If you accept the conventional estimates for what a life in the United States is worth, statistically, you come up with a number around $7 million. This of course is not to say that any particular life is “worth” $7 million. After all, if I asked you how much money you would accept to allow me to take your life, the number, if it existed, would be far higher. But what this IS to say is that if you look at the monetary tradeoffs people tend to make to avoid particular risks, and the kinds of risks that they willingly accept, for a price, then putting all of these “averting” behaviors together suggests that we “value” life at $7 million.
A simple example may illustrate. Suppose that the annual risk of dying from a hurricane if you live in the Midwest is zero percent. Suppose that you examine the history of hurricane mortality in the US and find that on average 47 people die per year in the US from hurricanes. Let’s assume that only Floridians die in hurricanes. With a population of about 20 million people, this means that there is a 47/20 million chance each year you would die in a hurricane. If these are the only risks we face (and we can proxy this with fancy econometrics) and we control for all other factors that relate to locational choices between Florida and the midwest, our estimates of the VSL suggest that to be enticed to live with this kind of a hurricane risk, each year you would have to be paid about $16 more PER YEAR than you would otherwise require.
I think there are two pretty incredible observations to be had here.
More to say. I’ll give kudos to any climate-changer for actually reporting what we know about risks to human life and health from the various models, with error bands. We’ll hopefully dig through that once the holiday grading season has passed.
At this juncture, the global warmer sciencey guy would say that the lives would save would be incalculable, and arguing in the alternative, would say that “bands of error” do not apply when buying an insurance policy for the hazards of AGW to protect your children, and then would further accuse his critics of unpopular methodology.
When was the last time pointy head insurance schemes came up around the coffee machine in your neighborhood, ye readers of TUW?
I, too, have trouble with these big dollar numbers. Our political hack Secretary of the Treasury Jack Lew lets trillions of dollars flow from his tongue as if they were pennies in a jar on his dresser, and seldom does one hear anyone in the news get excited by $85 billion a month as anything more than quantitative easing, as if it were equivalent to one’s cat shifting her position on the couch, or something one does between classes in the faculty rest room.