You are Worth your Weight in Gold!

Posted by Don Fullerton on Jun 18, 2010

Filed Under (Environmental Policy, U.S. Fiscal Policy)

It’s an old expression.  But, ARE you worth your weight in gold?  New record-high gold prices on Tuesday – along with Nolan Miller’s column on gold – inspired me to take another look.

On the face of it, valuing an average life sounds like a morbid, if not impossible task.  However, governmental agencies at all levels use a concept called the Value of Statistical Life (VSL) when making many different kinds of safety and regulatory decisions.  At its heart, the VSL tells us how much society should be willing to pay to reduce mortality risks over an affected population.   For example, guardrails make highways safer, yet they only appear on curved sections of road, because the extra cost of installing rails along the rest of the highway does not justify the relatively few fatalities averted.  In other words, we have NOT found it worthwhile to spend what would amount to $20 million to save one more life! 

Different agencies and regulatory bodies use different VSL numbers, calculated using different methodologies.  But a new study by Kniesner, Viscusi, and Ziliak (2010) estimates that what we ARE willing to spend to save an average American life is between $7 million to $8 million (2001 dollars).  THEY are not making a moral judgment, they are just reporting the moral judgments that actually get made.  The estimated value of statistical life (VSL) is $7-8 million.

To be clear, when it comes to a specific life, not a statistical one, we often are willing to pay any price.  For instance, when Baby Jessica fell down a well in Midland, TX, no one asked how much it would cost to save her.  The U.S. military takes this principle one step further with their doctrine of “leave no man behind”, which effectively places an infinite price on saving a comrade’s life and retrieving the fallen.

This brings me back to the original question, are you worth your weight in gold?  In short, yes!  An average adult American’s life is valued at more than TWICE his or her weight in gold on the open market.  The Center for Disease Control (CDC) reports that the average American adult (male and female), ages 20-74, weighs approximately 175 lbs.  At its high nominal price on Tuesday of $1245 per troy ounce, that 175 lbs of gold would sell for about $3.16 million.  (Note: 14.583 troy ounces per pound.)  Compared against Kniesner, Viscusi, and Ziliak (2010)’s VLS estimate, humans seems quite valuable relative to gold!