The most recent Science has an article about this. Apparently the Environmental Protection Agency (EPA) used one set of studies to decide on a value of $6 million. The Office of Information and Regulatory Affairs (OIRA) branch of the Office of Management of the Budget (OMB) wants them to use a different standard of $3.7 million. But because the EPA uses cost/benefit analysis to decide whether to make various kinds of regulations, this means that they would make fewer rules, which would be attractive to the White House, which is in favor of less regulation.
To understand what's going on, you have to understand how one computes the value of a human life. You can't just ask someone "how much would I have to pay you to kill you?" because, well, it doesn't much matter how much money I have if I'm dead. Instead, you try to ask the question "How much would I have to pay you to increase your risk of death by x%?" and then Divide payment by risk to produce the total value of a life. [0] Getting the value of a given risk is typically done in one of two ways. One approach is to to just ask people the question via a survey. The second approach is to examine people in high-risk jobs to see how much of a "risk premium" they are being paid.
OIRA's objection is that the wage studies are biased because workers value their lives more than the general population. This isn't totally implausible, since the employed typically have more money and so may value additional money less. When you just use surveys, you get a cost of life of $3.7 million, which supports this claim somewhat. On the other hand, revealed preference studies such as those on high-risk jobs are often considered more likely to reveal people's true values because surveys require people to speculate on their preferences.
OIRA's argument is rendered substantially less convincing by the fact that they also want EPA to adjust its practices in several other ways, all of which would result in less regulation. In particular, OIRA wants EPA to use a higher discount rate (effectively increasing the computed cost of any regulation), value the lives of older people less highly, and measure quality of life as well as well as just death rate. Taken individually, all of these changes are at least potentially plausible, but the fact that they all have the effect of making environmental regulation look less cost-effective makes one wonder if OIRA is fishing for a specific result.
[0] It's of course arguable that just because someone is willing to take a $1 payment
for a 1 in a million risk they won't take $500,000 for a one in two risk. However,
the risks we're interested in measuring are typically pretty small so it seems
reasonable to assume that risk valuation is linear over the relevant range.
Posted by ekr at March 24, 2003 10:09 PM