Yes, It’s Economic Ignorance Day At The Guardian Again – Dawn Foster Edition

Now it’s true that we rational people don’t go to The Guardian for economic advice. Sadly it’s also true that all too many of those who rule us do indeed go to that pit of iniquity for their information on how the world should be. Then of course there’s Dawn Foster and her beliefs about reality:

Instead, we were gifted David Cameron’s assault on regulation. Cameron boasted that the corner-cutting and revocation of many regulations on building and business would save £500 per home built: a small sum in the grand scheme of things. Weighing it against the value of a potential lost human life should be impossible.

It’s impossible to – or it should be – to weigh the value of a lost human life against anything else? Rilly?

So, cars should travel at 2 mph then, should they, so that we don’t kill 4,000 a year on the roads? High rise flats are clearly more dangerous than bungalows in fire incidents. Therefore the entire SE should be covered with bungalows – national parks and all – rather than anyone even risk death at all in a tower block in London?

No, of course such ideas are ludicrous. But then that’s what Foster is missing, isn’t it, the implications of her demand. She’s insisting that resources are infinite. Or, if you prefer, that there are no opportunity costs. Amazingly, this isn’t the way to run the world.

Which is why we do put a value of that potential life lost:

How much should we spend on safety? Trading off safety against other factors is a difficult task, and politicians have looked to economists for help. The result is the ‘value of a statistical life’ (VSL), where income and other factors are measured to estimate society’s loss from a single death. But how has this economic measurement come about, how and why do the resulting values vary, and what are the implications for public policy?

Note what is actually done here. We do not say “Hey, that bloke’s worth £1 million!” Instead we look at what people actually do in their lives. What risks do they take, how do they insist upon being compensated for those risks? Scaffolders – more in the past than now – and deep sea divers face higher risks of death than other workers of the same skill levels. How much higher are the wages to tempt people to take such risks? There’s more to it as well, but the calculation isn’t, at all, what do we think anothers’ life is worth. It’s what, by their actions, do others appear to value their own lives at?

The UK Department for Transport (DfT) values the prevention of
a fatality on Britain’s roads at £1.8 million (2016 £s). This value
is used across government departments and agencies, including
the Office for Nuclear Regulation, as a de facto standard for valuing the
benefit of safety measures that preserve human life; however, there is no
evidential basis for this valuation as it is derived from a statistical analysis of
sparse survey data carried out 20 years ago that has now been found to
be flawed.

What that value is is most certainly argued about. But that there is a value, one we need to incorporate into our decision making, is certain. This is the very thing Dawn Foster is insisting should not be. Yet we can never make any decisions about the allocation of scarce resources unless we acknowledge this basic point. Therefore we shouldn’t be listening to Dawn Foster, should we?

But then we knew that, we’re just getting a reminder.