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`Value of life' figures help government measure risk.

Byline: Trudy Anne Cameron For The Register-Guard

On July 11, The Register-Guard ran a front-page Associated Press article the lead paragraph of which trumpeted that, "A government agency has decided that an American life isn't worth what it used to be." The story and its headline could easily give readers the impression that government agencies assign monetary values to human life in an arbitrary, perhaps even amoral, fashion.

This is not the case.

These numbers, based on peer-reviewed external studies involving large samples of the population, measure tradeoffs that real people actually make, or claim that they would make, when they must decide whether to give up some money for an increased margin of safety.

Example: One of these large- sample studies might consider a one-in-a-million reduction in the risk of death (sometimes called a "micromort") and come up with an average willingness to pay of $6.90 to eliminate this much risk.

Suppose this number were scaled up proportionally. If willingness to pay is found to be $6.90 for a single micromort (that is, a risk change of 0.000001), then willingness to pay would be $6.9 million for a risk change of 1.00 (which sounds like going from a death probability of one to a death probability of zero).

Any estimate of willingness to pay for some small risk change, when scaled up to this huge 1.00 risk reduction, is called "the value of a statistical life." This is the number that the U.S. Environmental Protection Agency currently reckons to be about $6.9 million.

In practice, this huge average willingness to pay is promptly scaled right back down to be matched to the many types of small risk reductions, for each individual, that typically can be achieved by environmental regulations. The EPA number corresponds to $6.90 for one micromort, or $69 for 10 micromorts, and so on.

The concept of "the value of a statistical life" causes problems.

It is easy to infer that $6.9 million is the amount the EPA thinks we should pay to reduce the probability of some particular person's death from 1.00 (that is, death with certainty) to zero (perfect safety). From there, it is just another short leap to think that this somehow means "the value of a life."

This is simply not correct. None of the careful studies from which the evidence about willingness to pay is garnered has considered anything but small changes in risk. And nowadays, in the United States at least, most regulatory questions concern modest reductions in mortality risks that are already very small by international standards.

It is easy to provoke moral outrage by suggesting that the government is putting a dollar value on an American life. Most of us would agree that every life is priceless.

But there is nothing wrong with thinking about people's willingness to pay for small risk reductions. Almost all of us make regular tradeoffs between money and safety, for ourselves or on behalf of others.

We decide whether to put off replacing our tires for another month when money is a bit tight. We decide whether to buy a safer but more expensive car, or settle for a cheaper one. We decide whether to vote to fund bridge repairs through higher taxes.

Yes, in a small fraction of cases, somebody will die because of bald tires, inexpensive cars and collapsing bridges. But nobody bats an eye about the morality of these mundane choices, which are very similar to the choices that must be made with respect to environmental policies. It is simply too expensive to try to make everything perfectly safe.

The article also leaves the impression that there may be something wrong with the EPA using a revised estimate of $6.9 million for one rule and an older estimate of $7.8 million for another rule, especially since the U.S. Department of Transportation uses yet another, smaller, value. While we probably all agree that our government should "value" everyone equally, it is not the "value of a human being" that is in question. Instead, it is people's own willingness to pay (that is, their own demands) for small risk reductions. There is no reason why this willingness to pay should be the same for everyone or for all types of risks.

Mortality risk reductions are just some of the many different things on which people want or need to spend their hard-earned money. People's willingness to pay for mortality risk reductions, like their willingness to pay for most other goods or services, differs with their age, income level and a variety of other factors.

For example, elderly people may not wish to spend much to reduce their risk of contracting bladder cancer from trace contaminants in their water, because it may take 30 years for symptoms to appear, if they ever do. This particular risk may be a lower priority than other worries, such as paying to deal with current health care needs. Young people may be willing to pay more to reduce this particular risk.

We also are willing to pay different amounts to reduce different kinds of risks. For example, people tend to view traffic-related risks as controllable through careful driving, so they are less willing to pay to reduce these risks. Thus it makes sense for the Department of Transportation to use smaller values for mortality risk reductions than those used by the EPA - many environmental risks are considered to be less controllable. And even within the EPA's domain, various environmental risks should be valued differently, because people are more concerned about some risks than others.

The article also mentions that administrations have tried "to bring uniformity to that figure among all departments." Such pressures arise from a misguided attempt to be equitable. But not all risks are perceived the same way, and not all risks threaten everyone in the population equally.

Moreover, risk reductions are not provided free of charge. They are provided via regulations that divert society's resources from other, often equally compelling uses.

People sometimes wonder why governments need to place a dollar value on mortality risk reductions at all. Even if a government chooses not to be explicit about such values, decisions will still be made. Some regulations will be implemented and others will not. Greater safety typically means higher costs, whether in the form of higher prices, lower wages, decreased investment returns or higher taxes. Simply refusing to put an explicit dollar value on mortality risk reductions does not mean that cost-benefit comparisons can be avoided.

Somebody has to decide that the mortality risk reduction a regulation would achieve is "worth" at least as much as it costs. Governments use explicit values for mortality risk reductions to enhance transparency about how decisions are made.

Industry representatives and environmental advocates certainly have a vested interest in pushing the government to use a smaller or a larger number. It's a mistake to regulate too stringently, which causes excess resources to be devoted to a particular type of risk reduction, or not stringently enough, which leads to risks that could be avoided at an affordable cost. Government agencies are doing their best to reflect an appropriate value for the social benefits of risk reductions so that these benefits can be stacked up against the costs.

We should of course be vigilant about the influence of lobbyists in all types of government policy-making, and we should challenge any decisions that appear to be made in response to the pressures of lobbyists rather than the best empirical evidence about the well-informed preferences of the populace - whose collective best interests the government is mandated to serve.
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Title Annotation:Local Opinion; Numbers don't tell anyone what a human life is worth
Publication:The Register-Guard (Eugene, OR)
Date:Jul 27, 2008
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