No inflation here: EPA trims estimate of what a life is worth

WASHINGTON – Someplace else, people might tell you that human life is priceless. In Washington, the federal government has appraised it like a ’96 Camaro with bad brakes.

Last week, it was revealed that an Environmental Protection Agency office had lowered its official estimate of life’s value, from about $8.04 million to about $7.22 million. That decision has put a spotlight on the concept of the “Value of a Statistical Life,” in which the Washington bureaucracy takes on a question usually left to preachers and poets.

This value is routinely calculated by several agencies, each putting its own dollar figure on the worth of life – not any particular person’s life, just that of a generic American. The figure is then used to judge whether potentially lifesaving policy measures are really worth the cost.

A human life, based on an economic analysis grounded in observations of everyday Americans, typically turns out to be worth $5 million to $8 million – about as much as a mega-mansion or a middle infielder.

Now, for the first time, the EPA has used this little-known process to devalue life, something that environmentalists say could set a scary precedent, making it seem that lifesaving pollution reductions are not worth the cost.

“By reducing the value of human life, which is really a devious way of cooking the books, the perceived benefits of cleaning up the air seem less,” said Frank O’Donnell of the D.C.-based group Clean Air Watch. “That has the effect of weakening the case for pollution cleanup.”

To grasp the mind-bending concept of a Blue Book value on life, government officials say it is important to remember that they are not thinking about anyone specific. That happens in lawsuits, when plaintiffs seek to be compensated for a life lost – and there, it can involve personal factors such as the deceased’s lost income.

Here, officials say, they are trying instead to come up with the value of a typical life, without any personal information attached.

They might know, for instance, that a new cut in air pollution will save 50 lives a year – though they don’t know who those people might be. Still they want to decide whether saving them is worth the cost, officials say, and it helps to assign a dollar value to each life saved.

An example of this kind of analysis was used by the federal Consumer Product Safety Commission this year:

A proposal to make mattresses less flammable was expected to cost the industry $343 million to implement. But, a spokeswoman said, the move was also expected to save 270 people. The commission calculated that each life was worth $5 million, which meant a benefit of about $1.3 billion.

That was greater than the expense, she said, so the move made sense.

But how do you put a dollar value on a life, even in a generic sense?

It wouldn’t work for researchers to survey Americans at gunpoint and ask how much they would pay not to die. Instead, an unlikely academic field has grown up to extrapolate life’s value from the everyday decisions of average Americans.

Researchers try to figure out how much money it takes for people to accept slightly bigger risks, such as a more dangerous job. They also look at how much people will pay to make their daily risks smaller – such as buying a bike helmet or a safer car.

“How much are you willing to pay for a small reduction … in the probability that you will die?” asked Joe Aldy, a fellow at the D.C.-based think tank Resources for the Future.

The rest is more or less multiplication: If someone will accept a 1-in-10,000 chance of death for $500, then the value of life must be 10,000 times $500, or $5 million.

But it is one thing to calculate the numbers and another to explain them to the public. The EPA has been fighting that battle since last week, when the Associated Press revealed that the agency’s air office had reduced its Value of a Statistical Life.

Al McGartland, the director of the agency’s National Center for Environmental Economics, said the air office had revised the old figure in 2004 after new academic research showed it was skewed too high.

“It’s based on better methods,” McGartland said of the air office’s assessment. He said the new number would increase over time, in part because of inflation.

The EPA’s value for life remains one of the highest. Earlier this year, the Department of Transportation raised its value – but even after the increase, it stood at $5.8 million, more than a million dollars less than the EPA’s.