The value of human life and its policy implications

I have to admit, I don't really know how to calculate the value of a human life for purposes of policy analysis. And yet, the value of a single human life is fundamental to any of the cost-benefit calculations we need to construct optimal public policy.

For example, if I were to ask someone how much they would pay to save the life of someone close to them, the number would be incalculable. How much would you spend to have a parent back, or a spouse, a brother, a daughter? No number is too high - $10 million, $50 million, $1 billion. The number is unreliable and can't really be used for policy purposes. And yet, like I said, some value is necessary, particularly when evaluating environmental or healthcare policy. And the estimation of that value, the assumption if you will, ultimately makes or breaks any policy proposal. In short, the valuation of a human life has massive policy implications.

Fortunately, we don't ask people how much they would pay to save a human life because the numbers would be a) massively overstated when asked to save a close personal acquaintance and b) massively understated when it comes to saving the life of a random stranger. Think about it. If you could save the life of one human being in, say, Pittsburgh, who you'll never get to meet, for $50, would you cut the check? What about $500? Keep in mind. You'll never know or meet this person. What if the person lived in Shanghai? Beirut? Still writing that check? By the way, you should probably be aware that you can already do this. $100 bucks will feed 50 children for a month in Haiti. I'm pretty certain you can literally save someone's life for $50, somewhere in the world. The point of this exercise is not to guilt you into a donation (though if that happened, it wouldn't necessarily be a bad thing). The point of the exercise is to demonstrate how difficult it actually is to put a price on a human life. The EPA currently sets the price of a human life at $9.1 million. I actually think there is some validity in the current methodology, as explained in this NY Times article:

The current rise in the value of life is based on the work of Professor Viscusi, who wrote his first paper on cost-benefit analysis as a Harvard undergraduate in the early 1970s. He won a prize and found a career.

The idea he and others have since developed in a long string of studies is that differences in wages show the value that workers place on avoiding the risk of death. Say that companies must pay lumberjacks an additional $1,000 a year to perform work that generally kills one in 1,000 workers. It follows that most Americans would forgo $1,000 a year to avoid that risk — and that 1,000 Americans will collectively forgo $1 million to avoid the same risk entirely. That number is said to be the “statistical value of life.”

I actually like this method because it uses behavior (revealed preferences) rather than opinion (expressed survey preferences) to ground its findings. But here's the thing - is the value of a human life really $9.1 million? I just don't buy it. To me, it doesn't pass the smell test. I mean, there are probably thousands of things we can do, short of spending $9.1 million dollars, to save one human life. But we don't. Obviously the value we place on an ambiguous human life is substantially less than $9.1 million.

My problem with the $9.1 million number is that it seems so detached from reality. Playing around with the numbers, we could probably justify pretty much any public investment or regulation on those grounds. Want the public to pay to install metal detectors in movie theaters? Require roll cages on SUVs? Criminalize cigarettes? I can't think of a single public policy you couldn't justify on the basis of that $9.1 million number. It is so high it renders itself meaningless. Particularly when, as I pointed out earlier, I doubt the average citizen could honestly be roused to spend $50 to save the life of an anonymous stranger.

Like I said, I really don't know what the correct number should be. I do know it is difficult to execute sound public policy with such a widely inflated valuation. I'm just way to cynical to think that human beings value other human beings in this matter. Hell, we could provide universal healthcare in America and prevent hundreds of thousands of unnecessary, painful deaths each year for much less than $9.1 million per person, but God knows we won't do that - because of "Liberty" or something...

Anyway, since I don't want this post to be massively depressing and cynical, and to prove that there is a tiny, albeit dormant heart in this lumbering, dead soul of mine, here is a link to my charity of choice.

The Indie Rock Band Persona

I'm in the middle of reading an article about Grizzly Bear in New York Magazine and I'm reminded of the silly rule that indie rock bands can't admit to be famous, rich, or successful. To wit:

“Bands appear so much bigger than they really are now, because no one’s buying records. But they’ll go to giant shows.” Grizzly Bear tours for the bulk of its income, like most bands; licensing a song might provide each member with “a nice little ‘Yay, I don’t have to pay rent for two months.’ ”

And:

“Obviously we’re surviving. Some of us have health insurance, some of us don’t, we basically all live in the same places, no one’s renting private jets. Come to your own conclusions.”

Listen. I don't want pick on Grizzly Bear - I like them, but they're pretty much a poor man's Radiohead. And in their defense, I unfortunately have met and have known MANY indie rock fans who will abandon bands once those bands gain popular, mainstream success. It's a weird mindset, but it's been going on for decades. It's not just a new hipster trend. Good Lord, look at what they did to Dylan!

But gosh, golly, gee wiz. Is song licensing really only getting Grizzly Bear two months of rent? Because if that is true, their agent is either criminally corrupt or criminally stupid. Perhaps both. That, or the band is living in the Barclays Center and renting multiple suites on a pay-by-the-day basis.And if they don't have health insurance, well, that is a choice that I highly suspect is more closely tied to be a young, dangerous rock star and probably has virtually nothing to do with the affordability of health care. If it IS an affordability-issue, I'm curious to see what happens when the Obamacare healthcare mandate kicks in. Will Grizzly Bear be forced to work part-time at California Pizza Kitchen in order to have access to health care benefits?

It's just weird to me that indie rock bands need to play these games. They are constantly apologizing for their rock stardom. Hell, why did you get into the game if not for the success. You can play other instruments if you're not interested in the money.

Healthcare and the Supreme Court

So I'm reading how today was a disastrous day for healthcare proponents before the Supreme Court. You know what? It shouldn't fucking matter!

Honestly, this case shouldn't have even made it to the Supreme Court. The mere fact that it did make it to the Supreme Court is ipso facto evidence that the conservative majority plans to overturn it. That's a fucking joke. I mean, an even worse joke than Citizens United and Bush v Gore. If the Supreme Court plans to overturn the individual mandate, you might as well throw out the entire Constitution. It is literally a meaningless document that has no standing whatsoever. There is no meaningful difference between the mandate and a tax. And if the federal government cannot tax its citizens, it literally has zero power to do anything, including raising money for, and providing for, a standing army. Might as well throw out the document and start over. It's more toothless than the Articles of Confederation. And we saw how that worked out.

It's horrifying that I have to pray for a Hail Mary from that fraud John Roberts to save this country from sliding into the abyss.

Another billionaire, another self-deluded whiner

Are there any billionaires who aren't delusional sociopaths? I mean besides Bill Gates and Warren Buffett? Today's whine of the day comes from "The Man Who Owns L.A.", aka Tim Leiweke, the latest con man trying to extort a city for a publicly-funded stadium intended to line his own pockets with billions of dollars of taxpayer money. Here, in The New Yorker, he complains that Barack Obama hurt his fee-fee's so he's taking his ball and running home:

"Look, I personally came from nothing," he said. "Someone making me look like a bad guy because I'm making money now? I resent that. I'm really upset about the way he is positioning this now about protecting the rich. I was never rich in my entire life! I earned everything, built my life from the ground up, and never got one damn break in my life! I resent the fact that when my mom was sick, and my dad had to pay for her treatment, it took every dime from my dad and broke him as a human being and he was never the same. And then, after we have overcome that, now to make me look like I'm bad, I'm evil, I'm greedy, I don't give. Terrible!"

God, there is so much delusion in this statement its hard to figure out where to begin. First, the statement that he was "never rich in his entire life" must, for some reason, omit the fact that he has been extremely wealthy for the last two decades of his life. Funny that. It's also humorous how he's suggests that he "never gotten a break in his entire life" - I suppose the City Council's decision to seize thirty acres of public land through eminent domain and give it to Leiweke to build the Staples Center wasn't a break for some reason. I wonder how lucky the citizens and businesses evicted from their homes felt about that.

But the most unfortunate rant concerns his feelings about his mother getting sick when he was younger. By his own admission, the experience broke his father. And yet, in the very next sentence, he attacks the very people who would fight to ameliorate this healthcare disaster. I'm not sure what interpretation of this cognitive dissonance would be worse. Does Leiweke think that Americans need to individually experience catastrophic personal and financial loss in order to rise above and achieve great economic success (i.e., "How dare we spare the poor this essential life lesson!"). Or is Leiweke, this "modern-day Horatio Alger", too dumb to understand that he is attacking the very politicians and policymakers that would have supported the healthcare reforms needed to spare his mother and father this life-altering calamity?

God I just can't deal with these assholes. I'm pretty sure if I was ever invited to this man's house, and he started spouting nonsense like this, I'd nod politely, go pound some more of his booze, and then take an "upper decker" in the main bathroom.

Aligning incentives

Economist rock star Brad DeLong writes here about how healthcare companies essentially waste tons of money in the provision of healthcare services, all in the name of "free market efficiencies". Those familiar with the healthcare debate probably already know that approximately 25% of all healthcare costs are administrative - that billions of dollars are wasted in the U.S. healthcare system filing paperwork, contesting coverage, and shuffling responsibilities between different providers and insurance companies. DeLong doesn't offer a lot of new information, though he does cite some important data provided by Blue Cross. Instead, his more substantiative contribution is the insight that vast healthcare spending on adminstrative costs is the theoretical equivalent of lighting money on fire, at least as far as healthcare provision is concerned.

