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Human life just got more valuable!

by Karl Coplan

The New York Times has an interesting article today about how EPA and other federal agencies have quietly increased the dollar value assigned to a human life, to be used for regulatory impact and cost-benefit analysis.

According to the Times:

The Environmental Protection Agency set the value of a life at $9.1 million last year in proposing tighter restrictions on air pollution. The agency used numbers as low as $6.8 million during the George W. Bush administration.

The Food and Drug Administration declared that life was worth $7.9 million last year, up from $5 million in 2008, in proposing warning labels on cigarette packages featuring images of cancer victims.

The reason for the increasing value of human life? A combination of inflation adjustment and choice of methodologies. EPA has tended towards using a capitalized “risk premium” for hazardous occupations such as logging or fishing to try and set a “market price” for risk of death. Industry prefers to use surveys about the price the public would be willing to pay to avoid a statistical risk, or simply to add up lost wages, as though the value of a human life were no more than what she could earn in the rest of her years.

Coincidentally, I taught cost benefit analysis in my Environmental Law Survey class today, and we had a good discussion about the fundamental flaw in cost-benefit approaches — the illusion of mathematical certainty presented by comparing numbers, while hiding the policy and value assumptions underlying the calculation of these numbers.

I am beginning to think that perhaps the assignment of a numerical value for human life should not be left to the regulatory agencies at all, where it is subject to change from administration to administration, and even from agency to agency within the same administration. If Congress wants cost-benefit analysis to be part of the environmental regulatory calculus (as it has in TSCA section 6, and the Safe Drinking Water Act), then let Congress put a price on life — let’s establish by statute what value Congress wants to use. Many in the environmental community may fear that Congress would pander to industry and low-ball the number, but I think that the opposite might occur were Congress to have to explain exactly what they think their constituent’s lives should be worth.

1 Comment

  1. Trudy Ann Cameron

    My article entitled “Euthanizing the Value of a Statistical Life” in the Summer 2010 issue of the Review of Environmental Economics and Policy (REEP) was written to help policymakers and others understand what is actually meant by the Value of a Statistical Life terminology and why economists might want to rethink how these issues are explained to the public. The key insight is that the government is not trying to dictate the “worth of a human being.” Instead, it is trying to use evidence on the types of trade-offs people are already showing that they are willing to make, to gain an extra small measure of safety. There is no single “true” number. People’s willingness to give up other stuff to get risk reductions depends on the type of risk involved and the characteristics of the person being asked. Sure, a single number would be tremendously expedient, but only by accident would it be the correct number to use in benefit-cost analysis of a specific type of risk reduction program affecting a particular population.

    The article is available free of charge at http://reep.oxfordjournals.org/

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