Why economics needs ethics, continued.

Via Broome again, this time on how economists try to account for the value of life by assigning it a monetary value based on preferences expressed through markets:

The UK’s National Institute for Health and Clinical Excellence uses a money value between £20,000 and £30,000 for a “qualy” (a “quality-adjusted life-year,” which is not very different from a daly). In 2003, the US Office of Management and Budget recommended a money value of between $1 million and $10 million for a whole life…

[N]aturally, a poorer person will be willing to pay less than a richer person will [for a year of healthy life], because the poorer person has more urgent alternative uses for her money. In terms of money, then, a poorer person’s life is worth less than a richer person’s. This conclusion was incorporated into the 1995 IPCC report, and led the authors to assign a much lower value to Indian lives than to American ones. Not surprisingly, the result was a major row at the IPCC’s plenary session where the report was presented…

[I]n terms of life, money to a poorer person is worth more than money to a richer person. It does not follow that the actual value of a poor person’s life is less than the actual value of a rich person’s.

Previous post on this issue here.

[Update: BTW, if the US Office of Management and Budget thinks a life might be worth $10 million, it should note that with that amount of money, through effective charitable donations, it could save 181,000 years of healthy life, or 3.3 million years of healthy school attendance.]

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