As Economic Toll Mounts, Nation Ponders Trade-Offs Cost of confronting pandemic is millions of jobs, trillions in wealth lost to save potentially millions of lives By Hilsenrath & Armour, 3/23/20, Wall St. Journal [...]
Value-of-statistical-life measures are routinely used by the federal govt
to calculate the costs & benefits of a wide range of health &
environmental regulations, which also come with trade-offs between public safety & economic cost.
W. Kip Viscusi, a Vanderbilt University economics & law professor & leader in these valuations, estimates the value of a statistical life at around $10 million. The number means a U.S. community of 100,000 people would on average pay $100 per person to reduce the risk that one person in the community would randomly be killed by some threat. The community is essentially paying $10 million to reduce the risk that one among it will die.
Even under normal circumstances, such measures are complicated by many factors. For example, should the life of a child be given the same value as the life of an octogenarian? How do you account for age differences for a disease that affects the elderly most? Is a life in Laos worth as much as in the U.S.? Most people would say a life in either country is of equal value, but the calculations are based on how much a person would pay to reduce the risk of death, & because incomes are lower in Laos than in the U.S., the statistical value of life there is lower too.
In this case, the unknowns are especially large, notes Joseph Aldy, a
Harvard professor & former adviser to President Obama. The mortality rate of the virus itself is unknown. Because testing has been especially sparse in the U.S., nobody knows how widespread it is in the population, or how aggressively it transfers from one person to another.
“It is hard to even assess probabilities,” he said.
Mr. Viscusi noted another conundrum. Economic dislocation causes its own health problems.
“Mortality rates rise after periods of unemployment & income loss,” he
said. “Even if health is your only concern & financial costs are not
considered, adopting prevention efforts that limit the adverse effects on income is important.”
The U.S. should be willing to bear substantial costs to overcome this
virus, because it is something that can cascade out of control, said Mr.
Hammitt at Harvard.
How much cost?
“I don’t know,” he said.
www.wsj.com/articles/as-economic-toll-mounts-nation-ponders-the-trade-offs-11584970165