Lives Vs. The Economy : Planet Money (2024)

UNIDENTIFIED PERSON: This is PLANET MONEY from NPR.

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SARAH GONZALEZ, HOST:

A lot of people - politicians, mainly - have been arguing about something. Is it worth it to shut down the economy to save lives or should we let people die to save the economy?

KENNY MALONE, HOST:

And baked into this argument is a question. OK, then how much exactly is a life worth in dollars? It is a sticky question, and it happens to be very familiar to economists.

BETSEY STEVENSON: So the people who say, how could you put a value on life, I say, how could you not? How could you pretend people are valueless?

GONZALEZ: This is economist Betsey Stevenson. She's at the University of Michigan.

STEVENSON: And what would it even mean to think about people as having infinite value? We'd spend all our resources on saving one person? People wouldn't make that decision.

MALONE: Looking at how much it's worth to save a life used to be part of Betsey's job when she worked in the federal government in the Obama administration.

GONZALEZ: Federal agencies place a dollar value on life, and this value is used to determine which safety regulations are worth the cost, like whether we should require seatbelts to beep at you and whether we should require dangerous chemicals to be labeled dangerous chemicals.

MALONE: And now it seems that people - politicians, mainly - are asking for the same kind of is-it-worth-it analysis for the coronavirus. And Betsey, watching this unfold over the last few weeks, she was like, OK, you want to run the numbers? I can run the numbers. Is it worth it to shut the economy down?

STEVENSON: As an economist, I don't say it's worth it at any cost. That's not true. I mean, we could die of something else - starvation. So it's not at any cost, but here, it's worth giving up a lot. It's worth shutting the economy down for three, four months because there are so many lives being lost.

GONZALEZ: Betsey is one of a bunch of economists we've seen run the numbers and come up with the same answer. Yes, it is worth it, at least if you're the kind of economist who believes epidemiologists and their projections.

STEVENSON: I think it does make it easier if you take a look at the math and you realize that we're talking about people's lives that are worth trillions and trillions of dollars.

MALONE: Trillions and trillions of dollars' worth of people - which brings us back to that sticky question at the core here. How do economists put a dollar value on a single human life?

GONZALEZ: We can tell you they've got one. They say a life is worth about $10 million. But to explain how they got that number, that's a whole episode. Hello, and welcome to PLANET MONEY. I'm Sarah Gonzalez.

MALONE: And I'm Kenny Malone. Over the next few months, we will hear a lot of discussion about when it is worth it to risk people's lives and reopen the economy. And in order to make sense of all of that, you're going to need to understand the government's history with these kinds of lives versus money decisions. It goes back decades.

GONZALEZ: Today on the show, the story of how and when our government slapped a dollar value on our lives and why, arguably, we are the ones who slap that value on our own lives.

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MALONE: The story of our government weighing lives versus the economy comes from the world of safety regulations.

GONZALEZ: There's a rule that any federal safety regulation that's going to cost more than a hundred million dollars a year has to pass a cost-benefit test. So, for example, seatbelts that beep at you - how much would it cost to install beeping seatbelts, and how many lives, in dollars, would be saved by it?

MALONE: And generally, if the costs - money - exceed the benefits - lives saved - that new regulation gets rejected.

GONZALEZ: So the government has to run this math, and to do that, they need to say a lost life is worth some amount of money. And up until the '80s, here's how they did that. They asked, what is the cost of death? Just an average person's death, both the medical costs associated with that death and - and this is the important part - their lost earnings.

MALONE: Yeah. This is a version of how courts sometimes handle wrongful death lawsuits. When somebody dies early, there are all of these years of life when that person would have been working and earning money but isn't. And so the court will sometimes give a family all of that lost future income.

GONZALEZ: This calculation was called the cost of death. And in 1982, the average cost of death came out to around $300,000. So that would be, like, $800,000 today.

MALONE: But $300,000, that was the number back in 1982 that the government would use to evaluate a new regulation, to figure out if the lives saved were worth the regulation cost. Or at least, that was the number until W. Kip Viscusi entered the picture.

W KIP VISCUSI: I've gotten a lot of criticism, and I still do. So basically, they thought I was the demon from hell or something.

GONZALEZ: Kip is an economist at Vanderbilt University, and he specializes in the economics of risk and uncertainty.

VISCUSI: That's all I've been - almost all I've been doing for my entire career.

GONZALEZ: So are you getting a lot of calls right now?

VISCUSI: I get a call, at least one a day.

MALONE: So, back in 1982, the Occupational Safety and Health Administration - this is the federal agency known as OSHA - it was proposing this rule that businesses should have to label hazardous chemicals. That workers have a right to know when they're working with dangerous substances.

VISCUSI: Asbestos would be one of them. The major dangerous chemicals like sulfuric acid, hydrochloric acid.

