A Price Tag On Death?

"It's a very black thing to talk about," - Economist Andrew Oswald

In a June 05, 2007 article in Scientific American JR Minkel asks:

If money could buy happiness, how much would it take to bring it back after the death of a partner, child or spouse? Two economists have attached dollar values to deaths by comparing the way that lost loved ones lower scores on happiness surveys with the way that greater incomes boost scores.

"It's a very black thing to talk about," says economist Andrew Oswald of the University of Warwick in England, but courts regularly award damages to bereaved survivors after the death of a loved one. Such awards, however, are not necessarily based on well considered rules. In the U.K., the 1976 Fatal Accidents Act provides for a lump sum of $20,000 to a surviving spouse or the parents of a minor. Recent U.S. court cases have valued life at as much as $18 million or as little as $10,000, according to a 2005 study.

Looking for a more equitable way to assign damages, Oswald and Nattavudh Powdthavee of the University of London reviewed data collected from 10,000 Britons tracked by the British Household Panel Survey, begun in 1991, which records major life events and includes questions designed to gauge overall mental health. They identified the amount of money, on average, that raised a person's mental health score by the same amount that a loved one's death lowered it.

They calculated that it would take $220,000 annually to raise someone's happiness to pre-death levels after a spouse dies, $118,000 for a child, $28,000 for a parent, $16,000 for a friend and only $2,000 for a sibling. Taking into account that some people might be harder hit than others could as much as double those amounts, Oswald and Powdthavee wrote in paper reported at a conference held last week on happiness research, law and policy at the University of Chicago (UC). Oswald agrees that more research is needed before the findings should influence policy, but he stands by the concept. "Just because it's hard to value this subtle thing is no reason not to try to do the best in being fair to victim," he says. "We're trying to make it logical instead of random."

Is this a logical way to compensate for the loss of a loved one?

Posted June 06, 2007


Duncan Clemens said...

I presume that this analysis applies to untimely deaths such as in accidents? I can’t see any relationship between happiness and a dollar compensation value that would make any difference in a case such as this. If one lost a child in an accident I don’t see how a parent would feel any amount of money could replace bringing their child back.

However, if we want to consider damages for a wrongful death then I think a cold economic calculation can probably be done. I’m not familiar with what was done with the 911 victims of the World Trade Center but as I remember different families were given different damages calculated on the estimated loss of lifetime income. For some families that was much higher than for others.


Pianoman said...

Duncan – One of the best articles I have come across on this subject is at this link

What value has a human life?

The article shows that using publicly available numbers, one can calculate that the U.S. government values an innocent civilian slaughtered by al-Qaeda terrorists on September 11, 2001 at $1.8 million, and an Iraqi civilian killed by Marines at $2,000.

Take it from there!

Neil said...

Good article, Pianoman.

Sad to say but happiness does appear to be bought by compensation. I know of a gentleman who was paralyzed from the waist down here in Ireland by an IRA shooting. He received compensation and now goes about his regular farming duties with special equipment that allows him to operate a tractor etc. He has trouble urinating and had a device implanted to help that. A friend of mine visited him in hospital and remarked that probably would give all of the money back and more if he could just get back to “normal”. He replied that he wouldn’t and he was perfectly happy as he was!


Janet Witherspoon said...


I found a similar sentiment in the book “The Five Gifts of Illness” by Jill Sklar.

People with very serious chronic diseases such as cancer come to accept their situation and see positives in it that sometimes means that if given the chance to return to what you called ‘normal’ they say they would choose not to do so.

That was a very surprising revelation to me.


Neil said...

I think this technique could be applied with some benefit to the medical area.

As I see it we can not provide unlimited medical services to everyone as the Democrats are proposing and raise taxes in an attempt to pay for this. On the other hand if the Republicans have their way only the very rich will have access to medical care as insurance companies continue to raise premiums and provide less benefits.

A physician told me that new guidelines came out for doctors with respect to mammograms that essentially would mean fewer mammograms would be performed but there would be a very small increase in the number of tumors detected. She can not follow these guidelines as to do so would open her up to a huge lawsuit and already her malpractice insurance is about $175,000 per annum. Many gynecologists are leaving the profession because risks from the hazards of childbirth can not be reduced and despite their best medical attention they end up being sued regardless of their competence.

What if we had the following situation in place:

Boards are set up in every State to review a doctor’s or hospital’s mistake that results in patient injury.

The government establishes a fixed scale of remuneration for various injuries up to and including loss of life.

If the mistake was due to incompetence the doctor or hospital would be punished monetarily and perhaps have the license removed.

If the mistake was not due to incompetence then a strict investigation would be held to find the root cause of the mistake and procedures put in place to prevent a recurrence.

