An American life worth less today

By Seth Borenstein, The Associated Press
Article Last Updated: 07/10/2008 09:58:11 PM PDT

WASHINGTON - It's not just the American dollar that's losing value. A
government agency has decided that an American life isn't worth what it
used to be.

The "value of a statistical life" is $6.9million in today's dollars, the
Environmental Protection Agency reckoned in May - a drop of nearly $1
million from just five years ago.

The Associated Press discovered the change after a review of
cost-benefit analyses over more than a dozen years.

Though it may seem like a harmless bureaucratic recalculation, the
devaluation has real consequences.

When drawing up regulations, government agencies put a value on human
life and then weigh the costs versus the lifesaving benefits of a
proposed rule. The less a life is worth to the government, the less the
need for a regulation, such as tighter restrictions on pollution.

Consider, for example, a hypothetical regulation that costs $18 billion
to enforce but will prevent 2,500 deaths. At $7.8 million per person
(the old figure), the lifesaving benefits outweigh the costs. But at
$6.9million per person, the rule costs more than the lives it saves, so
it might not be adopted.

Some environmentalists accuse the Bush administration of changing the
value to avoid tougher rules - a charge the EPA denies.

"It appears that they're cooking the books in regards to the value of
life," said S. William Becker, executive director of the National
Association of Clean Air Agencies, which
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represents state and local air pollution regulators. "Those decisions
are literally a matter of life and death."

Dan Esty, a senior EPA policy official in the administration of the
first President Bush and now director of the Yale Center for
Environmental Law and Policy, said: "It's hard to imagine that it has
other than a political motivation."

Agency officials say they were just following what the science told them.

The EPA figure is not based on people's earning capacity, or their
potential contributions to society, or how much they are loved and
needed by their friends and family - some of the factors used in
insurance claims and wrongful-death lawsuits.

Instead, economists calculate the value based on what people are willing
to pay to avoid certain risks, and on how much extra employers pay their
workers to take on additional risks. Most of the data is drawn from
payroll statistics; some comes from opinion surveys. According to the
EPA, people shouldn't think of the number as a price tag on a life.

The EPA made the changes in two steps. First, in 2004, the agency cut
the estimated value of a life by 8 percent. Then, in a rule governing
train and boat air pollution this May, the agency took away the normal
adjustment for one year's inflation. Between the two changes, the value
of a life fell 11 percent, based on today's dollar.

EPA officials say the adjustment was not significant and was based on
better economic studies. The reduction reflects consumer preferences,
said Al McGartland, director of the EPA's office of policy, economics
and innovation.

"It's our best estimate of what consumers are willing to pay to reduce
similar risks to their own lives," McGartland said.

But the EPA's cut "doesn't make sense," said Vanderbilt University
economist Kip Viscusi. The EPA partly based its reduction on his work.
"As people become more affluent, the value of statistical lives go up as
well. It has to." Viscusi also said no study has shown that Americans
are less willing to pay to reduce risks.

At the same time that the EPA was trimming the value of life, the
Department of Transportation twice raised its life value figure. But its
number is still lower than the EPA's.

The EPA traditionally has put the highest value on life of any
government agency and still does, despite efforts by administrations to
bring uniformity to that figure among all departments.

Not all of the EPA uses the reduced value. The agency's water division
never adopted the change and in 2006 used $8.7 million in current dollars.

From 1996 to 2003, the EPA kept the value of a statistical life
generally around $7.8 million to $7.96 million in current dollars,
according to reports analyzed by The AP. In 2004, for a major air
pollution rule, the agency lowered the value to $7.15 million in current
dollars.

Just how the EPA came up with that figure is complicated and involves
two dueling analyses.

Viscusi wrote one of those big studies, coming up with a value of $8.8
million in current dollars. The other study put the number between $2
million and $3.3 million. The co-author of that study, Laura Taylor of
North Carolina State University, said her figure was lower because it
emphasized differences in pay for various risky jobs, not just risky
industries as a whole.

The EPA took portions of each study and essentially split the difference
- a decision two of the agency's advisory boards faulted or questioned.

"This sort of number-crunching is basically numerology," said Granger
Morgan, chairman of the EPA's Science Advisory Board and an engineering
and public policy professor at Carnegie Mellon University. "This is not
a scientific issue."

Other, similar calculations by the Bush administration have proved
politically explosive. In 2002, the EPA decided the value of elderly
people was 38 percent less than that of people under 70. After the move
became public, the agency reversed itself.