Government regulators put a price on human life

The thought of putting a fixed value on life is unpleasant, but it is necessary for regulators to determine how resources should be spent on health and safety improvements, says economist Ike Brannon.

Furthermore:

Society cannot spend an infinite amount of money to protect and extend each person's life.

With a fixed amount of resources, government needs to approximate how much each life is worth – called the value of a statistical life (VSL) – in order to obtain the greatest benefit for each dollar spent in trying to save one.

Economists and other researchers in the U.S. have used a variety of methods to determine the value of a statistical life. Some of the most widely accepted studies have found that VSL ranges from about $2 million to $3 million. Government regulators have adopted similar figures:

The Department of Transportation uses a figure of $3 million.

The Environmental Protection Agency (EPA) currently uses a mean VSL of $6.3 million for its cost-benefit analysis; in reality, every regulation issued by the agency that spent less than $8 million to save a life has been approved.

While having different agencies use different valuations may seem illogical, people place different values on avoiding different types of risk – for instance, people fear dying in a plane wreck much more than they fear dying in a car accident.

Source: Ike Brannon, What Is a Life Worth? Regulation, Vol.27 No. 4, Winter 2005, Cato Institute.

For text: http://www.cato.org/pubs/regulation/regv27n4/v27n4-8.pdf

For more on Regulatory Issues: Consumer Safety: http://www.ncpa.org/iss/reg/

FMF Policy Bulletin/ 22 March 2005