In the 1970s, the Ford Motor Company introduced a new subcompact car called the Pinto. In response to several fatal accidents involving the Pinto, Ford prepared a seven-page company memorandum entitled “Fatalities Associated with Crash-Induced Fuel Leakage and Fires.”
In the memo, Ford estimated the cost of fuel system modifications to reduce fire risks in rollover events to be $11 per car across 12.5 million cars and light trucks (all manufacturers), for a total of $137 million. The design changes were estimated to save 180 burn deaths and 180 serious injuries per year, a benefit to society of $49.5 million. In coming up with the benefits, the value of human life was estimated to be approximately $200,000 per individual, a value arrived at by the National Highway Traffic Safety Administration.
As a result of this analysis, Ford felt justified in not making the modifications, since the costs exceeded the benefits.
Fast forward to COVID-19, and the same sort of cost-benefit discussions are taking place.
Earlier this week a Congressman stated, when asked about the U.S. response to the COVD-19 pandemic: “it is always the American government’s position to say, in the choice between the loss of our way of life as Americans and the loss of life, of American lives, we have to always choose the latter.”
He then went on to add: “There is no zero harm choice here. We are going to have look Americans in the eye and say ‘we are making the best decisions for the most Americans possible’ and the answer to that to get Americans back to work, to get Americans back to their businesses.”
This Congressman was essentially doing a cost-benefit analysis; comparing the cost to the American economy of being shut down with the benefit of saving lives.
The Congressman is not alone in thinking like this, and many people have started to debate the trade-offs between starting the economy too soon and risking lives versus keeping the economy shut down and saving lives.
There’s no doubt it’s a difficult question, and Science magazine had an informative article on the issue.
The modeling efforts of a group of economists at Northwestern University showed that even a yearlong lockdown makes economic sense, to allow time for a vaccine to be developed. The pause would shrink the economy by approximately 22%—a cost of $4.2 trillion. By comparison, the model shows that without containment measures, the economy would contract by about 7% over that year—but as many as 500,000 additional lives would be lost, which translates into a loss of roughly $6.1 trillion.
The price of human life in this study is the price that the U.S. Environmental Protection Agency used to gauge the costs and benefits of environmental regulations: $9.5 million per life.
Another economist at the University of California, Los Angeles, agrees that the economics point strongly toward strict measures.
However, the researchers do note that these models are only as good as the data they are using, and at this point, much of the data needed is still unknown.
So what should be done?
As these studies point out, it is not as simple as saying, “Save lives at all costs. Nothing is more important.”
But what if, and I know this is an extreme example, it cost $5 trillion to save one life.
Would that be worth it? I think many, if not most, people would probably say it’s not worth it; that $5 trillion could be better spent helping millions of people in terms of educating, feeding, and housing them.
But what if it only cost $5 to save a life? Most people would argue in favor of spending the $5 to save a life.
As I noted, it’s not an easy question to answer.
My only advice would be to make sure that the decision-makers are taking the advice of people skilled at doing such analyses, and that they have no bias one way or the other in terms of the outcome.
Borden's Blather 
The American situation is different to some other parts of the world in that it is assumed that government will assist people who are locked down and not earning money to keep themselves in necessities. In South Africa, this is not happening so the loss of life as a result of starvation and malnutrition induced illness is likely to outweigh the loss of life due to this new disease. Even in the US, if vastly reduced taxes are being paid due to business not operating and no purchases happening so no GST or VAT, how long can government afford to keeping paying people benefits? Where will the money come form for a whole year? I can’t see lock downs being sustainable long-term from an economic perspective.
LikeLiked by 2 people
I think the question is how long is the long-term…
LikeLike
I get both sides of the argument, but I can’t imagine what it would be liked to lose a loved one from this dreaded illness. I’d opt for saving lives, even at a pretty steep price.
There is something distasteful (even from an economist’s point of view) about putting a value on a person’s life. My mother-in-law is now living in a memory care facility, and we decided to rent her house out to help pay for the expense. That meant cleaning out her home, which had accumulated a lot of things over ninety years. We had an estate sale and got rid of a lot of things in her house before donating or tossing the rest. One of the things that affected me the most was watching someone unwilling to pay $2 but willing to make a $1 offer. I understand that this is common practice in garage sales, but I kept thinking, “Do our lives come down to $1?”
LikeLiked by 3 people
I agree that there is something distasteful about putting a dollar value on someone’s life.
It’s nice that you and your wife seem to be close by your mother in law; have visits been restricted because of covid-19?
And I think garage sales bring out the worst in people.
