No 177: The first economist and the first economic question

ACCORDING to a book I am currently reading - Dr. Strangelove's Game: A Brief History of Economic Genius -  the first person who can be clearly recognised as an economic thinker was Sir William Petty (1623-1687). (This links to a Wikipedia article about him.)

Not the best looking man who ever lived, he was called a "bumptious and somewhat unpleasant man."

One reason why he was so important is that he seems to be the first person to have tred to put a monetary value on everything, with what he called "political arithmatiek". This included human life.

In measuring the value of the labour working on his vast lands in Ireland, he valued the worth of each working man at twenty times his annual income.

Doing this was an important development in the history of human thought. Firstly, it made it "possible to calculate the loss to a nation by deaths, especially in times of war and plague" (Dr Strangelove's Game p.21). In addition, a money value for everything "gave a common denominator against which everything could be measured" (p.22).


The true monetary value of a human life is a question economists are trying to answer even now, centuries later.

Some people are very uncomfortable with the idea of trying to do this.

However, if we believe that governments should take all costs and benefits into account before deciding whether or not to spend money on a project, the possible loss of human life must be included. For example, when deciding to build a road, the possible costs of traffic accidents need to be calculated.

This links to a very simplistic yet fun way of calculating your own worth. As you can see, I have tried it:

(If you try it, you need to make sure you click "scan" at the end to see the results.)

The maximum value of $10 would be achieved, according to the site, if you were a male, 33 years old, from Luxembourg, with a perfect body.

When I tried this again, with all the information the same except being a Mrs. Spottiswoode, instead of Mr, my value had fallen to $4.43. So it seems that a British woman is worth about a third less than a British man.........

Of course, this is fairly primative stuff. It's really just to stimulate discussion I think, so please don't take it too seriously!

However, there are of course serious issues here.

For instance, this article talks about how the Environmental Protection Agency (EPA) of the USA, in 2008 reduced its calculation of the value of an American human life from $7.8 million down to $6.9 million.

Critics of this decision speculated that the agency made the change so the Bush government could avoid tougher regulations on air pollution, water pollution, greenhouse gas emissions, and other environmental problems.
 

This article talks about valuing a year of human life. Doing this is important in assessing whether medical insurance companies should offer to pay for the cost of a new medical treatment or piece of equipment.  Previously, insurance companies calculated that to make a treatment worth its cost, it must guarantee one year of "quality life" for $50,000 or less. However, economists from Stanford University have written a report arguing it should go up to $129,000.

This suggest that by placing too low a value on human life, insurance companies have been avoiding paying for medical treatment that they should have been providing.

It seems then that the issue of the value of human life is as controversial now as it was in Sir William Petty's time.

It also seems that we still very far away from agreeing what that value should be.