How do you value a life? [updated]

How do you value a life?

In recent days we've heard Gareth Morgan claim a price on each head of $10,000; that Pharmac have a price of $33,000 every year that head stays upright; that the value of a "Quality of Life Year" is $45,000; and that "the value of a statistical life is $4.5 million." [Check out p. 25]

True stories.

But what is the value of a "statistical life"? Who apart from the truly ignorant lives one of those?

"The headlines death number implicitly assumes that all lives lost are valued the same. But that is not how society operates. The death of an already ill 85 year old is not regarded as equivalent to the death of 17 year olds with their lives in front of them."

Note the passive verb, the inevitable refuge of all clipboard monsters: "...is not regarded as..." Perhaps one could append the simple two-word question: "by whom?"

If I'm the son or daughter or husband or wife of that 85-year old, then that person may be worth more to me than anything else in the world! Certainly more to me than some prick with a clipboard living a statistical life.

"Not all deaths have the same social cost. The death of a 90 year old can be sad, but the death of a child or young adult is almost always a tragedy."

These quotes are from "economic modellers." They do this stuff for governments.*  They are not insurers calculating their risk in offering life insurance policies, which you can voluntarily choose yourself to purchase or not. These are would-be central planners, advising other would-be central planners how they should calculate the cost of a life. Of someone else's life.

So how exactly do you value a life?

Let's start with two simple questions:

• why do you need to? and
• how do you value anything?

Let's answer with the second question first.

There is no "value" of anything written anywhere in tablets of stone.** Not in government valuations of your house. Not in a tabulation of labour hours to make something. Not in an index of prices paid for art. Not in actuarial calculations of the value of a human life. The value of anything -- of anything at all -- is given to it by the person appraising it. And everybody will appraise that value differently.

(This, by the way, is the only reason trade -- any trade -- happens. Because we all do value everything differently. Because I value that six-pack of Epic Pale Ale more than the $25 it costs me; and my man, when he re-opens, values the $25 more than he values the six-pack.)

To put it another way then: the source of all value is individual thinking, breathing, acting human beings -- who each value everything in terms of its importance to them. In economic terms then, the price of anything -- of anything at all -- is no more than a ratio of the value of this thing here as compared to that thing there. A ratio that happens as on ongoing sum from all the trades that happen.

And no-one outside North Korea and central planning departments is actually trading human lives.

But can we get an estimation of what a life is worth? Well, yes. We can get an estimation of what someone's life is worth to them. A few days ago, a thought experiment was floated on Twitter. "Maggie" had just described the harrowing few days her husband and she had endured with the virus:

We’re getting better. But it’s taken more than two weeks to say that, and that was with the “mild” version, meaning no trouble breathing. This virus is absolutely brutal. “Mild” is not mild by any normal definition

And the economist's question:

Suppose a genie offered you a bag of cash to go through what Maggie describes in her thread. How much money would have to be in the bag to make you willing to accept it?

If you say, "it depends," then how about ...

you get that particular experience and not an even worse one (and probably score immunity afterwards as part of the deal) (and a loved also doesn't die) ...

What then?

Because this -- or something like it -- is the only way you can begin to answer that damn question at the top of the page. What's your life worth to you. And not to some prick with a clipboard.

Something similar of course, but less focussed, happens when you buy life insurance. You work out which you value more: these few dollars a month, or that bag of money paid out to your loved ones in the unthinkable event of your own death. Meanwhile, the insurance company themselves, after a brief calculation, is doing something similar in reverse. But that calculation they do underpins a voluntary transaction. And if the calculation undershoots (my own death being regarded by me as something pretty damned tragic), then no transaction will happen.

Not so with the calculation of the central planner. In the end, he's calculating how much your life is worth to him. And who, anywhere, wants to live on those terms.

So as we can see now, once you understand how things are valued, the answer to the first question becomes even simpler: Why do you need to value a life? Answer: you don't. Not unless you're an insurer, then all you need to do is ensure that the value you put on it is greater than your customers.

Ignorance is a leg-iron.

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* And the ones from whom I'm quoting claim to be among the good guys.
** "The market value of a product is not an intrinsic value, not a “value in itself” hanging in a vacuum. A free market never loses sight of the question: Of value to whom? And, within the broad field of objectivity, the market value of a product does not reflect its philosophically objective value, but only its socially objective value...
    "Just as the number of its adherents is not a proof of an idea’s truth or falsehood, of an art work’s merit or demerit, of a product’s efficacy or inefficacy—so the free-market value of goods or services does not necessarily represent their philosophically objective value, but only their socially objective value, i.e., the sum of the individual judgments of all the men involved in trade at a given time, the sum of what they valued, each in the context of his own life...
    "This does not mean, however, that the values ruling a free market are subjective..."
            [Rand, Ayn. Capitalism: The Unknown Ideal (p. 17)]

UPDATE: From the post Life Without a Livelihood:

"Destroying jobs to save lives is a gross contradiction. Jobs are the means by which individuals sustain their lives. Certainly, some individuals can live off of their savings (if they have adequate savings), but that means depleting funds set aside for their children’s education, retirement, or some other long-term goal.
    "We will never know how many lives were saved by shutting down the economy. But we can determine how many lives are being severely damaged by the shut down–the government gives us regular updates. We can determine the number being harmed by forcing individuals to live without a livelihood. And that number far exceeds the victims of COVID-19."

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