How Much Are We Willing to Spend to Save a Life?

How Much Are We Willing to Spend to Save a Life?
Dangerous Crossing by woodleywonderworks via Flickr

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From my experience as Director of Economic Analysis for the U.S. Environmental Protection Agency, I have some knowledge of how much U.S. government agencies are willing to spend to save lives. Our analyses allowed us to compute the cost per life saved or per illness averted. I’m used to seeing costs per life saved in the hundreds of thousands of dollars or even in millions. That’s a stark contrast to the several thousands of dollars to save a life and $50 or less to prevent or cure a debilitating handicap via the charities spotlighted by The Life You Can Save. 

There are several ways to measure how society values saving a life. The amount can be deduced from public behavior or determined by the amount that the government is willing to spend to save a life through regulation or other government actions. These may help put in perspective the cost per life saved for the charities that The Life You Can Save recommends to prospective donors. 

The Value of a Statistical Life

Economists take a statistical approach to give perspective on whether government actions that save lives are justified. The values they derive may be used by government agencies in performing cost-benefit analysis on actions under consideration. 

Kip Viscusi, Professor of Law and Economics at Vanderbilt University, is considered the leading expert in this field. His 2003 paper with Joseph Aldy of the Harvard Kennedy School entitled "The Value of a Statistical Life: A Critical Review of Market Estimates Throughout the World" was published by the National Bureau of Economic Research. They reviewed a host of studies that impute the value of a life saved from the behavior of individuals. For example, by looking at to what extent people are willing to undertake dangerous occupations for higher pay or to what extent people are willing to pay more for safer cars or safety devices in the home or for homes further from hazardous waste sites, one can deduce how much value people place on the risk of losing their lives. It's called the value of a statistical life because no one will make such a decision with the certainty that a specific choice will save one's life. Rather, the expenses are undertaken or the job accepted with the degree of risk in mind. 

Viscusi and Aldy reported that the value of a statistical life in the US was generally estimated to be in the range of $4MM to $9MM with a median value of about $7MM (in 2003 US dollars, which was about $7.8 million in 2011 dollars). Foreign estimates tend to be of the same order of magnitude but a bit lower than the US values. The value also varies with income, with wealthier people spending more to reduce risk and poorer people, by necessity, spending less to avert hazardous living or working conditions. The $7MM figure, updated for inflation, and other figures of the same order of magnitude, have been used in cost-benefit analyses of US regulatory actions as well as those of other industrial nations. 

According to the New York Times, in 2010 the US EPA used $9.1 million for the value of a life in justifying its regulations, the Food and Drug Administration used $7.9 million, and the Transportation Department used about $6 million. In 2004, the US Office of Management and Budget (OMB) told agencies to use figures between $1 million and $10 million, though more recent guidance has suggested that numbers under $5 million would be hard to justify (B. Appelbaum, “As U.S. Agencies Put More Value on a Life, Businesses Fret,” New York Times, Feb. 16, 2011). 

The Implicit Value of a Life Saved

Another perspective can be gleaned by looking at what governments are actually willing to spend to reduce loss of life. Even if you don't believe for ethical or analytical reasons in placing a dollar value on a human life, it may give perspective to examine the cost per life saved implicit in regulatory or other government decisions. Overseers and analysts of U.S. government regulation have been doing such analyses for over 25 years. 

John Morrall, formerly an executive at the US OMB and more recently at George Mason University, has done a compilation of the cost per life saved implicit in a host of U.S. regulations, most recently updated in 2003 (“Saving Lives: A Review of the Record," published in the Journal of Risk and Uncertainty). He lists 76 US regulations with an extraordinarily wide range of implicit costs per life saved. The implicit cost per life saved ranges from $100,000 per life saved [e.g., the Consumer Product Safety Commission's (CPSC's) regulation on childproof lighters and the Occupational Safety and Health Administration's (OSHA's) rules on respiratory protection, electrical safety, and logging operations] to over a billion dollars per life saved [e.g., EPA land disposal and safe drinking water regulations and OSHA's formaldehyde exposure rules]. 

Here are some illustrative examples:

  • Federal Aviation Administration rules on airplane cabin fire protection = $300K
  • National Highway Transportation and Safety Administration rules on passive restraints and seat belts = $500K
  • CPSC's rules on children's sleepwear flammability = $2.2MM
  • EPA's rules on fugitive benzene emissions = $3.7MM
  • The Mining Safety and Health Administration's rules on electrical equipment in coal mines = $13MM
  • OSHA's rules on worker safety and coke ovens = $51MM
  • EPA's ban on certain uses of asbestos = $78MM
  • Food and Drug Administration rules on DES in cattle feed = $170MM 
  • EPA's rules on dioxin in hazardous waste = $560MM 

To be clear, though the smallest cost per life saved is about $100K, there are a number of Federal rules that have a zero or negative cost per life saved because they lead to savings by the regulated entities that are greater than the costs (e.g., a company might save energy costs that outweigh the cost of compliance with pollution rules, even ignoring the lives saved).

Contrast with Recommended Charities' Performance

Though the estimates shown are certainly imprecise, their magnitudes are in the hundreds of thousands and millions of dollars per life saved. Comparable figures for injuries or disabilities cured or averted are in the many thousands of dollars as well. 

Compare those with:  

Given what individuals and the U.S. government spend to save lives, avert injuries, and cure illnesses or disabilities, the Life You Can Save-supported charities can accomplish vastly more per dollar. Economists strive to keep emotion out of their work, but I’ve got to say – that’s quite a bargain! 

Roy Gamse
Roy Gamse
Roy Gamse has founded or played a senior role in nonprofits over the last twenty years, including Earth Force, Youth Venture, and Imagine Schools. He has also been a senior executive at MCI and the U.S. Environmental Protection Agency. He has degrees from MIT and Harvard Business School.
The views expressed in blog posts are those of the author, and not necessarily those of Peter Singer or The Life You Can Save.

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