LikeLiked by 1 person
This experience has been a lot different because we’re on the outside looking in. We live four hours away, and visitors are not allowed to come in right now. Having gone through this a couple of years ago with my mom, I was the one doling out the information. My brothers live far away, so any medical decisions for my mom were in my hands. My sister-in-law lives close to her mother, but she can’t check on her right now either. The other part of the equation is that my mother-in-law hasn’t recognized her kids in years, so the whole thing is hard.
LikeLiked by 1 person
that does sound like a challenging situation in many respects. It’s nice that your sister-in-law is close by, even though she cannot do much right now…
LikeLiked by 1 person
Great post, Jim! We must look deeply into the decisions we make and their long term impact. In combat, we were always well aware of the human cost to accomplish a mission. But the math was easier then, most missions needed to be successful if even if it cost the life of every man there. We also had terms like, acceptable losses, anticipated losses, and the like that reflected some calculation of how many operators could die and the mission still be seen as highly successful. This calculations, however, require that we place a value on human life. Does it cost more to save a life than to let them die? What exactly is a human life worth? 9.5 million dollars? $200,000? If you had it to spend, what would you pay to stay alive?
LikeLiked by 1 person
thank you for your thoughtful insights, Brad. I am sure that even in combat, it was difficult to accept the loss of even a single life…
As Pete pointed out, coming up with a dollar value for a human life is quite distasteful, but I wonder if that sort of analysis is needed in terms of battling covid-19.
And Michael notes that economies always come back, but people who lose their lives do not.
As I said in my post, I’m glad I’m not the one having to make such decisions…
LikeLiked by 2 people
If the tiger only comes into the village once a month, and he only eats one person. Do we not build a wall to keep it out because it will cost twenty lives to do so? It is cost effective the first year, but the wall will last for many more and eventually well outweigh its original cost. Just stirring the pot a little…😁
LikeLiked by 1 person
another good analogy, Brad.
I knew I could count on you to stir the pot!
I hope you are having a good day – I was just watching a video of the protests today in Harrisburg… let’s hope it stays peaceful – and healthy…
LikeLiked by 1 person
I worry about their health, Jim, as I do for anyone, but I cannot imagine it being anything but peaceful. To come to blows over the effects of a deadly pandemic would have to be the epitome of foolishness. You can’t win me to your cause by being violent or stupid, but at least I don’t hold the stupid against you.
LikeLiked by 1 person
It would be incredibly foolish for it to turn violent. Ny guess is that most of these people jsut want/need to go back to work, and want life to return to normal. We all want that, the big question is when is the best time to do so. I think someimes you can hold stupid against someone… 🙂
LikeLiked by 1 person
this is where the numbers guys come into play with the scientists as well as the humanists. any and all things considered, i would pay whatever it took to save lives.
LikeLiked by 2 people
thank you, Beth, for your thoughtful comments.
even though I would consider myself a numbers guys, and I think they can certainly be part of such a discussion, I also think that they should take a back seat to the scientists and the humanists.
One concern might be if there is so much money spent on saving lives, does that have negative consequences somewhere else, where you are not spending money?
Again, I don’t have an answer, and I’m glad that I am not involved in such decisions.
Like you, I just hope they do consider the value of a human life, and it should be quite high.
LikeLiked by 1 person
Economies always rebound after massive devastation … Post WWII, Germany and Japan. Dead people never seem to make a comeback.
LikeLiked by 2 people
that’s a great way to think about it, Michael.
one caveat is that while what you say is true on a global or system wide level, at the individual level, some people/small businesses likely will not rebound after massive devastation. And those cases could have a devastating affect on those people.
LikeLiked by 1 person
You’re absolutely right about some people and small businesses … I’m opting in like many of the others about saving lives at whatever cost. Isn’t that what wars are about? Saving lives? Heck, if we can limit casualties during military offensives we can save them during a pandemic and a global economical collapse.
LikeLiked by 1 person
I’m with you. I want countries to take an extremely cautious approach to get their economies back in swing…
LikeLiked by 2 people
Most people seem to think that it will be like smallpox where if we wait long enough a vaccine will put an end to the threat for good. But it may be more like the flu where vaccines are only partly effective and we have a new pandemic each year due to mutations of the virus into new pandemics that have no effective vaccine.
Will we lock down for years as long as there’s a pandemic? Hardly, since totally destroying the economy will at one point cease to be an option.
We’re really lucky that this 2020 pandemic is not a great disaster for our children. We don’t like to think about the value of a life in a nursing home versus a life in a nursery.
