Value of a Statistical Life

Some of us may feel that human life is the most precious thing and we cannot put a value to life. But, the Environment Protection Agency in US has other ideas. It announced in May this year that the value of a statistical life is $6.9 million - a drop of almost $1 million from just five years ago !

How does it matter, what the EPA says ? Does it make a difference whether a life costs 6.9 million or 10 million dollars ? Apparently, it makes a lot of difference to the Government of US, and importantly to the US citizens. Can you believe it ? This is how it is ..

When drawing up regulations, government agencies put a value on human life, then weigh the costs versus the lifesaving benefits of a proposed rule. The less a life is worth to the Government, the less the need for a regulation, such as tighter restrictions on pollution.

Consider, for example, a hypothetical regulation that costs $18 billion to enforce but will prevent 2500 deaths. At $7.8 million per person (the old figure), the lifesaving benefits outweigh the costs. But, at $6.9 million per person (the current figure), the rule costs much more than the lives it saves, so it may not be adopted.

Of course, the officials told, it seems, that they were just following what the science told them. The EPA figure is not based on people's earning capacity, or their potential contributions to society, or how much they are loved and needed by their friends and family, some of the factors used in insurance claims and wrongful death lawsuits.

Instead, economists calculate the value based on what people are willing to pay to avoid certain risks, and on how much extra employers pay their workers to take on additional risks.

But, what I cannot understand is how the value of life can come down. The costs of everything seems to be going up; at least, on this count, the value of life should increase, I would have thought. People, I am sure, are willing to pay more to stay alive today - compared to, say, five or ten years ago.

Though I grew older by 10 years compared to 1998, I wouldn't accept that my life is worth less now compared to 10 years ago. As suggested by Anita, life is on a golden period right now and things are generally on a high. I assume, most of my friends and colleagues will also vouch for the same.

Probably, this is only for US citizens ?!