Real Value of Life!
People across the globe have been debating about whether we should close the economy & save lives or should we save the economy? Since decades economists have been working out the monetary value of human life. So, what exactly is that number, is it 100, 1,000 or 1 lakh?
First of all, why do we need a number?
This argument comes in when policymakers around the world need to make decisions regarding setting up of policies for the larger public/businesses. For example, deciding on whether to make airbags in the car compulsory, for which, administration calculates the numbers that whether total cost airbags (manufacturing to installing) is more or less than the cost of all the deaths incurred if it’s not present. Accordingly, it approaches the viability of the options.
And, due to the pandemic creating havoc all around, administration around the world is evaluating whether shutting the economy down for 3–5 months is worth as people going to die, let’s say of starvation, or is it a more viable option to let people roam around and be potentially infected.
The value of human life is immoral, it’s inconceivable, it’s incalculable. But people need a metric to objectively evaluate alternatives. Moreover, if we consider all human beings are born equal therefore the value of saving 10 lives should be worth ten times as much as saving 1 life.
How do we approach this from a rational perspective and construct a normative model for the valuing human lives?
Until the 1980s, this value was calculated in correlation with the expected future income -> (Av. Working life expectancy — Current age) * potential average income. This was how courts assessed and evaluated wrongful death lawsuits in the United States. And, in the 1980s this average value came out to be ~$3,00,000, adjusting for inflation this value comes out to be $8,00,000 in 2020.
(Data for the US has been used as it was readily available)
But, unlike working, advertising pays you for doing nothing just for the presence of your eyeballs in front of a screen. Continuing with stats of the United States, the average cost of a 30 sec TV ad to a thousand people is about ~$24. That comes around to be $2.88 per hour/per person. Average TV viewing time in ~4 hours, therefore, per day cost comes to be $2.88*4, i.e $11.52. Multiply that by the total life expectancy i.e 78 for the US. The total is about $328,000 dollars. Considering online video advertisements, go for much less amount, we round off the figure to be $400,000!
The total comes out to be ~$1.2 million.
But another argument arises that, if we look at people who are unemployed or don’t have any income yet, are their lives worth nil, nada? And, it gets further complicated as for an individual their life is priceless. W. Kip Viscusi, an economist then tracked behaviors of people ranging from premium people willing to pay/take for safer options in life, may it be a car or an occupation that requires working with hazardous materials. He further got a sample of, like, 10,000 nurses, 10,000 construction workers, 10,000 coal miners, 10,000 lawyers. And then computing how much extra money they require for that risk of death & their likelihood of dying on the job.
And, using complex models the calculated value of a statistical life was ~$3 million.
This figure is 150% higher than what was calculated but after his analysis government started using Kip’s value of statistical life and that shaped a number of regulations that might not go through using an earlier calculation of $1.2 million.
Then there’s an inherent fault in the argument that is it doesn’t factor in the grief of immediate family, friends, acquaintances when somebody dies.
Coming to the present-day scenario of coronavirus shutting down the economy, same economist Kip Viscusi has run the numbers and for the present-day scenario according to CDC and Transportation Dept. the number is $10 million.
Trump said in a comment that a million lives could be saved from shutting the economy down. Therefore, $10 million x 1 million = 10 trillion of lives saved, that’s almost 50% of the total GDP.
It can be concluded that economic loss is nowhere near that mark and closing the economy is a wise decision for now. But, for how long? Till there are zero deaths? Surely not till then but then when will the right moment or chance arrive. There is surely some tough decision to be made by policymakers across the globe that might not be entirely right but will be necessary.
Any thoughts? Do let me know in the comments.
References:
https://www.wsj.com/articles/why-the-government-puts-a-dollar-value-on-life-1458911310
https://www.bloomberg.com/graphics/2017-value-of-life/
https://www.theobjectivestandard.com/2020/04/lockdowns-versus-living/
https://www.theglobalist.com/the-cost-of-a-human-life-statistically-speaking/