Cost-Benefit, Not in Dollars, But in Lives

Posted by Don Fullerton on Dec 31, 2010

Filed Under (Health Care, Other Topics, U.S. Fiscal Policy)

Many non-economists complain that economists care only about money.   Not true.  I care a lot about money, but that’s not ALL I care about!  For a case in point, consider the proposal of the National Highway Traffic Safety Administration (NHTSA) that would require rearview back-up cameras by 2014 on all new cars, pickups and SUVs.  An article here says “The rule was demanded by legislation passed in 2007, called Cameron Gulbransen Kids Transportation Safety Act. The act was named after a 2-year-old boy who was killed, when his father accidentally backed over him in the family’s driveway.”   Yikes!

No warm-blooded human being could possibly oppose such a rule!  The article says that rule would save about 100 lives per year!  Don’t even LOOK at the cost, right?  It would certainly seem hard-hearted to oppose such a rule, no matter the cost, when human life is at stake.  We don’t want to trade off lives against dollars.   You might not even care to know that “the addition of rear-view camera equipment would cost between $159 to $203 per car” so that the “total approximate cost to equip their estimate of 16.6 million vehicles sold in 2014, would be between $1.9 billion and $2.7 billion.”

On the other hand, we can’t go passing legislation with no consideration for cost whatever.   Plenty of traffic fatalities could be avoided by spending more on guardrails, or by widening dangerous roadways, or adding traffic lights, or spending more on patrol cars to catch speeders and drunken drivers.  Why aren’t we spending THAT money?

The fact is we DO make such tradeoffs, when we DON’T spend all that money on all those life saving measures.  YOU make those choices, when you vote, or when you fail to write your Member of Congress.  It’s not just economists.

The stumbling block seems to be not the tradeoff of lives for money, which we all do through our legislators.  Rather, perhaps, the stumbling block is just the effort of economists to make that tradeoff explicit.   Personally, I do think we ought to be explicit in how we analyze and vote for such policy measures.  But that explicit tradeoff does not need to be in dollars at all!

Instead, consider the tradeoff JUST in lives lost.  Compare policies directly to each other (as in the paper by Kip Viscusi in the Journal of Economic Perspectives in the Summer of 1996).    For the $2 billion per year, we could save 100 lives, which is $20 million per life.  Is that worthwhile?  Write your legislator!  It is not up to economists to make that trade.  

But here is a thought to consider before you vote or write your Legislator.  Transportation specialists can list a lot of possible proposals to save lives, some of which are not that expensive.  The real tradeoff is not whether to spend $2 billion to save 100 lives, but rather, where to spend our $2 billion – on this proposal to save 100 lives, or on some other proposal that would save 200 lives!

Let’s at least look at all those traffic safety measures.  Guardrails in the right locations might be cheap per life saved.  Improving certain intersections might be cheap per life saved.  Let’s look at everything!  Viscusi mentions other kinds of safety expenditures as well, like emergency floor lighting, unvented space heaters, industrial benzene emissions, and seat cushion flammability.

Resources are inherently limited.  We can’t spend infinite amounts.  Even YOU might not agree to spend $2 billion on back-up cameras to save 100 lives, if that meant not spending $2 billion on something else that would save 200 or more lives per year.