Value of life

The value of life (or price of life) is an economic or moral value assigned to life in general, or to specific living organisms. In social and political sciences, it is the marginal cost of death prevention in a certain class of circumstances. As such, it is a statistical term, the cost of reducing the (average) number of deaths by one. It is an important issue in a wide range of disciplines including economics, health care, adoption, political economy, insurance, worker safety, environmental impact assessment, and globalization. Discussions about the value of life would be more-or-less limited to university philosophy departments and religious groups if it were not for the fact that this value must be calculated in an exact quantitative way by practitioners in these disciplines.

Some people feel that putting an economic price tag on life is inhumane, because every life is "priceless". However, with a limited supply of resources or infrastructural capital (e.g. ambulances), or skill at hand, it is impossible to save every life, so some trade-off must be made. Also, this argumentation neglects the statistical context of the term. It is not commonly attached to lives of individuals or used to compare the value of one person's life relative to another person's. It is mainly used in circumstances of saving lives as opposed to taking or "producing" lives.

Economic approaches to valuation

The value of life is most commonly determined by looking at a person's willingness to pay or willingness to accept. Willingness to pay can be found by asking a person how much they would be willing to pay for good health outcomes (or to reduce bad health outcomes). It can also be determined by looking at a person's purchasing choices. An example would be looking at how much more a person would be willing to pay for airbags in his/her car. To determine willingness to pay one would look at the change in the price that occurs because of the added airbags and divide that by the change in the risk of death. Willingness to accept is determined by looking at how much more you would have to pay someone to put them in a position where they are more likely to have bad health outcomes. This could be seen by changing a person's location from a less polluted city to a more polluted city and looking at the difference in wages between the two areas.

Uses

Since resources are finite, tradeoffs are inevitable, even regarding potential life-or-death decisions. The assignment of a value to individual life is one possible approach to attempting to make rational decisions about these tradeoffs.

When deciding on the appropriate level of health care spending, a typical method is to equate the marginal cost of the health care to the marginal benefits received. In order to obtain a marginal benefit amount, some estimation of the dollar value of life is required.

In risk management activities such as in the areas of workplace safety, and insurance, it is often useful to put a precise economic value on a given life. There can be no such thing as a perfectly safe or risk free system - one can always make a system safer by spending more money. However, there are diminishing returns involved.

Criticisms

There are also intergenerational aspects to the value of life. Some economists calculate social discount rates based on the interest rates prevalent in financial markets. The higher the social discount rate, the more future generations are devalued relative to the current generation.

The anti-globalization movement objects to the obvious disparity between the value assigned to life in developed nations versus developing nations - most particularly as reflected in World Bank, WTO, and IMF decisions. They point to such numbers as the IPCC assumption that a developed nation can pay fifteen times more than a developing nation to avert a death due to climate change, as evidence of systematic neglect of the value of life in the poorer South, as opposed to the more developed North. Some also fear that more standard global value of life mechanisms could have consequences for the working people in the developed nations.

A few also debate as to whether animal life deserves to have a value assigned to it, such as in the field of biodiversity. A moral argument associated with this is the Great Ape personhood debate, which has become especially poignant since the recent advocacy by some scientists to move the two chimpanzee species into the genus "Homo" (previously it was considered a hominid).

References

* Kevin M. Murphy and Robert H. Topel (2006). "The Value of Health and Longevity", "Journal of Political Economy", 114, pp. 871-904. ( [http://www.journals.uchicago.edu/cgi-bin/resolve?id=doi:10.1086/508033 abstract] )
* Thomas C Schelling (1987). "value of life", "", v. 4, pp. 793-96.
* W. Kip Viscusi, [http://www.law.harvard.edu/programs/olin_center/papers/pdf/422.pdf "The Value of Life: Estimates with Risks by Occupation and Industry"] (same title as in "Economic Inquiry" 2004 42 (1), January 2004, pp. 29-48).

See also

* Human values
* Rational choice theory
* Utilitarianism