Safety investment in transport is also an example of attempts to place a value on life. Rather than allowing for chance the rail authorities in the UK countenanced a scheme costing £3 billion to reduce the number of Signals Passed At Danger by trains. It was calculated that this would save two lives per year while reducing the capacity of the trains by 10% due to a national reduction in train speeds. This reduction in capacity would push more passengers into cars where they are at a higher risk of death. Essentially the scheme would indirectly result in an increase in transport fatalities. It therefore appears that there is no value at all to this scheme. Although it would cost £6 billion to revert to a scheme where the capacity was not reduced, this is more efficient in the long term than the cheaper system as it would save lives not cause deaths. Again cost-benefit analysis is being used to evaluate two alternatives. If the systems could be implemented for nothing then obviously the more effective one would be used. However, there is actually a significant cost difference. A government concerned primarily with public reaction would simply choose the cheaper option to appear as though it is reacting to its voters’ alarm. Most people would not realise the statistics involved with the scheme but would be placated by the government’s “token” gesture.
This reveals that in reality decision-making is not always rational. A government will want to appease its constituents at the lowest cost possible. If it were to implement the £6 billion system then taxes might have to be raised and their chances of re-election reduced. Further statistics support this argument. If the government were really concerned about safety then it would want to maximise the lives saved while minimising the cost per life. The chances of an asteroid killing a person are 1/6000 per annum. This implies that in Britain 8333 people die on average each year due to falling debris from space. Compare this to a 1/250000 chance of dying in an aviation accident. Therefore 200 people in Britain on average die each year due to problems with flight. Governments will spend money on regulations, engineers and inspectors to ensure that flight is safe but we hear very little of their plans to reduce the risk of asteroid death. This is perhaps because of perceived risk. People seem to overestimate deaths from lightning or flight while underestimating the chances of dying while walking or driving. Naturally few people concern themselves with asteroid risks. This raises the question of whether economics is really required each time a value is placed on life. The value will probably depend more on human irrationality than rationality. In reality therefore value is irrelevant as it will not be minimised or standardised. In some cases lives are worth millions, in others people are indifferent about the homeless and destitute. In conclusion, what need is there for value if its purpose, to minimise the cost per life saved, is ignored.
- State which of the alternative methods of valuing life you would choose to use in government decision-taking and explain why you think this method is superior to the alternative methods that are available.
There are two principle theories that have been used by governments to value life for decision-making purposes. They are the human capital model and the willingness to pay approach. The human capital model is the value of the fatality’s future output today taking into account future inflation. This is reduced by the fatality’s future medical costs and other resource costs. It might also be supplemented by a “grief allowance” which accounts for the suffering of the fatality’s friends and family. Although this is a simple way of valuing life it does have its merits in an economic sense. Although most people would argue that humans are not simply cogs in the system of production, many do value themselves on how much they earn and what possessions and type of employment they have. People do see wealth as an indicator of value in a person. Industries also use money to value the worth they place on their employees. The arguments against this model are that people should be valued on their safety preferences or the amount they will pay to avoid injury or death. This will place a value on health as an economic good rather than simply measuring GNP per capita as the human capital model does.
The willingness to pay theory is an attempt to use revealed and stated preference to discover what value people place on their own lives. It indicates the trade-off between safety and monetary compensation. It is probably more accurate when employment such as working on oil fields is examined. This displays the wages needed to tempt a labourer to take on extra risk. However in reality wages are based on a variety of factors, including application and ability, not simply danger. The stated preference route might give you contrasting answers as a richer person would pay more for their health while a poorer person might require less compensation for increased risks to their safety. It may also fail because a person will state a value they require when they don’t know for certain that they will die but when death is guaranteed that value will become infinity, as a person’s life to himself or herself is priceless.
A government also has the options of a) choosing not to place a valuation on life, as it is morally repugnant b) relying simply on good sense and judgement. These choices are clearly not responsible enough to be viable but the second may be used when the human capital model or willingness to pay theory have been exhausted.
In conclusion it appears that there is no right or standard way in which life can be valued. From an economic standpoint a valuation is essential in order to allocate resources as efficiently as possible. From a humanitarian perspective there is little reason to try, as every person values his or her own lives above others and no monetary amount could compensate for its loss.
Bibliography
Alan Marin, “Your Money or Your Life?”, 1983
W. Kip Viscusi, The Value of Risks to Life and Health, 1993