By the way the smallpox vaccine was not only the best vaccine ever invented it was the first. We can always hope that Covid-19 is more like smallpox than the flu. Personally I think it’s not likely.
LikeLiked by 1 person
thank you for your thoughts, Bob. I am one of those that hope the vaccine will be a magic cure, but I also think such a vaccine will be more like the one for the flu. It lowers the risk of getting the flu, but does not eliminate the risk. I think we’ve learned to live with such risks without having to shut down our economy.
You also raise a good point about the elderly versus children. That is another ethical dilemma that I am glad I don’t have to make a decision on.
I certainly hope things return to normal soon, but I strongly prefer taking a cautious approach. But my family is lucky to be in a position to be able to wait it out; many families are not. So I can see why many people want to get back to normal asap.
It is a tough call…
LikeLike
I’m trying to figure it out along with everyone else, but a few questions/ comments…(not intended to be comprehensive, just thought provoking)
First…. I learned how to drive on a forest green, 5-speed, 1974 (I think) Ford Pinto. It served me well until I got T-boned at an intersection. No fire.
If it is about risk and saving every life, shouldn’t we then reduce the speed cars travel and have a national speed limit of say, 45/mph? It would probably save lots of lives. Tens, if not hundreds of thousands each and every year. Aren’t saving those lives more important than the convenience of speedy travel?
When you mention modeling…. look what we just saw… original models predicted maybe a quarter of a million deaths in USA alone (social distancing was figured in). Now, the model, by the same group, is predicting approx 60k deaths by August. They keep changing the model, but never get asked why it is so far off? The so-called “experts” keep changing their answer, but if their first model showed what the last one has, would we be in this situation?
Politics are involved and I’ll define politics here as making your side look good while making the other side look bad.
If we keep it shut down, what will be the resulting loss of life from suicide, starvation and death brought about because people can’t go to the doctors for routine exams or intervention on existing illnesses/pathologies? That could be a very, very big number. Is it worth it?
So, no answers….I’m not that smart. Just things to chew on while you are “working“ from home.
LikeLiked by 1 person
thank you for your thoughtful reply, and you raise many challenging questions.
first, I’m glad your Pinto did not catch on fire! Perhaps it was a good thing that you were t-boned, since I think it was rear collisions that were the big problem.
and you are asking the wrong person about speed limits – it’s one of my pet peeves that people drive way to fast and there is little enforcement of speed limits. I mean, the speed limit is a law, and people routinely break the law every day, and ut loves at risk. If I ran the country, I’d have no problems with a national speed limit of 45, and speed sensors every half-mile with automatic ticketing.
with regard to models, as more data becomes available, I would hope the models are updated to reflect the new data. that doesn’t make the old models wrong. Seth Godin wrote a great blog recently about the value of modeling: https://seths.blog/2020/04/all-models-are-wrong-some-models-are-useful/
As to your final point, the Science article that I linked to does bring up the point about suicides: “Public health experts broadly agree that more suicides happen in recessions.”
But at the same time, it points out that: “Yet economic downturns have typically translated into a net drop in deaths, says Christopher Ruhm, an economist at the University of Virginia who has studied the phenomenon. Although suicides can rise, decreased economic activity can save lives partly because it reduces traffic accidents and air pollution, he says.” It does offer some notable exceptions to this.
So it seems that even using past data and experiences makes it difficult to determine what will happen with covid-19 and the economy.
I’m in favor of taking an extremely cautious approach to get the economy up and running, but as I replied to Bob Jensen, our family is lucky in that we can get through this lockdown without too much of a financial burden; I realize many people cannot.
As you note, lots to chew on!
LikeLike
My view is that any financial sacrifice that saves lives is worthwhile but I get the point that governments have to make a trade off at some point. The question is: when? No one really knows the answer to that, but if it were my decision to make I wouldn’t want any deaths on my conscience. But at least I think I have a conscience, which probably disqualifies me from being a politician.
LikeLiked by 2 people
you hit the nail on the head, Clive. the big question is at what point do these decisions need to be made. And like you, I’m glad I don’t have to. And while there are some political leaders I have no faith in, I do hold out hope that a least a few of them have a conscience…
LikeLiked by 1 person
I hope you’re right, Jim. Our current governments haven’t yet presented any obvious candidates for that!
LikeLike
The Pinto example illustrates one problem with these quantitative analyses which is identifying everything that needs to go into the equation. The cost of modifications was minor. What Ford didn’t calculate, among other things, was the damage to the company’s reputation and the value of resulting lost sales.
