A Life’s Value May Depend on Agency
Testing a G.M. vehicle. The Transportation Department says each life saved is worth $6 million.
By BINYAMIN APPELBAUM
Published: February 16, 2011
WASHINGTON — As the players here remake the nation’s vast regulatory system, they have been grappling with a subject that is more the province of poets and philosophers than bureaucrats: what is the value of a human life?
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The answer determines how much spending the government should require to prevent a single death.
To protests from business and praise from unions, environmentalists and consumer groups, one agency after another has ratcheted up the price of life, justifying tougher — and more costly — standards.
The Environmental Protection Agency set the value of a life at $9.1 million last year in proposing tighter restrictions on air pollution. The agency used numbers as low as $6.8 million during the George W. Bush administration.
The Food and Drug Administration declared that life was worth $7.9 million last year, up from $5 million in 2008, in proposing warning labels on cigarette packages featuring images of cancer victims.
The Transportation Department has used values of around $6 million to justify recent decisions to impose regulations that the Bush administration had rejected as too expensive, like requiring stronger roofs on cars.
And the numbers may keep climbing. In December, the E.P.A. said it might set the value of preventing cancer deaths 50 percent higher than other deaths, because cancer kills slowly. A report last year financed by the Department of Homeland Security suggested that the value of preventing deaths from terrorism might be 100 percent higher than other deaths.
The trend is a sensitive subject for an administration that is trying to improve its relationship with the business community, much of which has bitterly opposed the expansion of regulation. The White House said the decisions on the value of life were made by the agencies. The agencies, for their part, referred any questions to the White House.
“This administration utilizes the best available science in assessing the benefits and costs of any potential regulation, drawing on widely accepted methodologies that have been in use for years,” Meg Reilly, a spokeswoman for the Office of Management and Budget, which oversees the rule-making process, said in an e-mail.
Several independent experts, however, said that the increases were long overdue, noting that some agencies had been using the same values for more than a decade without adjusting for inflation. One office at the E.P.A. cut the value of life in 2004.
“Agencies have been using numbers that I thought were just too low,” said W. Kip Viscusi, a professor of economics at Vanderbilt University whose research is cited by most of the federal agencies as the basis for their calculations.
Businesses would prefer to discuss the consequences of the increases — new regulations and higher costs, which they say are hampering economic growth — rather than suggest that the government has overstated the value of life.
But some industry representatives said assigning a value to life was inherently subjective, and that the recent changes were driven by the administration’s pursuit of its regulatory agenda rather than scientific considerations.
“It looks like they just cooked the books — they just doubled the numbers,” said Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association, a trade group for the trucking industry, which faces higher costs under some of the Transportation Department’s new rules. The Bush administration rejected a plan in 2005 to make car companies double the roof strength of new vehicles, which it estimated might prevent 135 deaths in rollover accidents each year.
At the time, Transportation officials figured that the cost of the roofs would exceed the value of lives saved by almost $800 million. So the agency proposed a smaller increase in roof strength that might save 44 lives a year.
Last year, the Obama administration imposed the stricter and more expensive roof-strength standard, and it published a new set of calculations showing that the benefits outstripped the costs.
Most of the difference came from the increased value of human life. By raising that number to $6.1 million from a figure of $3.5 million in the original study, the Obama administration rendered those 135 lives — and hundreds of averted injuries — more valuable than the roofs.
The pattern of increases is scrambling a long-standing political dynamic. The business community historically has pushed for regulators to put a dollar value on life, part of a broader campaign to make agencies prove that the benefits of proposed regulations exceed the costs.
But some business groups are reconsidering the effectiveness of cost-benefit analysis as a check on regulations. The United States Chamber of Commerce is now campaigning for Congress to assert greater control over the rule-making process, reflecting a judgment that formulas may offer less reliable protection than politicians.
Some consumer groups, meanwhile, find themselves cheering the government’s results but reluctant to embrace the method. Advocates for increased regulation have long argued that cost-benefit analysis understates both the value of life and the benefits of government oversight.
“If analysis is going to be imposed on the rule-making process, we want higher values for injury and for fatalities,” said Robert Weissman, president of Public Citizen, which pushed the Transportation Department to reconsider the roof-strength regulation.
But Mr. Weissman said he still believed that such analysis was an impediment to necessary regulation.
“The bigger picture is absent,” he said. “How do you do cost-benefit analysis on global warming? It constrains the imagination. It really is a constraint in terms of bounding what is given serious consideration.”
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.”
Professor Viscusi’s work pegs it at around $8.7 million in current dollars.
Before the current administration, only the E.P.A. had fully embraced this methodology. Other agencies relied instead on the results of surveys asking Americans how much they would spend to avoid a given risk. This technique tends to produce significantly lower results. An even older technique, which yields even lower numbers, is to sum the wages lost when a worker dies. In 2000 the E.P.A set a baseline of $7.8 million, updated to current dollars. But in 2004, the office that issues clean air regulations reduced that baseline by $500,000 in an analysis of proposed limits on emissions from industrial boilers.
Last year, the E.P.A. directed its various offices to return to the 2000 baseline, adjusting that figure for inflation and wage growth. In some recent studies, the E.P.A. has used a figure of $9.1 million after making those adjustments.
The agency said at the same time that it was working to set a new standard. In a white paper issued in December, it raised the possibility that people might place a higher value on avoiding a slow death from cancer than a quick death in a car accident. It also broached a concept it described as “altruism,” the idea that people may place a higher value on the common good than on their own survival.
John D. Graham, who oversaw the use of cost-benefit analysis during the George W. Bush administration, said that the scientific justification was “quite strong” for raising the values used by the Transportation Department, but he cautioned that the E.P.A. was going too far.
“Why should the same clinical condition be valued differently at different federal agencies?” Mr. Graham, now dean of the School of Environmental and Public Affairs at Indiana University, asked in an e-mailed response to questions.
Many experts similarly ask why life itself should be valued differently. Agencies are allowed to set their own numbers. The E.P.A. and the Transportation Department use numbers that are $3 million apart. The process generally involves experts, but the decisions ultimately are made by political appointees.
The Office of Management and Budget told agencies in 2004 that they should pick a number between $1 million and $10 million. That guidance remains in effect, although the office has more recently warned agencies that it would be difficult to justify the use of numbers under $5 million, two administration officials said.
Close observers of the process point to two reasons for the variation in numbers. First, they say that setting a single standard is not worth the high-stakes battle that would be required with advocates on both sides. The Obama administration, like its predecessors, has preferred to deal with the issue informally, on an agency-by-agency basis.
Second, they say the lack of a standard preserves flexibility.
The Food and Drug Administration issued a rule in 2009 requiring new warning labels on packages and bottles of acetaminophen and other drugs. Its justification valued life at $5 million. A few months later, the agency acknowledged that it had calculated the cost of adding one new label, while requiring two new labels. However, the agency continued, the benefits still exceeded the costs because the value of life was $7 million.
A few months later, in an unrelated rule regarding salmonella, the agency once again cited a value of $5 million, which it said best reflected the available research. And in its recent study on cigarette labels, the agency cited a value of $7.9 million.
“The reality is that politics frequently trumps economics,” said Robert Hahn, a leading scholar of the American regulatory process who is now a professor at the University of Manchester in England. But he said that putting a price tag on life still was worthwhile, to help politicians choose among priorities and to shape the details of their proposals.
“Even small changes,” he said, “can save billions of dollars.”
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