Now God knows I've made my fair share of poor political prognostications. And I will continue to do so! One such prediction, which I even went as far as to lecture my students on several years ago, was that I believed we would have universal healthcare in this country within 10 years because, ultimately, the Walmarts, and the Best Buys, and the Verizons, would realize that they are wasting billions in the healthcare provision business when they could cut their costs substantially, and increase profits radically, if the government took over these responsibilities. Why should Ford be in the healthcare provision business? Why should Exxon? Why should they need to employ an army of human resource employees to navigate our byzantine healthcare insurance system? But companies have not aligned themselves in battle to reform U.S. healthcare, for reasons, to be honest, I still don't fully understand. And given the last healthcare battle, which only marginally expanded healthcare access in this country and in no way whatsoever introduced a "socialization" of healthcare [I suspect 90-95% of both public citizens and elected officials could not accurately define "socialization"], they seem very unlikely to do so. So I seemed destined to blow yet another prediction. Again, I could not say why. I have no idea why doctors oppose healthcare reform - do they really enjoy the administrative headaches associated with filing insurance claims? Do they enjoy paying the extra salaries needed to file all of this paperwork? And what about the larger corporations - those Walmarts and Verizons I mentioned previously? How come they are not on the reform bandwagon? It is to my bewilderment that the Chamber of Commerce opposes federal government reform that would improve the bottom lines of 90% of their member organizations, but there you have it.

DeLong links to an article in the Washington Post which breaks down how our healthcare dollars are spent.  He finds:

The thing to focus on is the $0.13 of every dollar that Blue Shield spends on "administrative costs"--i.e., trying to make sure that they don't pay for sick people.

To which I would add - well, how do we convince the insurance companies themselves that there is real money to be saved and presumably (har, har) passed on to the rest of us by reducing these administrative costs? I mean, why does Blue Cross BlueShield want to spend $0.13 of every dollar on administrative costs? Why does Wellpoint? Clearly there is money to be saved here! Clearly there are opportunities for efficiencies! There is no money to be profited when Unitedhealth tells the Kaiser Foundation, who tells Aetna, who tells the doctors, who tells the pharmacist, who tells the pharmaceutical companies, who tells the X-ray technician, what will be covered and who will be covering it - these inefficiencies are deadweight losses! Isn't there some kind of political agreement to be forged whereby the government and the insurance companies agree to find ways to substantially reduce those 13 cents? Even if only 2 cents goes back to the consumer, and 8 cents goes back to the insurance companies, isn't that a win for all of us. Why can't we bring these groups together? Our interests would appear to be aligned.

I think I know the answers to some of these questions. 1) I think insurance companies (perhaps rightly) suspect that any government sponsored healthcare reform is really a ploy to begin the process of nationalized healthcare provision. This suspicion is probably not too crazy, but the healthcare industry has proven itself powerful enough in the past to grab subsidies and tax credits for themselves without losing too much political and regulatory control. 2) I think this is an ideology question. The Chamber of Commerce in particular has proven itself to be a greater slave to ideology rather than the bottom line. Because if it cared about the bottom line, it would support Democratic candidates. As I've posted previously, and Larry Bartels has demonstrated in "Unequal Democracy", the economy always does better under Democratic administrations, for rich and poor alike. 3) The "masters of the universe", perhaps blinded by ideology, really don't know what's best for themselves. Again, this is perhaps a function of ideology, but CEOs, bankers and Chicago-based economists almost seem to presume that the status quo is at its profit-maximizing optimization point, merely by virtue of being at that point.  Believing in a "perfect market", rational decision-making, and full information, our Randian overlords are not allowed to believe that markets can be inefficient. If Exxon could have made more money, Exxon believes they already would have made more money! The fact that they didn't make more money is evidence, ipso facto, that they are operating at full profitability. Clearly this is delusional thinking, but I don't think it's difficult to find individuals in high-ranking positions that act and believe this way.

I'm not sure how to overcome these barriers. I don't think, believe it or not, they are impossible. However, I do think it will take some kind of grand CEO to be elected president to grant the other financial and political elites the ideological space needed to overcome these biases. What I mean is that eventually we are going to need a "Nixon goes to China" moment. We will need to elect some unimpeachably brilliant CEO President (don't worry, it won't be Mitt Romney) who will come forward (Bloomberg maybe???) and say, "well of course, businesess can save a shitload of money if we reform healthcare. Of course the government and the taxpayers could save a lot of money if we blow up the current system!" Will this happen within my 10 year timeline? Er, probably not. Will it happen in my lifetime? Well, I'm still betting on that...