How Do Economists Go About Estimating the Value of Life

question 20

Multiple Choice

How do economists go about estimating the value of life in the context of job safety regulation?

• A) They add up the cost of implementing all of the job safety features in firms that have excellent job safety records.
• B) They estimate the compensating wage differential that workers in a dangerous occupation receive for the level of risk that they assume, and then extrapolate that figure for a scenario in which the risk is reduced to zero.
• C) They take the amounts that are rewarded to victims' families in wrongful death law suits.
• D) They estimate the difference between profits that are earned by firms with dangerous working conditions versus those with safer working conditions.
• E) They never engage in such an exercise, as life is infinitely precious and thus no value can be placed upon it.

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Definitions:

Price Controls

Government-imposed limits on the prices that can be charged for goods and services in a market.

Consumers Gain

The benefit or surplus that consumers receive from purchasing goods and services at a price lower than their maximum willingness to pay.

Own Price Elasticity

The responsiveness of the quantity demanded of a good to a change in its own price.

Rent Controls

Government-imposed limits on the amount landlords can charge for leasing property, aimed at making housing more affordable for renters.