Today, many are blind to the damage caused by the failure of principled American leadership in this crisis and in general under this administration. These costs are hard to quantify presently, but we will see them in the future. Anyone who thinks there are no such costs or that they are inconsequential is kidding himself just as Ford did.
But back to the topic of your excellent post. Government may view the reopening in terms of cost/benefit of the whole country; yet it is not up to a President, governor or mayor to decide what we do. It is up to each private employer to decide to open or not and under what conditions. Each employee must decide if it is safe to work, and everyone must decide if it is safe to to patronize businesses and engage in social interactions. No one can order you to go to a restaurant, mall or ball game
Although the Occupational Health and Safety Administration sets standards for workplace safety, I’ve seen nothing from OSHA setting standards, guidelines or rules for workplace safety in the age of coronavirus. OSHA’s general duty clause requires that each employer furnish a workplace that is free from recognized hazards that are causing or likely to cause death or serious physical harm or to take actions to abte the hazard. Every business must ask how many of its employees or customers is it willing to kill or seriously harm to do business. Some may use the faulty Ford analysis.
Great question!
LikeLiked by 1 person
great response, John. And you are right, Ford’s reputation was hurt when word of its cost-benefit analysis got out. And the same could happen to any country that does not handle covid-19 with the utmost care and concern for its citizens. I also agree that it will be up to each firm and individual to decide when they think it is best to go back to work or engage in social activities.
Great point about OSHA – I have not heard if they have come out with standards for what protections the workplace needs to offer against covid-19.
I want to err on the side of being overly cautious in terms of when it is safe to come out from the lockdown…
LikeLiked by 1 person
According to one blogger, the US government values one American life at $10 million.
Viscusi, W. Kip. “How the Government Values Risks to Life.” In Pricing Lives: Guideposts for a Safer Society, 23-44. PRINCETON; OXFORD: Princeton University Press, 2018. doi:10.2307/j.ctvc772d8.5
But the costs of Covid-19 are much more than lost lives. Those who recover will be stuck with huge bills. The cost of one day in the ICU must be astronomical not to mention the cost of caring for others who need less intensive care. Bankruptcy lawyers may benefit. What will this do to insurance premiums? There is no such thing as free healthcare. Unreimbursed costs are recouped through higher hospital and ancillary services charges and higher insurance premiums. Where these costs are covered by insurance, those companies will pass them on in premiums we all pay. There must be many other non-healthcare costs too.
LikeLike
This is the dilemma we face here. But I think we cannot afford to not work for much longer as too many people are starving here.
LikeLiked by 1 person
that’s part of the issue; some people are ok with the lockdown being extended, but for others it has serious repercussions. I don’t know if you can create an approach that takes such differences into account…
LikeLike
This same discussion will play out in the coming weeks and continue into months. Sometimes these models of data and statistical analysis seem so cold and without compassion. Being 64 and retired, my world can stay pretty much the same as Ohio takes baby steps to open back up again. I look forward to the future day (far down the road) when I can travel to my beloved Montana and see family there. On a side note, I drove a Pinto back in the day.
LikeLiked by 1 person
it will be interesting to see how all this plays out, and to then look back on it and see which approach seemed to work best. I’m not surprised you owned a Pinto, along with many others – it was a top selling car for Ford.
LikeLike
The Ford Pinto is a great metaphor for cost-benefit analysis of Covid mitigation. I found this post because I was wondering if someone had made the same connection.
If you use cost per quality-adjusted life year (QALY) as a metric instead of VSL, you would come to the opposite conclusion, since most Covid victims are very old. In other words, if lockdown were evaluated like a cancer treatment, Medicare wouldn’t want to cover it.
However, that idea exploded, like a Ford Pinto gas tank. The idea of not valuing all lives equally in face of a new threat, or that letting more people die might actually be a better outcome, is repulsive to humans even if it were the right call in strict actuarial terms.
The key difference with Covid, is the unseen, longer-term costs are on the cost of action/lockdown, while with Ford, they were on the cost of inaction (i.e., reputational risk and lost future sales). Early debates were focused on lives vs. “the economy”, but what you’re seeing now is also a major mental health crisis, doubling numbers of students with failing grades, etc. — a loss of *living* in addition to the loss of life from Covid itself.
LikeLiked by 1 person
Wonderful analysis, Sean. There are certainly many costs associated with the lockdown including economic, social, and mental. I there are also cost associated with deaths from COVID-19 including economic, social, and mental. hopefully the vaccine will be effective and get the economy, and people, back on track.
LikeLike