- Email: [email protected]
The value of trying to value life
Journal
of Public
Economics
THE
15 (1981) 133- 137. ic; North-Holland
VALUE
OF TRYING
Publishing
TO VALUE
Company
LIFE
E.J. MISHAN Centre Jar Banking, City University, Received
London ECI, UK
April 1980
If one believes in the sanctity of human life, is it proper for the economist to attempt to place a monetary value on it? Again, if one believes that people respond to the issue of life or death, or to the risks of death, in a seemingly ‘irrational’ or ‘paradoxical’ way, should the economist accept’their representations? These seem to be the burning questions in John Broome’s mind [see Broome (1978)], his answers to which are emphatically negative. This note is intended to be fair and reasonable comment on his views. 1. No observations on section 2 of his exegesis is called for since it amounts only to some faint-hearted intellectual doodling productive of nothing more than a deprecatory suggestion about using (contrary to Pareto requirements) the equivalent variation weighted ‘by a suitable marginal utility’. On his section 2, however, a few remarks on what he imagines to be a critique of my proposal for the economic valuation of life and limb may help to clear the cobwebs from his mind and to restore perspective. 2. Each year about 55,000 Americans die in automobile accidents. We can all agree that if the names of those foredoomed to perish could be foretold, the fate of the private automobile as a means of travel would be sealed. And if, on this argument, Broome succeeded in persuading Americans collectively to ditch their automobiles, I should be delighted. Broome, in his turn, will surely agree that no amount of research will ever succeed in revealing the names of the victims in advance of the event and, moreover, that perfect knowledge of the statistics of automobile fatalities will not of themselves deter many Americans from continuing to drive them - even though each one may acknowledge that his own life is infinitely precious. To take another instance, close to Broome’s spirit of protest. A man who wants to play Russian roulette in return for a payment of $500,000 would certainly resent Broome’s attempt to prohibit the game. Should the man play the game after all, and lose, then ~ allowing that he remains conscious a few
seconds after the fatal shot ~~ he would doubtless rue his folly and fcr\ently wish he had heeded Broome’s prudent advice based on the argument that no sum compensates for loss of life. I should think such instances must have occurred to all economists and other social scientists who have given the matter serious thought. But what are we to make of them?
3. Let us put aside Broome’s fantasy about a scheming government department concealing relevant information (the identity of the actual victims) in order to reduce the cost of a pet project: Let us agree that the department heads should be impeached for their dishonesty. We may also put aside the question of imperfect knowledge of the relevant probabilities inasmuch as Broome’s alleged paradoxes arise even if each person has accurate knowledge of them. As he says, a risk of one in ten million of being killed would be judged as virtually riskless and ignored ~ notwithstanding which, in a population of 50 million, the expected number of deaths from this risk could be five. And. clearly, five deaths ought not to be dismissed as a costless item. Finally, let us ignore his dithering (bottom of page 93 and top of page 94) about whether further research could reveal the actual names of those who are destined to die if the project is undertaken. This is unlikely (even were it possible, the allocation economist would continue to accept people’s valuations at the time the decision has to be made) and, in any case, Broome’s arguments do not really turn on this point. Having got these brambles out of the way, the pith of Broome’s message can be seen to lie in his remark on page 94; that ‘to know a probability’ (about the incidence of death but rzol to know which particular people are doomed) ‘is a certain sort of ignorance’. Yes, to be sure it is; in a manner of of speaking, it is also ‘a certain sort of speaking. And, in a manner knowledge’. one that is the basis for successful insurance.’
4. 1 cannot, however, go along with the conclusions that Broome draws from this reflection. First. a minor point. His assertion that ‘we are asked by Mishan to accept the dictum that each person knows his own interest best’ (which amounts to saying that he knows it ‘better than’ others) is not true. I do not ask this of any one, if only because I do not believe it myself. What I maintain is that.
‘In this connection I am uncertain whether Broome would ad\lsc Lloyds of London not to insure an open air exhibition against rainy weather for less than the actual damage that will occur should it actually rain on the appointed day. Such advice, however. would bc consistent with the argument of his paper.
