The Price Of A Life

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Matthew Parris almost gets this right. He’s talking about the price of a life, something we’ve got to take note of. Because, as we all know, economics tells us there are no solutions, there are only trade offs. Given that this is so we must be able to value the various things that go into the varied trade offs.

We convert all of those values to cash not because a life is actually worth cash. Nor because an unobstructed view of the South Downs is and so on. Rather, the conversion is so that we can do sums.

So, lockdown saves some number of lives at the cost of some amount of economy. And some amount of economy kills off lives by not having medical treatment, or food, or housing and so on. All of this is true and he’s quite right.

It’s this little bit that’s not quite right:

That, however, is not always how we act. Deep down, we know we can’t. The National Institute for Health and Care Excellence (Nice) uses quality adjusted life-years (Qalys) to compare the worth of medical procedures, treatments and drugs. One Qaly equals one year of perfect health (or two years of 50 per cent health, and so on). The NHS is said to regard a £30,000 Qaly as the upper limit for good value for money. Various government agencies use the value of a prevented fatality (VPF) to cost human life at £1.8 million per life saved.

NICE is simply an invented number. They’ve determined what we’re worth – how nice of them. But the £1.8 million, while it is indeed the number often used, isn’t a determination by the bureaucrats. Rather, it’s what we value a life at.

The method used is to look at what people actually do. That is, revealed preferences, not what people say of expressed preferences. How much are we willing to pay for a car that is a bit safer? How much jaywalking do we do, how much crossing only when the light says so? What can we find out about how we value the risk of death by watching what we do?

From that we can then calculate up that, on average, we ted to value a life at that £1.8 million. So, spending that to save a life is justified, spending more than that isn’t.

The point here being that it’s not really a determination of what a life is worth, it’s a calculation of what we all, on average, think a life is worth.

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Swannypol
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Swannypol

The 1.8m for any average life makes a QUALY worth about £40k (£1.8m/(85/2)), not too far off the NIHCE £30k, which is in any event a “definitely worth it” boundary, not the absolute line. They will actually pay out for more expensive treatment, up to £50k per qualy, with argument.

Excavator Man
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Excavator Man

“How much are we willing to pay for …” If it’s a safer car you are talking about, how does the ordinary person decide? And having decided, can they actually afford that armoured Bentley? You can tell that some people value their lives at very little. For example, if they don’t get a tyre replaced immediately it reaches its safe limit. It also shows that they value the lives of other people at a lot less than your figure. As well as a conversion to a cash equivalent, there is a political dimension. For example the media will screech “ONLY… Read more »

John B
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John B

Politicians only ever make decisions based on politics.

Bloke on M4
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Bloke on M4

“If it’s a safer car you are talking about, how does the ordinary person decide? And having decided, can they actually afford that armoured Bentley?”

They can’t afford an armoured Bentley, but all those women driving Chelsea Tractors are definitely doing it because they perceive the risk to be lower.

Man Made
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Man Made

Economics is a man made construct. Humans define it wholly. The “little bit” that you cutely refer to is not the only thing that’s wrong. It’s the whole “science.” It is not a truth in and of itself. It is the set of game rules we have decided to apply. One could choose to make a human life priceless and work down from there. Adding human life as something that the game can decide a value for is silly at best. It is actually dangerous. It is precisely that “valuation” that leads to a huge number of problems, and assuming… Read more »

John B
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John B

And wouldn’t it be nice, if individuals in the UK could decide what their life was worth and be allowed to spend that, instead of NICE deciding for them. In other words, take away NHS State enforced monopoly and allow free market private sector insurance and provider competition so people could make their own choices. Now that would be nice.

John B
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John B

Lockdown served to extend, not save, lives that were a cost; moribund people with one or more serious underlying medical condition requiring institutional support with neither hope nor expectation of recovery, but certain progressive deterioration to death. And yes we did know that in March – the profile of those vulnerable evident from data from China & Italy. It was clearly stated a number of times, the number of deaths would be more evenly extended over time, rather than all at once. The so-called flattening the curve. But if you look at the curves for deaths, they are not flat:… Read more »

Spike
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Spike

Worked like a charm; stretched “flu” season into June. (The current round of US mask mania has no point except to portray Trump America as dysfunctional and make us miserable enough to want a change.)

We are lucky our Public Health people didn’t simply identify “lives that are a cost” and minister to Covid with euthanasia, justifying it “by the numbers.”

john77
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john77

It’s not as simple as that. Lockdown reduced the number of young healthy people who died – possibly fewer than the number of deaths it postponed among elderly people with co-morbidities but we cannot actually know that since a large proportion of those elderly people who would have died without lockdown died anyway thanks to the NHS.

dcardno
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dcardno

There was one interesting study that compared people’s willingness to speed when speed limits were either increased (maybe the old ‘double nickel’) or removed in (IIRC) New Jersey; it compared the value of the time saved versus the increased risk of injury or death. They came out with a value of $2M USD. We were doing some work on a construction project that could have been undertaken in two different ways – one would present higher danger to workers; the other would present higher (although still very remote) risk of a catastrophic outcome. As Tim says, to do the sums… Read more »

Leo Savantt
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Leo Savantt

Surely some lives are worth more than others. Is a scientist working on developing life saving treatments equal in their worth to society as that of a murderer? Of course they are not. Which isn’t to suggest that treatments be withheld or granted on the basis of worth. A collective approach is illogical but has an advantage greater than logic, it avoids the truly terrifying possibility of a Chinese style social credit scheme being the determining factor in who gets what support and which treatment. Never-the-less some people’s lives are worth a great deal more than 1.8 million and a… Read more »

Boganboy
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Boganboy

In the good old days, the problem of low-value lives was handled by the death penalty.

Though the Americans still seem to have plenty of ratbags despite having retained it.

john77
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john77

@ Boganboy
pendantically they were high negative values