What’s Life Worth? The Dollar Cost of 200,000 Dead Americans
Life is precious, but not priceless, economists say. So what’s the value of each life lost to Covid-19?
The economic costs of the Covid-19 pandemic in the United States are staggering. Tens of millions of lost jobs, billions of dollars in lost business revenue and state tax revenue, trillions spent on stimulus and relief programs. And in a few short days, 200,000 deaths.
But you can’t put a price tag on human life, right? Life is, well, priceless.
Actually, the government has for several decades put price tags on our lives. The Value of a Statistical Life (VSL) was set at $9.6 million in 2016 by the U.S. Department of Transportation, for example.
Yes, it’s a crude, some might say offensive way to think about a life, but it’s a fact of governing that helps inform how judges and juries award damages, how businesses are regulated, and how your tax dollars are spent on things like public health and safety. In short, the federal government routinely uses the dollar value of human life to make decisions about rules and regulations that have life-and-death consequences and also financial impacts on businesses and consumers.
Economists take myriad approaches to valuing human life, all fraught with limitations. Much of how VSL is derived was pioneered by economist Thomas Schelling in a 1968 essay that considered not the value of life but the risk of losing it. It involves, among other things, surveying people on how much they’d need to be paid to accept a higher chance of dying of cancer or to work a riskier job. Alternately, wage data can be used to determine the premium placed on dangerous jobs. Calculations then aim to look at risk from a societal perspective, considering the average value of any and all lives, rather than valuing any one group over another, such as rich over poor or young over old.
“All lives are precious, but they are not priceless,” writes Howard Steven Friedman, a statistician and health economist at Columbia University and author of the book Ultimate Price: The Value We Place on Life, published earlier this year. “Rather, they are priced all the time. Often the price tags are unfair. We need to ensure that when lives are priced, that they are priced fairly so that human rights and human lives are always protected.”
VSL informs decisions on everything from investing in safer roads to requiring seat belts in cars and warning labels on consumer products.
In the 1970s, the Department of Transportation rejected a proposed regulation that would have put bars under the rear of big trucks to prevent cars from sliding under them in a crash. The reasoning? The cost would have been more than the value of lives saved, writes Austin Frakt, PhD, a health economist and associate professor at Boston University. By 1998, the department had raised its VSL to a higher number, and the regulation was approved.
The Department of Transportation’s $9.6 million valuation was last updated in 2016. Economist Alan Krupnick, a Senior Fellow at Resources for the Future, rounds it out to $10 million, as does Vanderbilt Law School economist W. Kip Viscusi in his 2018 book, Pricing Lives: Guideposts for a Safer Society.
So some simple math: 200,000 deaths times $10 million in VSL equals $2 trillion.
Of course the pandemic isn’t over. Epidemiologists say that if we don’t get a successful vaccine, and if other prevention efforts are insufficient to stop Covid-19 from spreading like it is now, expect at least a million U.S. deaths. The VSL on that: $10 trillion.
With hundreds of Americans dying from Covid-19 every day, should a VSL be used in making decisions about the pandemic response? Probably not until the deaths are reduced significantly, Krupnick said earlier this year in an interview. VSL could be used to do, for example, a cost-benefit analysis of social distancing’s effect on deaths and on the economy. But with such high infection and death rates, there’s no sensible trade-off to consider, because “the economy just cannot get started again.”
Krupnick acknowledges that decisions based on VSL are “fraught with ethical and moral dilemmas.” It also can be hard to calculate for something new like the coronavirus. The extent to which people dread a particular type of death can drive VSL higher. It might be $20 million for Covid-19, he speculates.
Meanwhile, based on effective pandemic responses and lower per-capita death totals in several other countries, experts say at least 70% of the U.S. deaths could have been avoided had the federal government invested in a coherent mitigation effort from the get-go. Instead, President Donald Trump, admitting in early February that he knew the coronavirus was “more deadly” than the flu, told journalist and author Bob Woodward in March, “I wanted to always play it down. I still like playing it down, because I don’t want to create a panic.”
The cost of playing it down? Incalculable. Each of the 200,000 lives lost and those we will lose in the future are, indeed, precious, if not priceless.