Health Inflation, Wealth Inflation, and the Discounting of Human Life
Abstract:
This Article presents two new arguments against “discounting” future human lives during cost-benefit analysis, arguing that even absent ethical objections to the disparate treatment of present and future humanity, the economic calculations of cost-benefit analysis itself—if properly calculated—counsel against discounting lives at anything close to current rates. In other words, even if society sets aside all concerns with the discounting of future generations in principle, current discounting of future human lives cannot be justified even on the discounters’ own terms. First, because cost-benefit analysis has thus far ignored evidence of rising health care expenditures, it underestimates the “willingness to pay” for health and safety that future citizens will likely exhibit, thereby undervaluing their lives. Second, cost-benefit analysis ignores the trend of improved material conditions in developed countries. As time advances, residents of rich countries tend to live better and spend more, meaning that a strict economic monetization of future persons values the lives of our expected descendents above those of present citizens. These two factors justify “inflation” of future lives that would offset, perhaps completely, the discount rate used for human life. Until regulators correct their method of discounting the benefits of saving human lives in the future, the United States will continue to suffer the fatal costs of underregulation, and agencies will remain in violation of legal requirements to maximize net benefits.
Link: papers.ssrn.com/sol3/papers.cfm?abstract_id=1845504
Paper (PDF): SSRN-id1845504.pdf
It seems the quite interesting arguments about discount rates are marred by the political points the author wants to make. While not discounting might suggest we should regulate some areas more, there are other areas we’d want to regulate less, especially if regulation slowed the rate of growth at all.
Sounds like: better to save the life of a rich and happy person than a poor and unhappy person, because the former has more to live for. Am I reading this correctly?
If so, it seems pretty reasonable. It’s a gain in total utility to save a poor person’s life. It’s also a gain in total utility to transform a poor person into a rich person. And saving a rich person’s life can be expressed as the compound action of moving their life from unsaved to saved-and-poor, then from saved-and-poor to saved-and-rich. If you assume the utility of outcomes is ordered, then the utility of saving a rich person’s life is greater than that of saving a poor person’s life.
Whether in fact differences in real wealth are sufficient to overcome our true discount rate is a tougher problem. It seems to me as if middle class and above nowadays, and landowners in the past, have much more worthwhile lives (worthwhile to themselves, not to others) than the very poor. The former have a lot more time to think and to cultivate the higher parts of their souls. Whereas the very poor have to spend a much larger portion of their efforts on continuing to live. So a future of people at least that rich would be a material improvement over the median person alive today. To get any farther, though, it seems as though you’d have to assume reasonably widespread transhuman development. Which is plausible, though by no means certain.
Well, to the extent not saving the rich person would reduce total wealth. That would very much depend on the rich person, the nature of their wealth and who their heirs would be.
Yes, 2nd-order effects make it more complicated. But the simplifying assumption of no effect on other people is a reasonable one for addressing the questions we’re trying to answer here. The hypothetical is meant to express something about how to value future people. If we prevent extinction, then we are saving future people and their wealth.