Regulatory Relevance of the Value of a Human Life

This post is about As U.S. Agencies Put More Value on a Life, Businesses Fret by BINYAMIN APPELBAUM, a highly informative article in today's New York Times that will come in handy when I teach about public goods later this semester in my introductory microeconomics class.

There invariably are some commodities that businesses may not find profitable enough to produce and sell even though the public may really-really-really need them. This peculiarity arises when a commodity is -- jargon alert! -- non-excludable: that is, the commodity is such that those who don't want to pay for it cannot be excluded from consuming it anyway.

For example, clean air cannot be limited only to those who agree to pay for it, which is why businesses have no incentive to clean up the air we breathe. Protection from foreign enemies cannot be restricted to only those who pay for it, which is why -- Blackwater notwithstanding! -- national defense cannot be provided by private businesses. Broadcast radio and TV are also non-excludable. (Commercial broadcasters do exist, however, thanks to advertising.) The fruits of fundamental research -- think E = mc², or Boyle's Law, or the Pythagorean Theorem, or existentialism -- while essential for human progress, are non-excludable too, which is why profit-seeking businesses are unlikely to invest in such research.

So, it is up to the government to pay for the things we need that businesses won't provide.

However, just because we would benefit from a commodity does not mean that the government should provide it -- costs must also be considered. Only if the benefits exceed the costs would it make sense for the government to step into the breach.

Unfortunately, this cost-benefit analysis can be a very tricky business.

For one thing, to figure the benefits of a public good -- technically, a public good is both non-excludable and non-rival, but I will not dwell on this issue here -- it may be necessary to have a dollar measure of the value of a human life!

Take tornado sirens, a popular example of a public good in econ textbooks. They save lives by emitting a loud sound that warns people about approaching tornadoes, giving them time to reach a safe bunker somewhere. But business can't make money by building such sirens because their services are not excludable: even those who refuse to pay will end up benefiting from the existence of the siren, and, knowing this, most people will refuse to pay.

Therefore, it is up to the government to provide a tornado siren. But such sirens cost money. What if the cost was a gazzillion trillion dollars and the benefit was 2 lives saved per year? Would a siren be worth the cost? Yes, if each human life was worth at least half a gazzillion trillion dolars; no, otherwise.

In other words, for rational public policy, a government would need to have a reliable dollar measure of the value of a human life.

Moreover, as Appelbaum's article makes clear, the rational regulation of industry is also heavily reliant on the government's estimate of the dollar value of a human life. Appelbaum also provides interesting examples of the application of the value-of-life concept to the regulation of auto safety, cigarette packaging, emissions from industrial boilers, etc.

U.S. businesses have expressed alarm that federal regulators have lately raised their value-of-life estimates -- in one case to $7.9 million per human -- because the higher the estimated dollar value of a human life, the stronger the justification for a regulation that restricts what businesses may do to cut costs at the expense of the safety of the general public.

The funny thing is that although federal regulators have recently raised their value-of-life estimates, they did so after a long period of torpor during which they refused to even adjust their estimates for inflation! Moreover, even the top-end estimates of the feds are less than the $8.7 million per human figure estimated by W. Kip Viscusi, the economist who initiated this whole approach to cost-benefit analysis. Nevertheless, the business lobby sees the government regulators as unrestrained and out of control! (By the way, why has Viscusi not won the economics Nobel yet? Are you listening, Bank of Sweden?)

It was during the Jimmy Carter presidency that the use of cost-benefit analysis was enshrined into U.S. law: every regulatory proposal would thenceforth have to come armed with a cost-benefit analysis. At that time the business community had welcomed this rationalization and de-politicization of the regulatory process. Now, however, the tide has turned and the politicians are more eager than ever to suck up to big business. This is why the U.S. Chamber of Commerce is now lobbying for the return of the use of political discretion and control of the regulatory process. As Appelbaum, brilliantly and mordantly writes, "The United States Chamber of Commerce is now campaigning for Congress to assert greater control over the rule-making process, reflecting a judgment that formulas may offer less reliable protection than politicians."

So true! In a plutocracy, the golden rule is that whoever has the gold makes the rules.

January Jones on Jon Stewart: She is Funny Too!

"Collapse Into Now" by R.E.M.

