How Much Is Your Life Worth?

The following article is taken from a Science And Environment Online publication, Down To Earth. It explains how EPA has changed the hypothetical value of an American life, as used to calculate the economic cost of environmental regulations. To oversimplify, if the cost of implementing the regulation exceeds the value of the humans that will be killed without the regulation, the regulation is not cost-effective.

This leads to a couple of interesting points that many people don't think about. One is that environmental regulations generally involve some analysis of risk assessment and economic cost. A great place to learn about that is Harvard's Center for Risk Analysis. There are no risk free activities, and the risk of any activity must be weighed against the cost of not engaging in that activity. For example, the presence of chlorine in drinking water may cause injury or death to a small number of susceptible persons, but to fail to decontaminate the water supply would kill hundreds of thousands from water-borne diseases, and chlorine is one of the most cost effective ways of purifying water. Or an acceptable level of a certain carcinogen (cancer-causing substance) such as benzene may be set at a level that will, in theory, kill one in a million people who ingest that chemical over a 70 year period. That level is chosen instead of, say, a one in a 100,000 death rate, or a 1 in ten million rate.

The other point is this - while the numbers are best efforts to determine cost and risk, they are often SWAG (Scientific Wild Ass Guesses). In the example below, how would one really calculate that the cost of the regulation is 8 billion dollars? How do you know how many persons will be killed if it isn't put into place? What is the value of a person's life?

US devalues life by $1 million
The decision will lead to less life protecting regulations and more pollution the us Environmental Protection Agency (epa) has lowered the value of a statistical life from us $7.8 million five years ago to us $ 6.9 million today. The alarming drop was a chance discovery by an Associated Press reporter after scavenging through a series of epa documents filed over the last 12 years.Experts are worried since the depreciation has far reaching consequences on pollution related regulations. Unlike the factors commonly used in insurance claims and lawsuits, to figure out the ‘value of a statistical life’, epa economists use payroll figures—how much employers pay their workers to take on additional risks at work, and how much people are willing to pay to avoid certain risks at work. The value is used while drawing up environmental regulations in the country.A government policy is considered cost effective only if the cost incurred for its implementation is either less than or equal to the total statistical value of the lives that it will possibly save. For instance, a certain regulation costs about us $18 billion and is expected to save 2,500-odd lives.Five years ago when the statistical value of life was still us $7.8 million, the life-saving benefits of this regulation would have outweighed its cost of implementation. The policy would therefore be proven acceptable and possibly be adopted. Today, when the value has plunged down to us $6.9 million, the implementation cost of the project will turn out to be far greater than the total value of the lives it will manage to secure. This anomaly will keep the otherwise sound policy, which would have undoubtedly been employed five years ago, from being implemented today.According to Dan Esty, former epa official who at present is the director of the Yale Center for Environmental Law and Policy: “It’s hard to imagine that it (the reduction) has anything other than a political motivation.”Activists allege that the Bush government has purposefully cut down the value to relax federal pollution regulations imposed on large corporations. epa authorities say the change in value was brought about by ‘better’ economic studies.Kip Viscusi, an economist at the Vanderbilt University, Tennessee, says that no study he knew of has shown that Americans are in anyway eager to cut down their costs by spending less on risk prevention. “As people become more affluent, the value of statistical lives goes up,” he says.Meanwhile, the devaluation has alarmed Congress. The Senate environment committee in a statement has said that it would introduce legislation designed to reverse the epa move.