How to balance saving lives with the economy

How do we choose between economic losses and the likelihood of people dying in a pandemic?

Is that even a moral question to contemplate?

Like it or not, it’s something we have to think about now.

The classic approach is to come up with a Value of Statistical Life figure, basically the amount that society would be willing to spend to save a single life. In NZ it’s around $4.4 million; most other developed nations have a roughly similar figure.

Tim Harford (basically my favorite economist) did a column a week or so ago in the Financial Times that outlines an alternative approach. Instead of balancing expenditure with actual death, balance it with risk.

This turns out to be much easier to do and is also more intuitive for handling situations where a lot of people take on a small risk as a result of some policy (rather than thinking of whether we should save one nonspecific person). In particular, we can look at people’s actual behavior to see how much they’re willing to spend to manage risk in their own lives.

Anyway, Tim’s a better writer than me, so read the article.

How do we value a statistical life?