GONZALEZ: There was no law that said this bucket that can burn your skin needs to be labeled?

VISCUSI: These regulations did not exist. Also, they didn't exist for flammability. So nothing that required companies to warn workers, well, if you smoke a cigarette near this, you may blow up.

GONZALEZ: In 1982? That's so recent.

VISCUSI: Well, this is sort of stunning, actually, that we didn't have regulations like this.

MALONE: And, this regulation proposed by OSHA - it would have saved thousands of lives. The estimate was 4,750 lives total. And to save those lives, all you had to do was basically label things.

GONZALEZ: Essentially, the costs associated with this policy are ink, paper, and that's basically it.

VISCUSI: That's a lot of the cost. And the costs don't look that large, but they do add up.

GONZALEZ: So, the government runs the numbers. Does labeling cost more or less than the cost of all the deaths, if one death is equal to U.S. $300,000? If it's less, then it's worth it. Label the chemicals. If it's more, then it's not worth. It. Don't label the chemicals.

MALONE: First question - what is the value in money of all of those lives saved?

GONZALEZ: So, let me see - 4,750 times 300,000 would be - oh, my gosh, I don't even know what that figure is. My calculator says 1.425E9.

VISCUSI: OK. That's a lot of numbers. That's a billion.

GONZALEZ: A billion and a half, 1.4?

VISCUSI: One point four billion.

MALONE: But, printing the labels and all of the expenses associated with that was going to cost $2.6 billion.

GONZALEZ: So, they say, it costs $2 billion to print the labels, and we're only saving $1.4 billion worth of lives. It's not worth it.

VISCUSI: Right.

GONZALEZ: Let those people die.

VISCUSI: That's what they do. I mean, that's essentially - you know, they don't identify the people who will die, but that's the consequences of doing this.

GONZALEZ: The regulation didn't pass the math test - 4,750 lives? Not worth printing the labels.

MALONE: And this is where the story takes a turn. OSHA, the government agency proposing this regulation - they were like, how is this kind of regulation not worth it? And so they appealed - like, they appealed the math.

VISCUSI: And you had to appeal to the vice president. And the vice president then was Vice President Bush.

MALONE: As in George H.W. Bush.

VISCUSI: And he looked at the issues, and he said, gee, this is a technical dispute. Let's get somebody in here to settle it.

GONZALEZ: And who did they call?

VISCUSI: They called me.

GONZALEZ: Yeah, they called Kip. W. Kip Viscusi steps in and is like, I'll tell you what's wrong - this cost of death you're using, this $300,000 figure.

MALONE: Kip says, think about what you are implying by using this number - that a person is only worth what they make at work? Like, that is clearly going to be a low number, too low of a number.

VISCUSI: You know, it makes no sense in that, you know, if you look at people who don't have income coming in, are their lives worth nothing? So, you know, should we do nothing to protect them?

GONZALEZ: Kip is like, life is worth so much more than death. Life is worth life.

MALONE: Kip was like, you need to forget this lost earnings after death nonsense, and start trying to put a price tag on a whole life.

GONZALEZ: Kip and other economists had been working on this. And it's tricky because, like, what are you going to do, just ask people, how much is your life worth? They're just going to say, my life is priceless. It's worth an infinite amount of money.

MALONE: So Kip and others had been thinking, well, what if we look at places where people are revealing what they actually think a life is worth? Like, how much money are people willing to spend on things that keep them safe and alive? Like, how much more are people willing to pay for a safer car, or to not live near a toxic waste site?

VISCUSI: Like, do you buy bike helmets, for example? People have looked at that. They've looked at everything.

MALONE: Everything, including the jobs that people choose. And this - the jobs - were the key for Kip.

GONZALEZ: Kip says, people are putting a dollar value on their own lives all the time based on the jobs that they do. How risky they are, and how much money they're willing to accept, in wages, for those risky jobs. Risky meaning jobs where there's a risk of death, like construction workers or foreign correspondents.

MALONE: And this model isn't perfect. Some of the critiques are that, you know, it's not like people always want to take a riskier job. Sometimes they don't have a lot of options. And when people do take a riskier job, it assumes that they're aware of the risk at work, which - are we, really? But, Kip says we do tend to at least kind of be aware that some jobs are riskier than others, and that's enough for this calculation. So, he starts collecting data on all of these different kinds of workers.

VISCUSI: And the key is, you want some workers in risky jobs, some workers in less-risky jobs.

GONZALEZ: Kip is taking an average of the entire labor market. So he gets a sample of, like, 10,000 construction workers, 10,000 nurses, 10,000 coal miners, 10,000 lawyers - something like that. And he looks at what the likelihood is that they will die on the job, and how much extra money they require for that risk of death.

