COSTOFLIVING

”Yourmoneyoryourlife.”Thechoicetraditionallypresentedbythehighwaymanissupposedtohaveonlyonesensibleanswer.Moneyis,afterall,nousetoacorpse.Yeteconomistsoftenstudysomethingratherlikethehighwaymansofferinanattempttouncovertheanswertoanimportantquestion:howmuchisyourlifeactuallyworth?

Likemanyawkwardquestions,thisisonethathastobeanswered.Safetyregulationssavelivesbutalsoraisethecostofdoingbusiness,acostweallpaythroughhigherprices.Aretheyworthit?Ourtaxespayforlife-savingspendingonroadsafetyandfirefighting.Aretheyhighenough,ortoohigh?

Sohowmucharewewillingtospendtosavealife?Atraditionalplannersapproachusedtobetomeasurethevalueofwageslostduetodeathorinjury.Thatsdreadful:itconfuseswhatIthinkmylifeisworthwithwhatmybossthinksmylifeisworth.

Soanalternativeistoaskpeoplehowmuchtheywouldpayforasafercarorkitchencleaner.Butsuchsurveysdonotalwaysproducesensibleresults.Ouranswersdependonwhetherwerebeingofferedasafer?10householdcleanerandthenaskedifwewantthemoredangerous?5version,orwhetherwereofferedthe?5brandandthenaskedifwellpay?10forthesaferproduct.Peopleoftenanswer”no”tobothquestions,contradictingthemselves.Theseinconsistenciesmeanthatwereeitherirrationalorlyingtopollsters,andperhapsboth.

Economiststhereforetendtopreferobservingrealchoices.Ifyourewillingtocrossabusystreettopickupa?20note,theeconomistwhoputittherecaninfersomethingaboutyourwillingnesstoacceptrisk.Moreorthodoxapproacheslookatcareerchoices:ifyourewillingtobealumberjack,partofthatdecisionistoacceptriskinexchangeforfinancialreward.

Beingasoldierisrisky;soisbeingadrug-dealerorprostitute.Thedifficulty,evidently,istodisentanglethehealthriskandthefinancialrewardfromalltheothermotivationstochooseaparticularwayoflife.Thatisnteasybuteconomiststry.

WorldBankeconomistPaulGertlerandhiscolleaguesreckonedthatMexicanprostitutesvaluedtheirlivesatabout$50,000peryear,basedonwillingnesstotakemoneynottousecondoms.Atfivetimestheirannualearnings,thatsasimilarfiguretoworkersacceptingriskyjobsinrichcountries.

Thereareanomalies.SteveFreakonomicsLevittandsociologistSudhirVenkateshcalculatedthatChicagodrugdealersseemedtovaluetheirentirelivesat$50,000to$100,000-lowindeed,evenforpooryoungmenwhosecareerchoiceindicatesatasteforrisks.

Whateverthefrailtiesofthesecalculations,theyarethebestwehave.Andfarfromcheapeninglife,thissortofresearchoftenhighlightsjusthowvaluableoursafer,healthiermodernlivesreallyare.KevinMurphyoftheChicagoGraduateSchoolofBusinessrecentlyvisitedLondontopresenthisresearchonthevalueofhealthimprovementsintheUSsince1970.Theyrevast-about$10trillionintodaysmoney.Lookingfurtherback,ifyouhadtochoosebetweenthematerialprogressofthe20thcenturyandtheimprovementsinhealth,itwouldbeatoss-up.Thehealthgainsareasvaluableaseverythingelseputtogether.Encouragingly,healthinmostdevelopingcountrieshasimprovedfasterthaninrichones,suggestingthatglobalinequalityisfalling.

Andamorepersonalpieceofgoodnews:MurphyreckonsthedeliciouscheeseburgerIatebeforeinterviewinghimonlycostme?1worthofhealth.Talkaboutagooddeal.