GOVERNMENT REGULATORS PUT A PRICE ON HUMAN LIFE
March 15, 2005
The thought of putting a fixed value on life is unpleasant, but it is necessary for federal regulators to determine how resources should be spent on health and safety improvements, says economist Ike Brannon.
- Society cannot spend an infinite amount of money to protect and extend each person's life.
- With a fixed amount of resources, government needs to approximate how much each life is worth -- called the value of a statistical life (VSL) -- in order to obtain the greatest benefit for each dollar spent in trying to save one.
Economists and other researchers have used a variety of methods to determine the value of a statistical life. Some of the most widely-accepted studies have found that VSL ranges from about $2 million to $3 million. Government regulators have adopted similar figures:
- The Department of Transportation uses a figure of $3 million.
- The Environmental Protection Agency (EPA) currently uses a mean VSL of $6.3 million for its cost-benefit analysis; in reality, every regulation issued by the agency that spent less than $8 million to save a life has been approved.
While having different agencies use different valuations may seem illogical, people place different values on avoiding different types of risk -- for instance, people fear dying in a plane wreck much more than dying in an automobile accident.
Source: Ike Brannon, "What Is a Life Worth?" Regulation, Vol.27 No. 4, Winter 2005, Cato Institute.
Browse more articles on Government Issues