From: Rafal Smigrodzki (rafal@smigrodzki.org)
Date: Fri Feb 14 2003 - 08:18:26 MST
mail.virginia.edu
Subject: The price of human life RE: Fuel Efficient Cars (was Oil Economics)
Date: Thu, 13 Feb 2003 17:19:15 -0500
Message-ID: <BMEDJIBJGLNDOOANGIDLMEODCJAA.rafal@smigrodzki.org>
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Kai wrote:
> Rafal Smigrodzki schrieb:
> > Imagine that all participants in the economy would be required to
> > obtain a general liability insurance
>
> Enforced by whom?
### The state.
-----------------
>
> > You would be still free to burn and pollute as you want to, except
> > when you actually harm another person.
>
> Maybe I didn't get the clue, but as I understand it, a dangerous /
> polluting industry would still not be stopped by public will, as long
> as it delivers enough profit to pay the insurance.
### This is correct. Now, lest you think that it's only me who is such a
ruthless profit-shark:
The average human life does not have an infinite price, simply because the
average human has neither infinite resources nor the will to use all of what
he has to protect the lives of others. You are an example - you support both
in word and in deed your electricity provider by paying for their product,
although you could refuse to avoid complicity. At the same time this power
provider kills large numbers of people, both employees and third-party
citizens. The only way to stop that is to forbid the production of
electricity but for your own benefit you choose to accept this
dangerous/polluting industry, because you believe that your own utility
outweighs the harm to others.
An insurance system represents one of the ways of balancing the utility of
customers with the harm to others, using economic measures of efficiency,
and usually what amounts to a price on human life set by the courts. A
regulatory regime, forbidding the operation of certain industries, attempts
to achieve roughly the same goal, a balance of benefit and harm, using
political methods.
As almost always, a market-based system with appropriate information-flows
will outperform a monopoly run by politicians. This is why regulations are
less efficient, allow harm to more people and stifle more economic activity,
than a regulated insurance system where decisions are flexibly made by
thousands of independent entrepreneurs.
-----------------
The problem of
> pollution would become only an economical equation: How much profit
> can we draw out of a business, before we have to pay for the
> consequences, regardless of the damages produces in between. What
> about global consequences? We still don't know how much we are
> responsible for the damage to the ozone layer, the global warming,
> and we still don't know for sure, what the consequences will be.
### Exactly. If you don't know you are doing harm (=there is no credible
evidence you are doing harm), you should feel free to do whatever you are
doing, until evidence appears to discourage your activity.
--------------------
But
> in the meanwhile, the companies responsible go bancrupt, the persons
> who were in charge retire or die, and maybe we all are responsible to
> a certain degree. How could any court ever decide such a case and how
> much money is a premature death by lung cancer worth?
>
### This is why I am talking about a regulated insurance market, where an
insurance company would be liable long after the offending company is gone.
The court must be presented with scientifically valid evidence of harm being
done by the defendant to the plaintiff, this is they way courts decide cases
(or at least should, IMO). You cannot sue the whole world (as in "we all are
responsible"). The value of a lung cancer death could be calculated by the
loss of QALY (quality-adjusted life-years), multiplied by a constant, which
might be set globally e.g. by analysis of randomly selected samples of the
population, presented with choices describing the human life prices and
their financial consequences (changes in their own insurance premiums and
prices of various commodities). I am quite open about the optimal procedure
for pricing human lives.
Rafal
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