can be seen very clearly in the study that valued a statistical life at $2-3M, is that the subset of people engaged in dangerous occupations is self-selecting and likely unrepresentative from a risk tolerance point of view.

In any event, this almost certainly correct:

Dan Esty, a senior EPA policy official in the administration of the first President Bush and now director of the Yale Center for Environmental Law and Policy, said: "It's hard to imagine that it has other than a political motivation."

Anyone who has done this kind of analysis knows that you can produce a broad range of outcomes with defensible assumptions. If you're more interested in a political agenda than intellectual honesty, you simply choose all your assumptions from one extreme of the defensible range.

Another cynical conclusion that can be drawn from the story is that the government puts a higher value on statistical life when the burden of compliance falls on the private sector (EPA) than when it falls on public sector budgets (DOT).


Posted by: Knecht Ruprecht | Link to this comment | 07-14-08 6:48 AM
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Pricing the Priceless Child
yeah, i never could understand life insurance for example


Posted by: read | Link to this comment | 07-14-08 6:52 AM
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and on how much extra employers pay their workers to take on additional risks.

By this method, as workers become more willing to take more dangerous jobs for less pay, environmental and safety standards can be relaxed. A neat trick, because regulators are be able to say that "That's the revealed preference" and pass the responsibility for lowering standards over to the market. And you know that it's wrong to interfere with the market! And certainly it would be wrong to forbid people to work at dangerous, low-paid jobs!


Posted by: John Emerson | Link to this comment | 07-14-08 6:55 AM
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5: Try re-reading this.


Posted by: Sir Kraab | Link to this comment | 07-14-08 7:04 AM
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By this method, as workers become more willing to take more dangerous jobs for less pay, environmental and safety standards can be relaxed. A neat trick, because regulators are be able to say that "That's the revealed preference"

I'm only half surprised that they didn't take this analysis to its logical conclusion and set different standards for different races and national origins, because everyone knows that the brown people will take the jobs that no American wants.


Posted by: | Link to this comment | 07-14-08 7:16 AM
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Hey Kraabie, are you and M/tch going to Netroots Nation?

8 wuz me, BTW.


Posted by: Knecht Ruprecht | Link to this comment | 07-14-08 7:17 AM
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9: Nope. Not really my scene, plus it costs like $400.


Posted by: Sir Kraab | Link to this comment | 07-14-08 7:23 AM
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7: In addition to abjecting to read's misunderstanding of American life, people might ask how America looks to someone from a socialist nation where family security isn't a matter of insurance gambles by those who can afford it.


Posted by: John Emerson | Link to this comment | 07-14-08 7:30 AM
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This is a pretty standard thing to economists. That's not to say unproblematic, of course. (Probably closer to the opposite.)

1's point about goulishness and 4's point about selection effects are both right on. Another problem is the assumption that you can extrapolate - plenty of folks will go from a .01 chance of death to a .02 chance for a few thousand more bucks. However, does it really ring true that the average person would kill themselves for 6 million?


Posted by: ptm | Link to this comment | 07-14-08 7:39 AM
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This has nothing to do with recent changes in the economy. There's no steady tracking of this stuff, so people just cherry-pick studies based on political priorities (in this case, less regulation). So these kinds of changes are just bullshit back-door deregulation. But in general, over time, the value of statistical lives will increase as countries get richer.

The really interesting issue is whether there should be a different value of a statistical life in less developed vs. more developed countries. In practice, historically there has been -- countries when poorer are willing to make different tradeoffs between life and wealth than they do when they are richer. E.g. tolerating more pollution, less safe working conditions. You can see this in the same country over time as well as across countries.

You can argue that greenhouse externalities rich countries should subsidize poorer countries to have a different pollution/growth tradeoff than the poorer countries naturally would.

FWIW, I think value of statistical life is one of those areas where economics succeeds in making you wiser about how the world actually works. Both societies and individuals trade off mortality risk for convenience all the time


Posted by: PGD | Link to this comment | 07-14-08 7:42 AM
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Whoops -- s/b "You can argue that greenhouse externalities mean rich countries should subsidize poorer countries to have a different pollution/growth tradeoff".

And you would be right. Free technology transfer might even make it possible to have the same level of growth with less pollution.


Posted by: PGD | Link to this comment | 07-14-08 7:45 AM
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11: er, which actually existing socialist nations do you have in mind where there is a someone whose family security is safely guaranteed for the indefinite future and is therefore amazed by risk and gambling with family security?


