1. How government accountants value life:
Last week, the New York Times reported: “Buried deep in the federal government’s voluminous new tobacco regulations is a little-known cost-benefit calculation that public health experts see as potentially poisonous: the happiness quotient. It assumes that the benefits from reducing smoking -- fewer early deaths and diseases of the lungs and heart -- have to be discounted by 70 percent to offset the loss in pleasure that smokers suffer when they give up their habit.”
I hope editors at the New Yorker or Sixty Minutes noticed.
Did you know that a federal agency -- the Office of Management and Budget, which did the cost-benefit analysis described by the Times -- actually employs people who calculate how many lives will be saved by government regulations; then calculates the dollar value of the lives saved, and then weighs that value against the “cost” of the regulation? Apparently in this case, part of the cost to be calculated was the cost of the lost pleasure from quitting smoking.
According to this report to Congress, OMB must make a cost-benefit analysis for every rule where the projected cost of compliance is more than $100 million. The agency with the most rules falling into that category has been the Environmental Protection Agency, and OMB has consistently found that the value of the lives saved exceeds the cost of compliance.
But what’s the “value” of a life saved?
Here’s what a footnote from that OMB report says:
What is sometimes called the “value of a statistical life” (VSL) is best understood not as the “valuation of life,” but as the valuation of statistical mortality risks. For example, the average person in a population of 50,000 may value a reduction in mortality risk of 1/50,000 at $150. The value of reducing the risk of 1 statistical (as opposed to known or identified) fatality in this population would be $7.5 million, representing the aggregation of the willingness to pay values held by everyone in the population. Building on an extensive and growing literature, OMB Circular A-4 provides background and discussion of the theory and practice of calculating VSL. It concludes that a substantial majority of the studies of VSL indicate a value that varies "from roughly $1 million to $10 million per statistical life."
Don’t you want to have Malcolm Gladwell or some other talented observer take you inside and meet the people who presume to make all these calculations?