Valuing a Human Life

Written on June 2, 2013. Written by .

Can you put a price on a human life? This is a question that a lot of people have trouble answering honestly. They say “no”, but their actions say “yes”. In this video, Nobel Prize winning economist Milton Friedman explains how people put a price on their own lives when buying cars. (It’s important to watch the whole thing!)

It isn’t that corporations are artificially making up a price for people’s lives; consumers are putting a price on their own lives by choosing cheaper cars over safer cars. The corporations are just trying to estimate that price on behalf of the consumers.

Friedman also points out how all budgeting decisions have an opportunity cost that may be less visible. For example, if $200 million is spent to save someone’s life, it is certain that many others will die who could have been saved by that money. According to the charity research organization GiveWell, the best charities can save lives at a cost of less than $3000 each. If it costs more than $30,000 per life, the charity is not considered cost-effective because so many better options exist. (GiveWell) Even using the conservative value of $30,000 per life, $200 million could save over six thousand lives.

But it is not just the poor in third-world countries whose lives are hanging in the balance based on the distribution of relatively small amounts of money. South Korea has the highest suicide rate among the 30 OECD countries and 15.9% were estimated to have been directly caused by economic difficulties. The most common cause was psychological despair (28.8%) which very plausibly could also be dependent on financial factors in many cases. (Wikipedia) It is clear that financial difficulties cause deaths even in highly-developed first-world countries.

The important point here is that economic decisions do have life and death consequences. If the government imposes a tax that utilizes funds less efficiently than the market would have otherwise, then we can presume that people will die as a result. A glaring example is provided by the famines and mass starvation that occurred in many communist countries in the past. But even in capitalist countries, a small increase in the tax rate can have a profound impact given the large number of people affected. Given the notorious tendency of governments to waste money, every time we vote on a tax increase, we should be mindful of the very real possibility that people could die as a result of our decision.

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