Posted by: Timothy Burke | Link to this comment | 07-14-08 7:48 AM
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Tangentially on topic, this story in the current Artforum is about the advanced work architects are doing in Beijing for the Olympics now precisely because the Chinese government can displace thousands of residents from their homes and construction companies can pay laborers about 4 dollars a day.


Posted by: Populuxe | Link to this comment | 07-14-08 7:51 AM
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Obviously, they should calculate the value from the insurance premiums of people who offed themselves and tried to make it look like an accident so their family would still get the payout.


Posted by: Sifu Tweety | Link to this comment | 07-14-08 7:59 AM
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i can understand the sentiment one'd want to insure his life in hope that his/her death will benefit the loved ones and leave them financially secure
what i can't understand what the family feels consuming the money left, they lost their loved one! how money can replace that
well, i don't understand heirs and inheritance too
this urge to get rich by all means, you can't consume it all before and after you die, so for what to collect all the riches
your descendants, well, everybody should earn his/her living and provide for the children in his/her lifetime, why to drag it further turning it into the farce like helmsley's


Posted by: read | Link to this comment | 07-14-08 8:05 AM
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16. I know. Those Chinese are so vulgar about it. But that is OT.


Posted by: OneFatEnglishman | Link to this comment | 07-14-08 8:07 AM
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However, does it really ring true that the average person would kill themselves for 6 million?

Well... The more relevant question is "How much money would the payout after death have to be to make relatives indifferent between the person living or dying?". Now that's one that would have a lot of depressing answers.


Posted by: Po-Mo Polymath | Link to this comment | 07-14-08 8:19 AM
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Iain should learn to paragraph.


Posted by: John Emerson | Link to this comment | 07-14-08 8:39 AM
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Give me a break, read. As several people explained in the earlier thread, the point of life insurance isn't to replace the person, it's to take care of spouses and children (or others). Say parents die when their children are young and whatever relatives take them in are having a hard enough time taking care of their own family. The relatives probably feel okay spending it to make sure the kids are, you know, fed, clothed, and other luxuries like that.

And if I should die tomorrow, what should happen to the money I'm saving to buy a house and to retire? Should I find a way to spend it right before the plane crashes? Or should I give it to my family or to Doctors Without Borders so it'll do some good?

If you don't want to spend money left to you, fine, but stop suggesting that those who do are greedy and immoral. Very few of us leave behind $8 billion, whether it goes to dogs or not.


Posted by: Sir Kraab | Link to this comment | 07-14-08 8:41 AM
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Social insurance in socialist nations is a government responsibility, not a private one. Some meet the need better than others. The pervasive insecurity of even well-off people in the US is characteristically Ame4rican, and free-marketers and Social Darwinists think its a good thing, because fear is a good motivator.


Posted by: John Emerson | Link to this comment | 07-14-08 8:42 AM
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Or should I give it to my family or to Doctors Without Borders so it'll do some good?
i do believe there is no dilemma for you there
rightfully so, rightfully so
for me too, for that matter
sure the hypothetical money left should go to the family automatically without identifying heirs and public quarrel between them i guess


Posted by: read | Link to this comment | 07-14-08 9:29 AM
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Before LB come in and asserts that the EPA imposes no tests on employers, only on polluters, I'll point out
that the Occupational Safety and Health Administration - (OSHA) is the lead agency for on the
job safety.

But EPA's cut "doesn't make sense," said Vanderbilt University economist Kip Viscusi. EPA partly based its reduction on his work. "As people become more affluent, the value of statistical lives go up as well. It has to." Viscusi also said no study has shown that Americans are less willing to pay to reduce risks.

This logic could work in the converse if people become less affluent.



Posted by: Econolicious | Link to this comment | 07-14-08 9:31 AM
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aathethethe, wherever you like


Posted by: read | Link to this comment | 07-14-08 9:39 AM
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23: Would that I lived in one, though don't kid yourself about cradle-to-grave care. Grafitti I saw in England (as a demand, not a description): Free tampons on the NHS!


Posted by: Sir Kraab | Link to this comment | 07-14-08 9:49 AM
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to each his own
i mean if you choose the mercantile conscience so be it


Posted by: read | Link to this comment | 07-14-08 10:53 AM
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Read, do you have any people who are financially dependent on you?