R.E.M.'s new album, "Collapse Into Now," will go on sale in March. If you can't wait that long, check out below the album's first video, "Mine Smell Like Honey." I liked the video -- it's monochromatic, until the very end, when it takes you by surprise and turns into sublimely restful and clarifying color -- and I just love the song.

An alternative version that scrolls the lyrics as the song unfolds is available here. Please also check out a few other sneak peeks into the album: Oh My Heart, It Happened Today, ÜBerlin, and Discoverer.

Sonic Youth and The Black Keys on Austin City Limits

Did you see last Saturday's episode of Austin City Limits? It was an absolutely extraordinarily super excellent blast of rock music at its best, featuring, first, Sonic Youth and, then, The Black Keys. The video is embedded below from the ACL web site.

Sonic Youth has long been a favorite of mine. Even after all these years, they remain experimental rock's avant garde. I like their stripped down and unadorned style in performances for live audiences. They play rock the way it should be played on a stage and this particular performance was one of the best of their's that I have seen (on video). The Black Keys are an insanely talented new band. Their music sounds to me like straight-up guitar-driven blues. Both bands have incredibly gifted guitarists and frighteningly good drummers, in Steve Shelley of Sonic Youth and Patrick Carney of the Black Keys.

Curiously, the Black Keys chose not to play their big hit, "Your Touch." But, again, the video is available on YouTube and is embedded below.

India's Devadasi Custom: Sex Slavery Under the Fig Leaf of Religion

The English film director Beeban Kidron (Bridget Jones: The Edge of Reason) has directed Sex, Death and the Gods, a BBC documentary on the devadasi custom in India. This vicious custom, although illegal in India since 1988, continues in a few areas. Destitute mothers -- often devadasis themselves -- sell their young daughters into sex slavery. The sale itself is framed as the mother dedicating her daughter to a life of service to a God. But nobody is under any illusion that it is anything but prostitution. This is an especially vivid example of how religion can be used as a fig leaf for any kind of atrocious behavior, whether it is murderous violence and terrorism or the sale of children into sexual slavery.

Here is a video with scenes from the documentary and excerpts from an interview with the filmmaker. See also:

Why India's 'devadasi' girls face a wretched life in the name of religion by Tracy McVeigh guardian.co.uk, Saturday 22 January 2011. [It was once considered a holy calling but a BBC film shows that becoming a devadasi is a direct path into sexual exploitation.]

Beeban Kidron on the devadasi system As told to Joanna Moorhead The Guardian, Friday 21 January 2011. [The film-maker is outraged by the practice, but says that 'evil mothers' are not to blame.]

'Devadasis are a cursed community' by Nash Colundalur The Guardian, Friday 21 January 2011. [Southern India's devadasi system, which 'dedicates' girls to a life of sex work in the name of religion, continues despite being made illegal in 1988. A veneer of religion covers the supply of concubines to wealthy men.]

Slippery Glenn!

Glenn Beck, the talk-radio superstar and ultra-vicious right-wing propagandist on Fox TV, is in the news. In a series of broadcasts he has accused Frances Fox Piven, a 78-year-old liberal academic, of proposing -- in an article co-authored with her late husband 45 years ago -- a plan to “intentionally collapse our economic system.” Moreover, as Brian Stelter writes in today's The New York Times, he has accused her on television this week of being "an enemy of the Constitution." Not surprisingly, "Anonymous visitors to his Web site have called for her death, and some, she said, have contacted her directly via e-mail."

These threats against Prof. Fox Piven can't be taken lightly. As the recent horrors in Tucson have reminded the world, the United States remains a country where idiotic and suggestible people can easily get hold of automatic weapons and copious quantities of deadly ammunition.

Although I do not watch Beck's program, I think I have an idea of his basic approach to propaganda: He starts by describing a government initiative that most people would find innocuous. He then uses the slippery slope argument -- the last refuge of every debater who realizes that he has no case -- to argue that the initiative, no matter how reasonable -- or even appealing -- it may seem, is only a start and that in the end all your rights will be taken away and you will become a slave of the government.