MALONE: So, like, construction workers don't get paid great, but they probably get more than, say, the ticket-taker at a movie theater. And some part of that extra money is to pay for that added risk. So Kip is able to isolate that portion of somebody's salary that you have to pay them just because the job is risky.

VISCUSI: So rather than relying on what some government official arbitrarily thought lives were worth, why don't we look at how much workers themselves think their lives are worth in terms of the small probabilities of death that they face on the job?

GONZALEZ: And here's what he finds. Back then - in 1982 - there was a 1 in 10,000 chance of dying at work, on the job. And to convince workers to accept that risk, companies had to pay them an extra $300 to $400 a year - each of them.

MALONE: And if you think about this - if I require $300 to take a one in 10,000 chance of dying, I have essentially revealed a value that I am putting on my own life, once you run some math.

GONZALEZ: So, you say, 300 times 10,000 people. That is how much we have to pay as a company to get those workers to work for us, knowing that one of them will pass away at work.

VISCUSI: That's right. We don't know for sure, but we think, on average, one will die. And, that's going to give you $3 million.

GONZALEZ: And so, then, therefore, that means that the value of a life is $3 million?

VISCUSI: Right. The value of a statistical life, we'll call it, would be $3 million.

GONZALEZ: It's a statistical life, not a real life?

VISCUSI: Yes. It's a statistical life or an expected death.

MALONE: Kip's calculation gave us a much higher number for the value of a life - $3 million, not the $300,000 the government had been using in their chemical labeling calculation. So Kip swapped in his new number.

VISCUSI: And that transformed the whole analysis.

GONZALEZ: The 4,750 lives saved at $3 million each - not $300,000 each - were worth $14 billion. And it did not cost $14 billion to label chemicals. It cost $2.6 billion. So now it was worth it, like, super-worth it, which is why we have hazardous chemical labels today.

VISCUSI: That's right. If you use an appropriate price tag, it makes many expenditures on health and safety look like a bargain.

MALONE: After this case, government agencies started using Kip's value of a statistical life. And a lot of the regulations today wouldn't have made it through if we were still using that old cost of death method. And this new value - it determines so much.

STEVENSON: So the lower the value of statistical life, then the smaller the benefits and the fewer costs you're willing to spend to increase people's safety.

GONZALEZ: This is economist Betsey Stevenson again. She says, it is not like every safety regulation passes now because of Kip's higher life value. There are still hard decisions that have to be made.

MALONE: Betsey remembers seeing one case that was particularly difficult involving SUVs - whether they should be required to have rear backup cameras.

STEVENSON: The idea was, if you have a rear backup camera, you're less likely to run over somebody who's behind you because you can see better behind you. So, particularly, if there's a toddler playing behind you.

GONZALEZ: This policy would mainly protect small children.

STEVENSON: What initially the cost-benefit analysis showed was that it just - there weren't that many lives saved. And the cost, when the technology was new, was so high that it was hard for the government to justify forcing that regulation on people.

GONZALEZ: It just - the math didn't work out.

STEVENSON: Exactly.

GONZALEZ: No backup cameras. And people just couldn't accept that answer, so a lot of people kept trying to pass this regulation.

STEVENSON: There were some really emotionally-difficult stories of people who had run over their own children, and they lobbied Congress. And I think the reason they kept going back and trying to solve that problem was because it just highlighted a weakness of the value of statistical life.

MALONE: This is one of the flaws with this method of putting a value on life. It doesn't factor in grief, or how, or when somebody dies.

STEVENSON: It's the people who love you, and who are richer for having you in their lives, and their loss. And we have to think about, you know, when a person, you know, runs over their own child. There is just - there's more than the child's life that ends. The parent's life ends, in some real sense. That's just not true with any other kind of death.

GONZALEZ: Did we factor in the age of the people who were being killed because people were backing into them?

STEVENSON: No.

GONZALEZ: No.

STEVENSON: We do not adjust the value of statistical life for age. That means we don't have a senior discount. That also means we don't have a baby boost or child boost. It's the same number, whether you're 2, or 42, or 82. And I think a lot of people can see the problems with that.

GONZALEZ: Valuing people differently was kind of tried once in 2003. The EPA, under the George W. Bush administration, was considering a new clean air standard. How clean the air should be. And the EPA was like, well, people over age 70 have fewer years to breathe clean air. They should count less. And a lower value on some lives would essentially mean looser clean air standards.

MALONE: The EPA suggested that, perhaps, older people should be worth 37% less money.

STEVENSON: It became known as the senior discount.

GONZALEZ: The senior death discount, actually. People protested. They held up signs that said granny for sale. It did not go over well.

STEVENSON: The backlash was so intense they, very immediately, walked away from that, and you haven't seen any kind of similar proposal since.

