Monday, March 03, 2008
More on Valuing Lives
If lives tomorrow may be worth significantly more than lives today, I think this poses some additional difficulties for figuring out what to do about long term environmental problems.
So, how do we find out how much a life is really worth? One of the best ways is to measure how much extra you have to pay someone to take a dangerous job. If lion tamers and elephant tamers have comparable skills and comparable working conditions, but lion tamers earn $20,000 a year more than elephant tamers, it's probably because that's what it takes to compensate someone for the risk of being eaten by a lion. And if that risk amounts to, say, an extra half-percent probability of dying on the job, then you figure that the value of a life must be $20,000 per half-percent, or $40,000 per percentage point, or $4 million.
So, once you carry out that experiment, how much does a typical life turn out to be worth? Professors Dora Costa of MIT and Matthew Kahn of Tufts point out that it depends on exactly when you asked the question. As incomes have risen, so has the value of life. The increase is more than proportional: A 10 percent rise in income is generally associated with about a 15 percent rise in the value of a life. Between 1940 and 1980, according to Costa and Kahn, the value of a life increased from about $1 million 1990 dollars to between $4 million and $5 million 1990 dollars.
(Other researchers, notably Harvard's Kip Viscusi, have found higher numbers. Viscusi estimates that the value of a life in 1970 might already have been as high as $8 million 1990 dollars.)
Given this, it seems that lost (potential) wages is a more accurate way of measuring a life, even though it does put extra weight on the value of millionaires to our society. Perhaps an answer to Summer's 3rd world pollution idea would be to shift all our dangerous jobs and trash and nuclear waste to the third world, let these workers accept higher wages (for the risk) to clean up our mess and work in our dangerous factories, and as the value of their life rises (faster than the rate of growth of their income, as mentioned in the article), we will be able to re-evaluate the cost of our messy habits and consumption, and produce at an internationally efficient level, because the opportunity cost of third world lives is now more comparable to our own. ...perhaps this is completely incorrect theorizing, but it's an interesting idea!
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