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Thursday, February 17, 2011

The Price Is Right

A pack of cigarettes in New York City? $8.75.

A late model Trabant? 3 pairs of Levis.

Your life? Priceless.

Or, if you believe the Environmental Protection Agency, $9.1 million. At least, that was the proposed value last year. And lest you think that price too low, consider that during the Bush Administration, the number was $6.8 million.

What accounts for the 33% inflation rate? Has there been a sudden plunge in the supply of life? Something else we can blame on the abortion-rights crowd no doubt.

Government agencies monetize life--or, to be more accurate, "lives"--as part of their rule-making process. When agencies consider new regulations, they conduct cost-benefit analyses. If anticipated costs to industry are greater than the value to public health or safety, say, then the regulation may not be adopted. In order to measure the public value, the agency may look at the number of lives saved. And in order to measure comparative value, then, these lives must be priced.

Take the EPA's price of $9.1 million. Let's say the agency wants to require industries to install better waste filtration systems. Their scientists expect that these better systems would save 100 lives and cost the affected industries $500 million. In this case, the rule should pass because the value of lives saved ($910 million) is greater than industry's cost. On the other hand, if the fix would cost $1 billion, the rule should not be adopted.

Unless, of course, we're mispricing life. Businesses certainly think that's what's happening. Of course, they think the EPA is holding life too dear. You can't really blame big business for doubting the numbers. After all, the Food and Drug Administration only asks for $7.9 million per person. The Transportation Department sets the price at an even $6 million. (Wonder if Steve Austin worked for them? He was an astronaut. . . .That's like transportation. Where were we?)

Is a "life" even the right metric? Shouldn't years of life lost or gained provide a better way to measure the imapct of rules and regulations? How can there be a generic value for the continued existence of . . .anybody? Does a newborn baby have the same "present value" as a 70-year-old? What if the 70-year-old is Dick Cheney? What if it's a 70-year-old Canadian?!? You can see where this can get tricky.

In the meantime, if you ever have to sell yourself to the highest bidder, we suggest you peddle your wares over at the EPA. You'll never get top dollar from those cheapskates in other agencies. Heck, the Department of Education won't even cover the price of parts!

"As U.S. Agencies Put More Value on a Life, Businesses Fret"

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