MALONE: Every government agency has made the choice to use one value for all of us. A kind of average for old and young, but also, for rich, poor, brown, white - which, you know, that part definitely feels right.

GONZALEZ: So - OK. So built into this, like, kind of hard numbers formula, there was a moral decision made, at some point, that we would not value different lives differently based on age.

STEVENSON: Yeah, I guess you could call it a moral decision. A policy decision. I think the challenge is, who gets to decide how we discount people over time?

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GONZALEZ: This gets us to today, and the coronavirus, and this argument from some people, that you may have heard, that older people, maybe, aren't worth shutting down the economy for. But, it's important to keep in mind that we have already decided, as a country, that this is not how we run the numbers. Older people, younger people - same worth.

MALONE: After the break, how we do run the numbers.

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GONZALEZ: You've done the math on the coronavirus - if we do nothing, versus if we continue to shut down the economy.

VISCUSI: Yes.

MALONE: Kip Viscusi, the man who invented the numbers, has run the numbers on coronavirus. But, before we do that, one important caveat here. The way Kip calculates the value of a life is based on the riskiness of jobs, and the coronavirus is changing which jobs are risky.

VISCUSI: Now, it's the service workers. These are really, comparatively, safe jobs, in terms of fatality risk. But, they're exposed to these inordinate risks of exposure to coronavirus.

GONZALEZ: Grocery store workers, nurses, delivery people, janitors - they all face more risk now. But those changes aren't factored into Kip's calculation. We don't have that information yet.

MALONE: So, to do this math, we start with the current - but pre-coronavirus - value of a life. And, according to the Department of Transportation and the CDC and a bunch of other government agencies, this number is now around $10 million.

GONZALEZ: So now, how many more lives are we saving by shutting down the economy? Trump has said a million lives could be saved. Epidemiologists say it could be as high as 2 million. But, Kip says, let's just go ahead and use the 1 million lives.

VISCUSI: If you multiply the 1 million lives saved, and if the lives are worth $10 million each, the result is $10 trillion.

MALONE: Trillion with a T - $10 trillion worth of lives saved.

VISCUSI: So it's a very large number, which certainly dominates whatever economic costs we're incurring.

GONZALEZ: Ten trillion dollars is half of the U.S. GDP, which means that in order to justify completely opening businesses back up, the economy would need to lose half of its value. And Kip and many, many, many other economists say we're not even close to that, especially because if there wasn't a shutdown, it's not like businesses would be able to run at full capacity anyway because so many people would be sick and scared of going out to the businesses, and a whole bunch of other problems.

MALONE: Basically, what Kip is saying is that even his low-ball, basic calculation results in such a high cost of lives lost that he doesn't even need to do a more elaborate calculation. The basic calculations showed him that shutting down the economy was obviously worth it.

VISCUSI: And, if it wasn't, then you'd want to start looking at all the things you left out. So are you missing all of the costs of disease that are not simply mortality costs that you should be taking into account?

GONZALEZ: Does it feel good that the smart thing to do - the, like, economically responsible thing to do - is also the nice thing to do and the moral thing to do, which is to not just let people die?

VISCUSI: Yes. It would feel even better if we'd done it sooner. But, yes, it feels good.

STEVENSON: I definitely had the moment of, OK, this is the right thing to do. It was also the moment where I realized we may stay shut down for three months, and it'll be justified.

MALONE: Again, economist Betsey Stevenson, who says it's clear that we are doing the right thing right now.

GONZALEZ: But Betsey says there is a tough decision ahead. The U.S. will open the economy back up at some point when it's still not entirely safe. This is one of those kind of gross, but also necessary, decisions.

STEVENSON: You're right that there's just a level of disgust with this. And I think it's going to be hard for the public to wrap their head around the fact that we're going to make choices to open the economy back up, and you're going to continue to see deaths from coronavirus. And it will still be the right choice.

GONZALEZ: And it'll still be the right choice because you can't just close the economy forever?

STEVENSON: We can't close the economy until there's zero deaths.

GONZALEZ: We don't do that now.

STEVENSON: Right. We don't do that now.

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GONZALEZ: You can email us at planetmoney@npr.org. We're on Facebook, Twitter and Instagram. We're @planetmoney.

MALONE: Today's show was produced by Liza Yeager and Autumn Barnes. Alex Goldmark is our supervising producer. Bryant Urstadt edits the show. James Sneed fact-checked this episode.

GONZALEZ: It is really hard to do math on the radio, so we simplify it a lot. If you want to learn more about how you put a value on life, including things like how many injuries equal one death, Kip Viscusi has a book, "Pricing Lives." If you liked this episode, share it with a friend. I'm Sarah Gonzalez.

MALONE: I'm Kenny Malone. This is NPR. Thanks for listening.

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