As proof, I give you -- ta da! -- Beck's Sept. 14, 2010 program. Beck begins with a gratuitous and vulgar attack on Michelle Obama, the first lady, and her anti-childhood-obesity campaign. He then launches a prolonged attack on Nudge: Improving Decisions About Health, Wealth, and Happiness, the recent bestselling bestselling book on behavioral economics and its policy implications, by Cass Sunstein and Richard Thaler, two world-renowned academics.

Last fall semester, I had introduced a new course on behavioral economics, and one of the textbooks I used was Nudge. To illustrate my lectures, I had been scouring the Internet for related video, and it was this search that had led me to Glenn Beck's program. I couldn't believe that one of the most popular programs on TV was devoting 15 precious minutes to a textbook that I was teaching from. This had never happened before and will almost surely not happen again. I was appalled by Beck's insane attempt to turn what was essentially a deep and policy-oriented treatise -- see the reviews in The Chronicle of Higher Education, Time, and The New York Times -- into some sort of blueprint for a program to enslave all Americans. But I was thrilled that I had something to impress my (largely apathetic) students with. After this, they would not be able to say that what I was teaching did not matter. The textbook was on TV, for heaven's sake!

Nudge argues that the choices that we make are in may cases distorted by deep-seated psychological weaknesses and that, as a result, government policy may be able to intervene to make us all better off without in any way taking away our freedom to choose as we please. (Take, for example, the fact that many Americans save far too little for retirement. Many workers do not bother to even join the pension plan available at work, not through conscious decision but simply because they are hobbled by procrastination. Thaler and Sunstein suggest that the current opt-in system be replaced by an opt-out system. Under an opt-in system a worker must write to his or her employer to be included in the company's pension plan. Naturally, many don't bother to do even that. Under an opt-out plan, on the other hand, every employee would automatically be enrolled into a pension plan, but would be able to opt-out by simply checking a box on a card. Such opt-out systems do not take away a worker's freedom to not join a pension plan, but have been found to dramatically increase enrollment rates and saving rates. See Thaler's article in Newsweek.) In his program, Glenn Beck -- what a coward! -- actually does not take on the argument of the book. He simply distorts the book's argument! He says that eventually "a nudge will become a shove" and that the freedoms that Americans take for granted will be taken away.

Thaler and Sunstein repeatedly clarify that they are against any reduction in a citizen's freedom to choose. They call their approach libertarian paternalism, to emphasize this very point. And yet, Beck completely ignores this! In short, Beck makes no argument against the Thaler-Sunstein proposals, distorts what the book says, and uses the slippery slope argument to frighten his largely semi-literate audience. As a coup de grace, Beck calls Cass Sunstein -- who, before joining the Obama administration, was a professor of constitutional law first at the University of Chicago and then at Harvard, and is one of America's most distinguished legal scholars -- the "most dangerous man in America." Twice!

Please read Brian Stelter's article on the Fox Piven affair. It seems that Beck is simply recycling the strategy he used against Nudge.

"The Spirit Level"

This post is about "Equality, a True Soul Food," By NICHOLAS D. KRISTOF in today's New York Times. This is the sort of article that makes The New York Times a great newspaper.

I had read Richard Wilkinson and Kate Pickett's "The Spirit Level" last year. It was an eye-opening experience. I remember finding it difficult to understand why a book with such deep policy implications had been by and large neglected by the mainstream media.

I discussed Wilkinson and Pickett's findings in my Behavioral Economics course in the recently concluded fall semester -- the PowerPoint presentation that I used is available here.

Traditional economics -- which is usually concerned with the nature of a society made up of rational people -- finds it hard to understand why the mere fact of inequality would affect a rational individual: after all, why should your happiness depend on someone else's income or wealth?

Heterodox economists -- most prominently Thorstein Veblen in "The Theory of the Leisure Class" -- knew that there was something missing in the economist's disregard for the effect of inequality on our psyches. So did the American humorist H.L. Mencken. In "A Mencken Chrestomathy" (1949), he defined "wealth" as "any income that is at least $100 more a year than the income of one's wife's sister's husband!" (By the way, the inflation calculator at the Bureau of Labor Statistics says that $100 in 1949 is equivalent to $919.34 in 2010.)

Wilkinson and Pickett show that -- like it or not -- inequality affects us in a profound way. It corrodes our souls, and, eventually, our bodies too.

Please see their web site for more about the data underlying their book.