It’s not every day that you see a story that makes every single major player in it — including the reporters — look bad, but there was one in today’s New York Times.
It seems that the OMB regulatory analysis shop wanted to base evaluations of the value of preventing deaths due to air pollution partly on the age of the people whose deaths are being prevented, on the perfectly common-sense ground that having your death prevented when you’re 70 adds fewer years to your life expectancy than having your death prevented when you’re twenty. As Milt Weinstein of the Harvard School of Public Health, the only person quoted in the story who doesn’t emerge looking like a fool or a scoundrel, tried to explain to the reporters, no life is ever saved; it can merely be prolonged. The mortality rates sum to unity.
Naturally, the enviros tried to pretend that the administration was insulting older people by pretending their lives were worth less than the lives of younger people. Of course, the Bush flacks responded that they were terribly, terribly fond of human life, as evidenced by their willingness to force the sick to die slowly and painfully, even if they prefer to die quickly and painlessly. Carol Browner, who ran EPA under Clinton, admitted (rather than boasting) that the studies that generated the quantitative estimates of the difference in the value of death-prevention by age had been done on her watch, but boasted (rather than admitting) that she’d never had the good sense, or the nerve, to use them in decision-making. Christie Whitman of EPA and John Graham, who runs the regulatory analysis shop, promptly said that they would never, never, actually use such calculations in decision-making, but Graham still thinks it would be valuable to include the figures in regulatory analysis: presumably, if they’re not going to be used, just for decoration.
And neither the enviros nor the reporters (who were clearly on their side) had the wit to question the actual numbers used: $3.7 million per prevented death before 70, $2.3 million per prevented death after 70. (Nor did the reporters ask how a 30% discount could somehow make the estimated benefits of a program shrink from $77 billion to $8 billion; but since it’s clear from the story they don’t know what the term “conservative assumption” actually means, I’m not sure they would have understood the answer even if they had asked.)
As it happens, I just finished teaching this stuff to my introductory policy analysis class for undergraduates, so I have the figures fresh in memory. There are two well-known approaches to estimating the value of preventing death: Kip Viscusi’s empirical analysis of wage differentials for more and less risky jobs, intended to discover people’s actual willingness-to-pay for safety, and Ron Howard’s theoretical calculation, which starts with assumptions about 1) base income 2) base life expectancy 3) the rate at which someone would be willing to trade small reductions in life expectancy for small increases in income, 4) risk aversion, and 5) the discount rate and then calculates what a person in that situation and with those preferences ought to be willing to pay.
Viscusi, looking at data from the late 1970s, gets a value of $6.3 million per prevented death for working-age people (other studies, using similar methods, get similar results); Howard, assuming someone with an income of $20,000 (1968 dollars) per year and a life expectancy of 45 years, gets a value of $2.43 million. Given how utterly dissimilar the methods are, I regard that as astonishingly close agreement.
It’s not obvious how to update the figures, but it should be obvious that the richer you are, the more of your own money you should be prepared to spend to extend your own life, both because the value of what you could do with the money instead goes down (that’s the “diminishing marginal utility of income”) and because having more money ought to make your life more pleasant and therefore give you a greater reluctance to leave the party early.
With a current median family income of about $60,000 as opposed to $20,000, that ought to bring the Howard number up to something like $7.5 million. The Viscusi number ought to update (depending on whether you use just an inflation adjustment or an adjustment for changes in nominal personal income) to somewhere between $12 million and $15 million. Thus anything between $7.5 million and $15 million per (relatively young) life seems reasonably defensible; $10 million seems like a nice, round figure to use.
Of course, in the air-pollution case you also have to add in the benefits of prevented illness, plus the aesthetic benefit of 1) breathing air that smells better and 2) admiring the view through air you can’t see. Those benefits, too, rise with, and more quickly than, the incomes of the people enjoying them, since the marginal utility of income spent on most material goods diminishes as income rises but the enjoyment from breathing clean air rather than dirty air doesn’t.
So instead of being outraged by a perfectly sensible (indeed, perhaps unduly modest) age adjustment, we all ought to be outraged that the Administration intends to sell our lives so cheaply. The richer you are, the more you ought to be willing to pay to live longer and breathe cleaner air. On average, over time, we keep getting richer (though the current administration seems determined to adopt macroeconomic policies to slow that process down). That makes this sort of benefit analysis, if it’s not deliberately rigged to support anti-environmental policies, the long-term friend of environmental protection. Friends of the environment ought to be demanding, not that benefit estimation be abandoned or fouled up, but merely that it be done right — and followed through on.
E.P.A. Drops Age-Based Cost Studies
By KATHARINE Q. SEELYE and JOHN TIERNEY
BALTIMORE, May 7 — A Bush administration policy to base some regulations on a calculation that the life of each person older than 70 should be valued less than the life of a younger person has antagonized older Americans and environmental groups, and it has stirred tensions among federal agencies.
Instead of the traditional assumption that all lives saved from cleaner air are worth the same, administration officials in two environmental studies included an alternative method that used two values, $3.7 million for the life a person younger than 70 and $2.3 million for an older person, a 37 percent difference.
Critics call the policy the “senior death discount” and say the administration is turning on older Americans as a rationale to weaken environmental regulations.
Today, Christie Whitman, administrator of the Environmental Protection Agency, said her agency had never applied the policy in its decision making and never would.
“The senior discount factor has been stopped,” Mrs. Whitman told reporters at a meeting here. “It has been discontinued. E.P.A. will not, I repeat, not, use an age-adjusted analysis in decision making.”
John D. Graham, the regulations administrator at the Office of Management and Budget who has been the champion of the policy, said the calculation would not be used because it was based on an old study. Dr. Graham insisted he was committed to the principle of analyzing how many years of life would be added by a particular measure, not simply the number of lives.
He has proposed that all agencies’ cost-benefit calculations include the “life expectancy” method and the simpler “statistical lives” approach.
“My instinct has always been to present policy makers and the public with both perspectives, so you can get a sense of the difference,” he said.
The life-expectancy approach could bolster the case for health measures that benefit children, Dr. Graham said, and in some cases it could help the elderly.
“It can distinguish a regulation that may extend senior citizens’ life by 5 or 10 years, compared to a regulation that will extend their life by only one year,” he said.
A spokesman for the Office of Management and Budget, Trent Duffy, made clear that in considering the cost-benefit calculations the administration should not be seen as insensitive.
“The Bush administration’s commitment to human life should not be questioned,” Mr. Duffy said. “The Bush administration has been aggressive in protecting human life of all ages, from extending prenatal care benefits for pregnant women to filing a friend of the court brief against euthanasia in Oregon.”
The balance of the story is here: