On Balance: How Cost-Effectiveness Can Help People Hear Our Message

On the 26th of March, the Associated Press reported that, "Gov. Andrew Cuomo of New York has said that if all of his sweeping, expensive measures to stem the coronavirus saved one life, it would be worth it." This surely must be hyperbole, but he has also said, "We’re not going to accept a premise that human life is disposable… And we’re not going to put a dollar figure on human life." At the same time, it seems that there is an increasing call in public discourse for a sensible weighing of the pros and cons of "lockdown" measures, which I suspect anyone reading this blog would agree is a necessary component of good decision making. If Cuomo's sentiment about the value of life is shared among decision makers and the public, how do we get our benefit-cost message across in an effective way, that can actually improve the quality of public decision making, at this particular moment, in this particular context? 


In my view, the crucial takeaway from Cuomo's public statements isn't that there are decision makers out there who actually think that every single life should be preserved at any cost, but that he finds the explicit assignment of a dollar value to a human life is abhorrent. And, in the sense that Cuomo is thinking of. it is abhorrent. We know that the value of a statistical life (VSL) isn't the dollar value to society of saving a human life, but rather the dollar value of an amount of risk reduction sufficient to save one life, which we know is not the same thing, and captures only a portion of the value society places on human life.  The usefulness of the VSL for the purposes of measuring the welfare impacts of regulation is undeniable.The trouble is, explaining what it really is, to non-economists, is challenging at the best of times, and probably more or less impossible right now. People don't want to hear it, and there seems to be a real risk that at this very particular moment in time, some may simply disregard any analysis that involves monetization of human life.

So, how do we deliver the extraordinary value we know we can contribute with benefit-cost analysis? My answer is to just skip the step of monetizing lives saved. Don't use the VSL. Don't mention the VSL. Just compute the cost per life saved, and have that be the number that gets reported to decision makers and to the media. In other words, conduct cost effectiveness analysis and let decision makers decide whether the cost per life saved is too high to justify lockdown. I'm not suggesting that we should abandon VSL. I'm simply suggesting that at the moment, it may be getting in the way of the usefulness of our analysis.

In practice, all of the economic costs of lockdown would be calculated, as usual, then all of the non-mortality benefits of lockdown would be calculated, the latter would be subtracted from the former, and the result divided by the number of lives saved. If we were conducting an actual benefit cost analysis, this number would be the breakeven value of a life saved. This exercise still requires monetization of health impacts, which is not entirely free of controversy, but I suspect would prove less abhorrent than monetization of lives.

Now, as we know, in order to make decisions on the basis of cost effectiveness analysis, decision makers need some number to which to compare the estimated cost per unit of "effect." One possibility is that decision makers will simply have a "gut feeling" of what is too low or too high, and indeed, for very small or very large numbers, this may be good enough. If the cost per life saved by lockdown is estimated at $10,000, I suspect most decision makers would find it easy to support lockdown. If the number was $100 million, some might balk. But there is likely to be a wide range in between within which decision makers would find it difficult to come up with a coherent and justifiable threshold. Offering some candidate benchmarks might prove helpful. One benchmark that comes to mind is the VSL itself. Again, I would recommend not even naming it as such, but simply referring to it as a benchmark used by some government agencies when making decisions that involve mortality risk. Another potentially useful way to provide a benchmark might be to report a range of cost-per-life saved estimates of other regulations and policies that involve mortality reduction.

One might argue that benefit-cost analysts often do report numbers like breakeven cost-per-life saved, as part of sensitivity analysis. What I'm calling for goes beyond that, because benefit cost analysis inevitably draws attention to the monetization of life, and what I am arguing is that the usefulness of our analysis is undermined by doing so. Presented with a cost effectiveness analysis of the sort I'm suggesting, Governor Cuomo might still cling to the fanciful notion that there is no cost so high that society should not incur it, but among those who take the weighing of pros and cons seriously, I believe my approach would eliminate an unnecessary and distracting source of controversy at this particular moment in time.

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