The Joy of Economics:  Making Sense out of Life
 Robert J. Stonebraker, Winthrop University
 

Priceless Life?

            Although human life is priceless, we always act as if something had an even greater price than life...But what is that something?

                                                                        .....Antoine de Saint-Exupery

            Prices matter.  If the price of hamburger rises, I switch to chicken.  Charge more for bagels and I buy cereal instead.  When prices rise, the quantity demanded falls. 

            It sounds simple, but does it always work?  Might we be willing to buy some products regardless of price?  How about gasoline?  Will higher prices reduce how many gallons we buy?  Yes, they will.  High gas prices in the 1970s stampeded an entire generation to smaller, more fuel-efficient cars.  Recent price hikes have been causing similar shifts.  What about water?  We need water.  Won't we continue to buy water even if the price goes up?  Perhaps, but how much water do we need? At $50 a gallon, might we take shorter showers?  

            Substitution is the key.  Chicken substitutes for hamburger, cereal for bagels, small cars for gas-guzzlers, short showers for long showers.  If substitutes exist, higher prices always will reduce the quantity demanded.  Price up, quantity demanded down.

Exceptions?   

            However, suppose no substitutes exist?  For example, consider medical care.  Not cosmetic or elective care; people routinely reject these if the price is too high.  But consider critical care such as insulin for a diabetic or surgery for a burst appendix.  Such care is essential for life.  There is no substitute for life.

            Or is there?  If the price of insulin rises to $5,000 per day, what will the diabetic do?  If surgeons will remove your burst appendix only for an up-front payment of $2 million, what will you do?  There is a substitute for life; it is death.  Death is a substitute thrust daily upon destitute and low-income individuals who cannot afford the food or the medical care necessary to live.  When price rises, the quantity demanded falls.

            Taxpayer dollars might offer a solution.  Can't afford to eat?  Have the taxpayers feed you.  Can't afford needed medical care?  Have taxpayers cover your bills.  Will taxpayers do it?  What is a life worth?

            These are not idle musings.  If a $5 million highway improvement can save a life, should we make it?  If $32 million of new pollution controls can save three lives, should we buy them?  These are real decisions that must be made by real people every day of every year.

            Imagine that a random person is to be plucked from the earth tomorrow and killed.  Luckily, the executioner is corrupt and can be bribed to spare the life.  You do not know who the victim will be.  It's not likely to be you or anyone you know.  It probably will be someone of a different country, a different race, a different religion.  Will you bribe the executioner?  How much would you pay?  What is this unidentified life worth?¹

            Would you pay $1 million?  Don't try the "I don't have $1 million" defense. Most of you will earn in excess of $1 million during our working lives.  Borrow it..  Dash to the nearest bank and offer your future earnings as collateral.  Will you do it?  What percent of your future earnings are you willing to sacrifice?  If $1 million is too much, would you pay $100,000?  How about $10,000?  Maybe $500?  Entire families live on less in some countries.  Would you pay $500 to save a family?  Are you nodding "yes"?  If so, think a minute. What did you do with your last $500?  Did you use it to save lives?  Actions speak louder than words.

The Grand Canyon

             Some years ago my sons asked to vacation at the Grand Canyon --  a stunning spectacle, but expensive.  With four round-trip airline tickets, a rental car, food, lodging, and souvenirs, a ten-day trip could easily run over $2,000.  We had a choice: ten days at the Grand Canyon or, at $500 a shot, save four families.  What should we have done?  What would you do?

            We chose the Grand Canyon.  We had a glorious time.  It was even more awesome than I had imagined.  But, by the time we returned, four families were dead.  Did we kill them?  Am I a murderer?  Their lives were in our hands, and we let them go.  We had the opportunity to save them, and we let them die.  Wait.  It gets worse.  I had such a good time that I went back a second time.  More families are dead, but I did take some great photographs. I do feel guilty, but know that many of you would have made the same choices.  You would have been just as guilty, and that makes me feel better. 

            We pretend that life is priceless, but it is not.  If we believed life was priceless, we would behave very differently.  When push comes to shove, the price we are willing to pay to save a life is not very high.  Our lips say life is priceless, but our actions say life is cheap.  When price rises, the quantity demanded falls.

Closer to home

            Of course, we would pay more to save a loved one than to save a stranger.  If my wife's life was at stake, or my own,  I quickly would pony up dollars I never would offer to save a stranger.  However, even when our own lives are on the line, there are limits to what we will pay.  If we truly thought our lives were priceless, we would never risk losing them.  Yet we take such risks every day.

            My mother smokes.  She knows it is dangerous; she has seen friends die from lung cancer.  But still she smokes.  She hopes it will not harm her, but knows that it might.  She refuses to pay the price of kicking the habit, even though it may save her life.  And she is not alone.  People smoke, even though they know it can kill them.  They drink to excess, even though they know it can kill them.  They exceed speed limits on highways, even though they know it might kill them.  Some do all three simultaneously. 

            Such choices often are not foolish or irrational.  We know what we are doing.  Risks are all around us.  Should we stay off the highway to avoid a potentially fatal accident?  Should we not visit our sick friends in the hospital for fear of contracting a deadly airborne virus?  Should we keep out of the woods to avoid being struck by a falling tree?

            No.  Risking premature death makes sense.  We all die; the only issue is when.  Our choices are not between life and death; they are between the quantity and quality of life.  We can avoid risks and maximize the quantity of years lived, but only if we sacrifice the quality of those years. To avoid risks we must shut ourselves off from the people and the activities that make life worth living.  Given the choice between 90 years of life in an isolated, but safe, padded cell, and 75 years of happy, fulfilled living, most of us would grab the latter.  Extra years of life are surely tempting, but not at any price.  When price rises, the quantity demanded falls.

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Notes:

1.         This exercise in "willingness to pay" is often identified with economist Tom Schelling.  See Schelling, Thomas, "The Life You Save May Be Your Own," in Chase, Samuel B., Jr. (ed.), Problems in Public Expenditure Analysis, Brookings Institution, Washington, D.C.,  1968, pages 127-162.          

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Testing Yourself

To test your understanding of the major concepts in this reading, try answering the following:

1.         Explain why economists are unsympathetic to the claim that “life is priceless.”

2.         Describe a circumstance in which policymakers must decide how much a life is worth.

3.         Explain why risking death might be a rational choice.

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