E.J. Mishan,
The ualue of trying fo due
life
135
of fact, the standard economic prescriptive method rests inter of this dictum.2 Secondly, to conclude as Broome does (concerning the people who, in the event, will perish) that ‘their interest is to refuse every offer of compensation, but they do not know this’, is surely an arguable point. These unfortunate people ‘do not know this’. Broome, of course, does know this. And if he were so good as to share his knowledge with them, what does he imagine the result would be? Even in an ethical capacity, I would hesitate to go along with him. But that does not really signify, since the task I set myself in my paper” lacked fundamentalist fervour. Indeed, its subtitle, ‘A theoretic approach’ was intended to serve notice on the reader that I was addressing myself only to the issue of consistency in respect of the concepts on which economic calculation is based. The paragraph of mine quoted by Broome which, in his innocence, he finds ‘remarkable in many ways’ is no more than a standard interpretation of one of the essential maxims, or procedural rules, that inform the economist’s evaluative techniques. I do not necessarily subscribe to any of them. as a judgment
aliu on the acceptance
5. Broome’s quarrel is not with me. It might be with my interpretation of the foundations of allocative economics as practised today. If it is not, and he accepts the dictum I enunciated as being a part of these foundations, his quarrel has to be with the reactions of ordinary men. If John Doe chooses to ignore a one in ten-million risk of being fatally injured by falling from a step ladder he is purchasing, I can imagine Broome assailing him with evangelic ardour thus: ‘My dear sir, you have no right to ignore this one-in-ten-million risk. Do you not consider that if every person in our nation of 50 million people acted as you do five people are likely to be killed within the year? And are not these five lives beyond all material treasure.’ I can also imagine John Doe’s response to this appeal: ‘Look here mate, if I want to buy this perishin’ ladder, that’s my business, see!’ Perhaps John Doe has a point after all. For when one comes to think of it, there can be very few items in the shops that carry a risk of death to the buyer himself, or someone else, of less than one in ten million. One has only to reflect a minute on the wide range of pesticides, cleaning agents, food ‘The inter alia is not just garnishing. At the beginning of his note (page 91) Broome tells us he thinks ‘that by now most people recognize the invalidity of the compensation test except when compensation is actually paid .‘_Frankly, I have no way of checking his surmise. If it is true, then ‘most people’ ought to recognize also, as a matter of verifiable fact, that cost-benetit analysis, mathematical programming, and other allocative techniques. operate on the basis of hypothrticul, and nor actual compensation. ‘Chapters 22 and 23 of my first edition of Cost-Benefit Andysis, which is the reference given by Broome, was in fact based on an earlier paper, ‘Evaluation of life and limb: A theoretic approach’, Journal of Political Economy, 197 I.
additives, synthetics, drugs, weed-killers, fuels, sprays, electric gadgetry, to conclude that the risks of death items must be well above one in a million.
dyes, sharp tools, and from any one of such
6. Assuming that Broome is not going to advocate closing the shops, what would he want done about it? He does not wish to go along with the economist’s principle of accepting people’s own (ex ante) valuations of goods and bads at the time the decision has to be made ~ perhaps not even if he recognizes that an economic calculation of a project is only a contribution to the political decision-making process and, in fact, is seldom decisive. But then, he might not want to abide by a purely political decision either (one made in ignorance of any economic calculation). For a purely political decision to spend, say, a million dollars on a highway only for the purpose of saving 20 lives a year entails an implicit value of life of $50,000, a sum that hardly reflects the worth of a human life. Whenever the government has to decide as between subsidizing a new steel mill, subsidizing housing, or extending hospital facilities, its decision can entail the savings of more or fewer lives, and an implicit value of life emerges. And we can be pretty sure that, where all decisions having some bearing on mortality are reached through a purely political procedure, the implicit valuation of life will not only be finite but will vary widely over time. 7. In sum, objections to my proposal can be understood either as (a) an attack on my interpretation of the standard procedure in economic evaluation; or, if one broadly agrees with that interpretation, as (b) an attack on the standard procedure itself; or, if one accepts, in the main, the standard procedure of economic evaluations, as (c) an attack on my proposed extension of this procedure; or, finally, as (d) an attack on my proposal arising not from a belief that it is inconsistent with the standard procedure but that, in some sense, it is illegitimate to extend to life and limb the standard procedure that is appropriate for other goods and bads. While I realize that these are not mutually exclusive alternatives, the fact that Broome did not explicitly take issue with the standard principles of economic evaluation, nor ~ apart from ostentatiously raising an eyebrow ~ with my interpretation of them, along with the fact that he nowhere elects to argue that my proposed extension is not consistent with these principles, impel me to conclude that his objections to my proposal fall into the last category, (d). This conclusion, along with a reappraisal of the nature of his arguments, leaves me with the impression that Broome is seeking a value for life that not only has universal ethical appeal but is invariant to time, knowledge, and material circumstances; a value unsullied by distinctions between ex unte and e.x post, and impervious in particular to the ‘paradoxical’ responses of men
E.J. Mishan, The oalue of trying
to value life
137
according as death is a certainty or a risk. He is a knight errant in search of a holy grail. I wish him luck in his wanderings ~ better luck, at any rate, than he had with his 1978 essay. The economist must, perforce, settle for less. Once he accepts that the distinctive characteristic of economic evaluation is recourse to the individual’s own valuations of the change in question, he has no choice but to go along with their responses, ‘paradoxical’, perverse, or otherwise.
Reference Broome,
H., 1978, Trying
to value a life, Journal
of Public
Economics
8, 91LlOO.
of Public
Economics
THE
15 (1981) 133- 137. ic; North-Holland
VALUE
OF TRYING
Publishing
TO VALUE
Company
LIFE
E.J. MISHAN Centre Jar Banking, City University, Received
London ECI, UK
April 1980
If one believes in the sanctity of human life, is it proper for the economist to attempt to place a monetary value on it? Again, if one believes that people respond to the issue of life or death, or to the risks of death, in a seemingly ‘irrational’ or ‘paradoxical’ way, should the economist accept’their representations? These seem to be the burning questions in John Broome’s mind [see Broome (1978)], his answers to which are emphatically negative. This note is intended to be fair and reasonable comment on his views. 1. No observations on section 2 of his exegesis is called for since it amounts only to some faint-hearted intellectual doodling productive of nothing more than a deprecatory suggestion about using (contrary to Pareto requirements) the equivalent variation weighted ‘by a suitable marginal utility’. On his section 2, however, a few remarks on what he imagines to be a critique of my proposal for the economic valuation of life and limb may help to clear the cobwebs from his mind and to restore perspective. 2. Each year about 55,000 Americans die in automobile accidents. We can all agree that if the names of those foredoomed to perish could be foretold, the fate of the private automobile as a means of travel would be sealed. And if, on this argument, Broome succeeded in persuading Americans collectively to ditch their automobiles, I should be delighted. Broome, in his turn, will surely agree that no amount of research will ever succeed in revealing the names of the victims in advance of the event and, moreover, that perfect knowledge of the statistics of automobile fatalities will not of themselves deter many Americans from continuing to drive them - even though each one may acknowledge that his own life is infinitely precious. To take another instance, close to Broome’s spirit of protest. A man who wants to play Russian roulette in return for a payment of $500,000 would certainly resent Broome’s attempt to prohibit the game. Should the man play the game after all, and lose, then ~ allowing that he remains conscious a few
seconds after the fatal shot ~~ he would doubtless rue his folly and fcr\ently wish he had heeded Broome’s prudent advice based on the argument that no sum compensates for loss of life. I should think such instances must have occurred to all economists and other social scientists who have given the matter serious thought. But what are we to make of them?
3. Let us put aside Broome’s fantasy about a scheming government department concealing relevant information (the identity of the actual victims) in order to reduce the cost of a pet project: Let us agree that the department heads should be impeached for their dishonesty. We may also put aside the question of imperfect knowledge of the relevant probabilities inasmuch as Broome’s alleged paradoxes arise even if each person has accurate knowledge of them. As he says, a risk of one in ten million of being killed would be judged as virtually riskless and ignored ~ notwithstanding which, in a population of 50 million, the expected number of deaths from this risk could be five. And. clearly, five deaths ought not to be dismissed as a costless item. Finally, let us ignore his dithering (bottom of page 93 and top of page 94) about whether further research could reveal the actual names of those who are destined to die if the project is undertaken. This is unlikely (even were it possible, the allocation economist would continue to accept people’s valuations at the time the decision has to be made) and, in any case, Broome’s arguments do not really turn on this point. Having got these brambles out of the way, the pith of Broome’s message can be seen to lie in his remark on page 94; that ‘to know a probability’ (about the incidence of death but rzol to know which particular people are doomed) ‘is a certain sort of ignorance’. Yes, to be sure it is; in a manner of of speaking, it is also ‘a certain sort of speaking. And, in a manner knowledge’. one that is the basis for successful insurance.’
4. 1 cannot, however, go along with the conclusions that Broome draws from this reflection. First. a minor point. His assertion that ‘we are asked by Mishan to accept the dictum that each person knows his own interest best’ (which amounts to saying that he knows it ‘better than’ others) is not true. I do not ask this of any one, if only because I do not believe it myself. What I maintain is that.
‘In this connection I am uncertain whether Broome would ad\lsc Lloyds of London not to insure an open air exhibition against rainy weather for less than the actual damage that will occur should it actually rain on the appointed day. Such advice, however. would bc consistent with the argument of his paper.
