How much is your life worth?

According to the Environmental Protection Agency, the answer is $10 million.  Other agencies place use a somewhat lower number.  The Food and Drug administration pegs the value at $9.5 million and the Department of Agriculture places the value at $8.9 million.

Technically, what these agencies are calculating are the value of a statistical life (VSL).  Although measuring the value of a life is an interesting academic exercise, it has real world implications.  Notably, VSL is used in federal agencies cost benefit analyses.

For instance, consider a new regulation to reduce pollution that saves 10 lives but costs $50 million.  Should society undertake this intervention?  If VSL is $10 million, then the answer is ‘yes.’   Each of the 10 lives is worth $10 million so the regulation leads to $100 million in benefits but only costs $50 million.

On the other hand, consider a more drastic intervention for reducing population: making privately owned cars illegal.  In this case, let us say the intervention saved 10 lives still but the cost now is $1 billion is lost economic activity.  In this second example, the costs outweigh the benefits and so based pursed on aggregated costs and benefits, we would not implement this intervention.

For the politically minded, those who prefer more regulation would prefer a higher VSL and those who prefer less regulaion would opt for a lower VSL.

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