14 Sep 2015

The Wealth-Health Connection

Economics, Shameless Self-Promotion 4 Comments

Inefficient regulations can obviously make people poorer, but did you know they can kill? There is actually a whole literature on this. I summarize the key points in my latest IER post. An excerpt:

By analyzing consumer behavior, economists can come up with rough estimates of the implied “value of a statistical life” (VSL) that this behavior exhibits. To repeat, it’s not that someone flirts with certain death in exchange for $10 million.

Rather, it’s that a typical person might choose product X which costs $1 less than product Y, even though product X has a 4-in-ten-million chance of death compared to a 3-in-ten-million chance with product Y. In this hypothetical example, the person is willing to take on an extra 1-in-ten-million chance of dying, in order to save $1. This is the sense in which the person’s behavior implies a monetary value of a certain life (versus death) at $10 million.




4 Responses to “The Wealth-Health Connection”

  1. Tel says:

    Interesting reminder of seen vs unseen.

    I do wonder whether anyone can accurately calculate the difference between 3 in 10M and 4 in 10M probability on any everyday action. I doubt the regular consumers can do it, I really doubt the EPA has either the ability or the incentive to get these things so accurate, and I often wonder about those medical trials.

    For example, suppose that people who are very disciplined and conservative (a) don’t smoke, drink, or overeat and (b) study hard in school and do a good job at work. In this case, we would also see a correlation between higher income and longevity, which wouldn’t necessarily cause more deaths if the government suddenly made everybody $1,000 poorer per capita.

    I would expect correlations of that nature to be very common. The guy who spends a lot of money on a nice sports car probably drives it harder than the guy who buys a Toyota Corolla. The wealthy housewife who insists on a big luxury SUV because the other ladies at daycare have them probably does not know the exact probability of flipping her vehicle at 50mph out on the highway.

  2. Colombo says:

    There is a story out there that says that cyclists who take more security measures are exposed to greater risks. If you spend a lot of money in the best security equipment (helmets, gps, high-visibility clothing) then drivers may assume that you are better protected and reduce the safety distance.

    • Harold says:

      Dutch helmet wearing cyclists are more likely to be injured – but that is because helmet wearing is rare and those that do wear helmets tend to be engaged in mountian biking or road racing. Don’t know where they find the mountains.

      In other studies:
      “Dr Ian Walker, a traffic psychologist from the University of Bath, used a bicycle fitted with a computer and an ultrasonic distance sensor to record data from over 2,500 overtaking motorists in Salisbury and Bristol.

      Dr Walker, who was struck by a bus and a truck in the course of the experiment, spent half the time wearing a cycle helmet and half the time bare-headed. He was wearing the helmet both times he was struck.

      He found that drivers were as much as twice as likely to get particularly close to the bicycle when he was wearing the helmet.

      Across the board, drivers passed an average of 8.5 cm (3 1/3 inches) closer with the helmet than without.”

      So not just a story, but a study.

      And there is such a thing as a traffic psychologist, apparently.


      • Colombo says:

        Thanks for expanding on that.

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