Posted by: heebie-geebie | Link to this comment | 07-14-08 10:56 AM
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why do i need to answer personal questions like this
i feel it's intrusive


Posted by: read | Link to this comment | 07-14-08 10:58 AM
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Well, wait. Life insurance really only makes sense for workers who are without significant savings and who have financial dependants.* (And, in that context, it makes perfect sense. I fit this demographic, and have life insurance.) The people who sell life inurance to retirees (I believe they call themselves "life insurance salesmen") are pond scum. And the people who buy it in such circumstances are usually being suckered by the exact same shallow sales pitch that is offending read -- "how about a little windfall for your family when you go?" (You don't buy $200,000 policies to cover funeral expenses.) It *is* a bit distasteful.

*There are some tax loopholes through which it can also make a useful estate planning tool for the wealthy, but that's a different consideration.


Posted by: Brock Landers | Link to this comment | 07-14-08 11:04 AM
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You do not need to answer any question that you feel is intrusive.

My belief is that you do not have any people who are financially dependent on you, and that perhaps this is relevant to your feelings on insurance.


Posted by: heebie-geebie | Link to this comment | 07-14-08 11:06 AM
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re: 27

No free tampons, but free condoms and other contraception, yes.


Posted by: nattarGcM ttaM | Link to this comment | 07-14-08 11:09 AM
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sure the hypothetical money left should go to the family automatically without identifying heirs and public quarrel between them i guess

read,

In general, depending on state law, that is what happens. Personally I've gone through the will making process with a competent attorney and there are some other considerations too. Like should all the money be split equally among all the heirs and if so, who handles the money for the non-adults and when do the adults get the money.

In general I think as long as you didn't bump off the old man then the inheritance is not blood money.

As for why do rich people insist on accumulating more wealth than they need: some of them have gotten rich by having a competitive nature and that doesn't end. How many Super Bowl rings are enough? After awhile the money is just a way to keep score.


Posted by: Tripp | Link to this comment | 07-14-08 11:12 AM
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Sorry, bump off the old man or woman. I didn't mean to leave anyone out of the murdered for money category.


Posted by: Tripp | Link to this comment | 07-14-08 11:14 AM
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Speaking of how much insurance is needed - one of the things I liked is that term life insurance is one of the few things that when you need the most of it it is also the cheapest.

In general. Spoken without any supporting evidence. Because I'm a first principles kinda guy.


Posted by: Tripp | Link to this comment | 07-14-08 11:17 AM
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You do not need to answer any question that you feel is intrusive.

Unfogged posters should reveal all kinds of embarassing personal information spontaneously, without having to be asked.


Posted by: PGD | Link to this comment | 07-14-08 11:46 AM
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Unfogged posters should reveal all kinds of embarrassing personal information spontaneously, without having to be asked.

Oh yes. Goes without saying. e.g. Tripp - streaking - 10/76.


Posted by: Tripp the Crazed | Link to this comment | 07-14-08 12:23 PM
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The people who sell life inurance to retirees (I believe they call themselves "life insurance salesmen") are pond scum.

How does that scheme work? Because I don't see how you could actually make money selling life insurance to retirees, unless you're planning to weasel out of paying the claims.


Posted by: zadfrack | Link to this comment | 07-14-08 12:35 PM
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unless you're planning to weasel out of paying the claims.

And your point is?


Posted by: OneFatEnglishman | Link to this comment | 07-14-08 12:38 PM
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39: well, yes, 40, but also they're mostly selling relatively small policies for relatively large premiums. So the insurers do win, statistically. It's a complete scam--of course this means that in most cases all that's happening is that the insurer is taking a chunk of the retiree's retirement savings in the form of monthly premiums, and then giving back a smaller chunk when that person dies (possibly not true in nominal dollars, but very true in inflation-adjusted dollars). All for an "insurance" that the policyholder has absolutely zero need for.

[Insert slight caveat about how wisely investing the float means you could actually pay policyholders more at their death than they paid you in premiums (even in inflation-adjusted terms) and still turn a profit, but we need not dwell on this caveat as it's not the way the industry works.)


Posted by: Brock Landers | Link to this comment | 07-14-08 12:47 PM
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41:

I second and third Brock. A similar scam is when they try to sell you insurance for your car payment and quote the price per day.

Essentially you are buying, say, a 20K term insurance who's value goes down as the car is paid off at horribly inflated prices.

Because some of this is easily hidden I prefer to avoid it and also "whole" life like the plague. I like my insurance and investments separate where I can see their (sometimes dismal) performance clearly.

But we all know I'm a first principles kind of guy and am probably missing out on some incredible second principle money making scheme one learns in college economics.

Hey, I hear Amway has a new name now. I'm sure it is just fine with no flaws left.


Posted by: Tripp | Link to this comment | 07-14-08 12:58 PM
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