E.J. Mishan,
The ualue of trying fo due
life
135
of fact, the standard economic prescriptive method rests inter of this dictum.2 Secondly, to conclude as Broome does (concerning the people who, in the event, will perish) that ‘their interest is to refuse every offer of compensation, but they do not know this’, is surely an arguable point. These unfortunate people ‘do not know this’. Broome, of course, does know this. And if he were so good as to share his knowledge with them, what does he imagine the result would be? Even in an ethical capacity, I would hesitate to go along with him. But that does not really signify, since the task I set myself in my paper” lacked fundamentalist fervour. Indeed, its subtitle, ‘A theoretic approach’ was intended to serve notice on the reader that I was addressing myself only to the issue of consistency in respect of the concepts on which economic calculation is based. The paragraph of mine quoted by Broome which, in his innocence, he finds ‘remarkable in many ways’ is no more than a standard interpretation of one of the essential maxims, or procedural rules, that inform the economist’s evaluative techniques. I do not necessarily subscribe to any of them. as a judgment
aliu on the acceptance
5. Broome’s quarrel is not with me. It might be with my interpretation of the foundations of allocative economics as practised today. If it is not, and he accepts the dictum I enunciated as being a part of these foundations, his quarrel has to be with the reactions of ordinary men. If John Doe chooses to ignore a one in ten-million risk of being fatally injured by falling from a step ladder he is purchasing, I can imagine Broome assailing him with evangelic ardour thus: ‘My dear sir, you have no right to ignore this one-in-ten-million risk. Do you not consider that if every person in our nation of 50 million people acted as you do five people are likely to be killed within the year? And are not these five lives beyond all material treasure.’ I can also imagine John Doe’s response to this appeal: ‘Look here mate, if I want to buy this perishin’ ladder, that’s my business, see!’ Perhaps John Doe has a point after all. For when one comes to think of it, there can be very few items in the shops that carry a risk of death to the buyer himself, or someone else, of less than one in ten million. One has only to reflect a minute on the wide range of pesticides, cleaning agents, food ‘The inter alia is not just garnishing. At the beginning of his note (page 91) Broome tells us he thinks ‘that by now most people recognize the invalidity of the compensation test except when compensation is actually paid .‘_Frankly, I have no way of checking his surmise. If it is true, then ‘most people’ ought to recognize also, as a matter of verifiable fact, that cost-benetit analysis, mathematical programming, and other allocative techniques. operate on the basis of hypothrticul, and nor actual compensation. ‘Chapters 22 and 23 of my first edition of Cost-Benefit Andysis, which is the reference given by Broome, was in fact based on an earlier paper, ‘Evaluation of life and limb: A theoretic approach’, Journal of Political Economy, 197 I.
additives, synthetics, drugs, weed-killers, fuels, sprays, electric gadgetry, to conclude that the risks of death items must be well above one in a million.
dyes, sharp tools, and from any one of such
6. Assuming that Broome is not going to advocate closing the shops, what would he want done about it? He does not wish to go along with the economist’s principle of accepting people’s own (ex ante) valuations of goods and bads at the time the decision has to be made ~ perhaps not even if he recognizes that an economic calculation of a project is only a contribution to the political decision-making process and, in fact, is seldom decisive. But then, he might not want to abide by a purely political decision either (one made in ignorance of any economic calculation). For a purely political decision to spend, say, a million dollars on a highway only for the purpose of saving 20 lives a year entails an implicit value of life of $50,000, a sum that hardly reflects the worth of a human life. Whenever the government has to decide as between subsidizing a new steel mill, subsidizing housing, or extending hospital facilities, its decision can entail the savings of more or fewer lives, and an implicit value of life emerges. And we can be pretty sure that, where all decisions having some bearing on mortality are reached through a purely political procedure, the implicit valuation of life will not only be finite but will vary widely over time. 7. In sum, objections to my proposal can be understood either as (a) an attack on my interpretation of the standard procedure in economic evaluation; or, if one broadly agrees with that interpretation, as (b) an attack on the standard procedure itself; or, if one accepts, in the main, the standard procedure of economic evaluations, as (c) an attack on my proposed extension of this procedure; or, finally, as (d) an attack on my proposal arising not from a belief that it is inconsistent with the standard procedure but that, in some sense, it is illegitimate to extend to life and limb the standard procedure that is appropriate for other goods and bads. While I realize that these are not mutually exclusive alternatives, the fact that Broome did not explicitly take issue with the standard principles of economic evaluation, nor ~ apart from ostentatiously raising an eyebrow ~ with my interpretation of them, along with the fact that he nowhere elects to argue that my proposed extension is not consistent with these principles, impel me to conclude that his objections to my proposal fall into the last category, (d). This conclusion, along with a reappraisal of the nature of his arguments, leaves me with the impression that Broome is seeking a value for life that not only has universal ethical appeal but is invariant to time, knowledge, and material circumstances; a value unsullied by distinctions between ex unte and e.x post, and impervious in particular to the ‘paradoxical’ responses of men
E.J. Mishan, The oalue of trying
to value life
137
according as death is a certainty or a risk. He is a knight errant in search of a holy grail. I wish him luck in his wanderings ~ better luck, at any rate, than he had with his 1978 essay. The economist must, perforce, settle for less. Once he accepts that the distinctive characteristic of economic evaluation is recourse to the individual’s own valuations of the change in question, he has no choice but to go along with their responses, ‘paradoxical’, perverse, or otherwise.
Reference Broome,
H., 1978, Trying
to value a life, Journal
of Public
Economics
8, 91LlOO.