Sunday, April 28, 2013
About Those Costly Rescues in Bangladesh
According to this account, rescuers are still scouring the rubble of what used to be several garment factories in Bangladesh, where hundreds are believed to be still entombed. Large amounts of time and materiel are being devoted to the task, which will no doubt disturb those six-figure American journalists who think that too many resources are being spent on saving lives. After all, in a poor country officials could just write off the handful of survivors and spend the money on promoting new sweatshops to replace the old. That’s a tradeoff we think they should be happy to accept.
Seriously, it is often noted that much more is spent per life saved to rescue someone after a disaster than to take precautions beforehand. Economists justify low investment in precaution by saying that, actually, two different goods are involved, “statistical lives” of workers who might be saved if safety conditions were improved and “identified lives” of those who can be seen to be in imminent danger. A lower price for the first is compatible with a higher price for the second.
I have always found this to be unconvincing. What is the difference between these two kinds of lives? In a word, information. Before the fact we can forecast a certain number of expected lives lost but we don’t know who they will be. After the fact we do, and that’s the difference. Now, I tend to think that more information leads to better judgments—not always, but on average. If the “value of life” goes up as we gain more information about the life in question, isn’t that saying something? Media coverage often dwells on the personal details of individuals whose survival depends on rescue dramas—their classmates from school days, their spouses and children, their dreams for the future. This makes us value them more. As for the unknown individuals who are statistically expected to be at risk, we don’t know their friends, families and dreams, and so we value them less. Who wants to cast a vote here for ignorance?
Taking a step back, the root problem for economics is that its value system is entirely ex ante. Things have value according to our willingness to pay for them, but this approach is situated in time prior to the acquisition or realization of whatever it is we are valuing. Our experience enters in only to the extent that it informs future willingness to pay valuations. It’s not that informed, retrospective judgment is downplayed; it has no direct role whatsoever. There is no place in economic valuation for looking back and asking, “So what did this do for me after all?” Putting a price tag on risk of injury or death is no different: whatever we learn after the fact doesn’t count.