Additional Math Pages & Resources

Wednesday, April 6, 2011

How Much Are You Really Worth?

This blog is about using elementary math to make sense of the world around us.

Yesterday I did a blog on the value of vehicle inspection programs - Pennsylvania compared the total cost of its programs, as borne by 11 million people, versus the life of 127 people who might have died IF there had been no vehicle inspections. A big IF.

There was a number put on a human life - $5.8 million for the Value of a Statistical Life (VSL). Where did that come from? You can read the full report here.

Bur first a different definition: VSL is a statistical term describing the cost of death prevention in certain circumstances -  the cost of reducing the average number of deaths by one. 

I was looking at my Social Security statement recently and I am quite sure that the money I have earned in my working lifetime (since 1967) does not equal $5.8 million! Are you interested in your worth as estimated by your government?
  • Office of Management and Budget says $1-10 million
  • Food & Drug Administration says $5-6.5 million (value of a drug or treatment)
  • Environmental Protection Agency says $7 million (value of a life damaged by pollution)
  • Department of Transportation has ranged from $2-5 million
  • Department of Agriculture uses $5-6.5 million
I found the following paragraph uses a fascinating line of reasoning!

... there has been no adjustment (to the VSL) for growth in real incomes, but research indicates that as people grow richer they are willing to pay more for safety.
    Potential damage associated with vehicle accidents includes the personal dis-utility of death or injury and a variety of economic losses (to victims and others), including property damage, traffic delay, lost productivity, and the costs of police, investigation, medical, legal, and insurance services. The benefit of preventing economic loss  to society as a whole, apart from victims and their families, should be counted.

    VSL includes lost after-tax earnings, suffering and lost quality of life and a separate "productivity" component. Avoiding losses should be treated as the entire benefit to potential victims of accidents and their families. In contrast, reductions in property damage, medical expenses, traffic delay, and other social costs associated with fatal accidents should be treated as added benefits to society as a whole, and not included in a victim's benefits.

    Sheesh! This is complicated.We are not only worth something on our own, but our avoidance of dying saves the society money that's not allowed to be counted. Hmmm. What about money generated for our employers by our inventions, or copyrighted products we create? Who counts that?

    It seems that the VSL number does NOT really calculate the output (or the consumption) of one person. For that we have to create a new number, the Consumer Unit (CU). And it appears that capitalism isn't the only economic theory needed for this - we also might need to consider Karl Marx's viewpoint on individual output and consumption.

    Go here if you want to read more about this interesting subject. Take your calculator!

    It looks like these numbers that represent personal worth have significant influence on policies like the value of an education, cost-avoidance of keeping young men out of prison, etc.