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Wednesday, March 05, 2003

Security as a Normal Good-This is an interesting Steven Landsburg Slate piece (found via Randy McRoberts) on how the implicit value of life has gone up over the years, as measured by the willingness of people to invest in various safety equipment.
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.
For most cultures, safety is a luxury. Pollution-prevention is a form of safety, for pollution can shorten lives overall. I'm thinking back to the coal miners in the first half of the 20th century who died of black lung, including my great-grandfather. They knew that mining was dangerous to their health, but the job paid well; with life expectancy a lot lower, the benefit of protecting yourself against an illness that wouldn't kick in until their 30s or 40s was a lot less than today, for there was a good chance that they wouldn't get to see 40 even without black lung. Also, with incomes much lower than today, guarding against black lung via gas masks or watering down tunnels wouldn’t give as big a bang for the buck than other necessities of life of the era. The richer we get and the better our health care system gets, the greater value we place on safety. We can afford to pay for better safety and have longer lives to live, making those lives more valuable even without the higher income.

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