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.
- If the entire world grew as prosperous as the U.S. and if the VSL rose in all places to what it were in the US, what would the value of global life be? Well, 7 billion people each with lives “worth” $7 million seems to me to add up to $49 quadrillion worth of life. I always find numbers like this staggering, especially considering people are out there wishing less of us were around, and wishing that we’d not get as rich as the U.S.
- What might this imply about global warming, its costs, and what we should do about it? Well, for the United States, we have 320 million people. Global warming would, with certainty, cause 47*16 = 752 additional deaths each year in the US (assuming hurricane risk is the only one). Therefore this imposes a collective cost on life of $5.3 billion. If the entire world faces the same risk increase as the US (it would be higher, think about why) then the entire global cost would be 16,450 additional deaths per year. At $7 million per life (again an overestimate), this implies an annual global cost of $115 billion. Of course, the risk of hurricanes killing people abroad are greater than here, so on that measure the damages would be larger. On the other hand, the VSL is far smaller across the world than here, so on that measure the damages would be smaller. In either case, the assumption here is that we will go from ZERO risk of death to the highest risk of death within the US. Do we think that this is how much real additional risk global citizens will face? And do we think that economic growth would not continue to decrease the risks of death from hurricanes independent of adaptation efforts? The comparison of US risk versus that of poorer countries should help you make those estimates.
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.