The Board would make a determination that the patient had been injured by the doctor or the physician and would then pay out the fixed scale of remuneration to the patient.

It seems to me with a scheme such as this insurance premiums would drop (physicians would not be practicing defensive medicine); insurance costs would drop (one is no longer able to sue a doctor or a hospital); mistakes now covered up would be surfaced and corrected etc.


Joan Ferguson said...

Neil - I quite like this idea but I think it is going to take an independent canditate to win the Presidency and then try to push this. Even then I think the special interests will kill it.

Let's face it the U.S.A. is in its 'late Rome' period. It will be a slow and painful decline but all great Empires eventually pass away.


Avid Reader said...

How Much Is My Life Worth?

Apparently $663, 500!


Avid Reader said...

In the June 11, 2007 issue of the NY Time there is an article that is very relevant to this discussion. It is entitled “Pinning Down the Money Value of a Person’s Life” by Alex Berenson.

The following section which I am quoting and paraphrasing is the part that I think is quite interesting:

Health care economists have created the “quality-adjusted life year.” The idea is that a year in perfect health is worth more — both to the patient and to society — than a year spent in pain, depression or a wheelchair. So what’s worse? Losing one eye or both ears? Constant back pain or severe asthma? Late-stage diabetes or congestive heart failure?

To get the answer, these economists have developed several tests. The simplest and most elegant is called the standard gamble. People are asked to imagine having the symptoms of a certain disease — the pain, loss of function and shortened life expectancy. (Economists try to avoid using the specific name of the disease when they are describing it because some diseases, especially cancer, provoke disproportionately negative responses.)

Then the people are told that an operation exists that would cure them. But if the operation fails, the patient will die. Under those circumstances, what odds of failure will the sick person tolerate? The higher the odds, the worse the disease. For example, a survey of people with severe diabetes, including blindness, found that they would accept the operation even if there were only a 42 percent chance they would survive, according to a registry compiled by Dr. Neumann’s program at Tufts.

In other words, these patients would, on average, accept a better than 50-50 chance of immediate death to be rid of their condition. Patients who had suffered a severe stroke carried an even more negative view of their condition. On the other hand, people with severe sleep apnea — which causes them to wake up repeatedly during the night and requires them to wear a breathing mask in bed — were much more willing to live with the disease than stroke or diabetes patients were. The apnea patients would accept an operation only if their chances of dying were no higher than about 10 percent.

Economists put these conditions on a simple scale, with a year in perfect health scored at 1. Death is scored at 0, but 0 is not the lowest point on the scale. A person who is in intractable pain, bedridden, depressed and unable to care for himself could have a score below 0, because many people would rather be dead than living with those problems.

Once they know how to rank the “costs” of various diseases, economists can determine the worthiness of a particular treatment. To do so, they use the “quality-adjusted life-year,” or QALY. The idea of QALY is to put a value on treatments that may not save lives but improve them.

For example, if a blind person’s quality of life is “worth” 0.75 points per year, a treatment that would restore him to perfect vision — and raise his quality of life to 1 per year — is worth 0.25 per year of life. If the person lived another 30 years, the treatment would be worth 7.5 QALYs, or 30 times 0.25. With QALYs, that treatment would produce the equivalent of keeping 10 patients on dialysis — whose lives are also “worth” 0.75 points per year — alive for a year.

In theory, QALYs offer a single figure that can measure value of every treatment, from drugs to surgeries to preventive care, like vaccines and cancer screenings. Once they know how many QALYs a treatment is worth, economists can figure out its cost per QALY — the broadest measure of the cost-effectiveness of health care.

For example, what does screening for colon cancer really cost? First, divide the cost per screening by the probability that a screening will find cancer to determine the cost of a cancer diagnosis. Then divide that figure by the number of QALYs lost in an average case of colon cancer. And as any gastroenterologist will you, because screening is relatively cheap and colon cancer is expensive and difficult to treat, colon cancer screening turns out to be something of a bargain, at $10,000 to $25,000 per quality-adjusted life year — at most, one-third the cost of dialysis. Put another way, if the United States had to choose between dialysis and colon cancer screening, most economists would suggest it pick screening.

But the United States has never accepted that health care should be rationed, or that new treatments should not be covered simply because they are expensive. That attitude has led to coverage for technologies like the left-ventricular assist device, a wildly expensive way to help failing hearts pump blood more usefully.

Costing as much as $1.4 million per QALY, the device is an enormous use of resources. Some new cancer medicines are also inefficient, extending the lives of very sick patients by a few weeks at a cost of tens of thousands of dollars per case, or several hundred thousand dollars per QALY. Meanwhile, some people without insurance do not have access to cholesterol-lowering drugs, which cost just a few thousand dollars per QALY when they are prescribed to patients who have a high risk of heart attack.