What is a person's life worth?: A Three Act Play
Act One: The realization of the problem
Everyone realizes that a person's life is worth more than what they could have earned in the labor market over their working life. A typical person does a lot more than work. For example, the average person spends over 15 hours a week on household production related activities such as maintaining the lawn and chores. People spend over 40 hours a week on leisure activities such as going to movies and socializing with friends.
(See expecantacy data website for Time Value of Day publication)
The question posed in legal cases where there is a death or significant injury is how do you put a price tag on the value of the non-labor market time? One approach is simply to let the courts decide. That is let the jury place a value on the lost of non-labor market life. Others think that the court system would be better served by providing some guidance to courts and juries on this issue.
Act Two: The solution?
Enter the economists. Starting in about the 1980's economists, who since the begining of modern economics period have been researching and studying human behavior thru utlity models, began formulating specific models to attempt to address this types of issues in court cases. Generally speaking the models and concepts offered by modern economists fall into two catagories.
One class of models attempts to value a person life by looking at how much people would pay not to have their life taken away from them. These types of models involve measuring how much people are willing to pay to reduce the probablity of death. Market measures of people's actions can be seen thru the insurance people buy and implictly thru the things that they buy. For example, how much more would you pay for an automobile that would increase your chance of survival by 25%? How about 75%?
The second class of models attempts to value a person's life by looking at what it would cost a person to replace or purchase all the things, out side of the labor market that the person does. For example how much would it cost you to hire a person to take care of your lawn? How about to watch over your kids at night? The replacement value of these activities is determined by estimating the number of hours spent by the applicable hourly wage.
See: Economic/Hedonic Damages, by Michael Brookshire and Stan Smith (1993) for an excellent overview of the approach.
Act Three:The re-realization of the problem
Economist Exits, Stage Left Daubert and related cases,has significantly effected how these actual issues are handled in the courts. In short, while most economist realize the power and the value of these types of economic models when applied to large groups of individuals, the same economist recognize the substantial problems when trying to apply these models to individuals. Thomas Ireland, et al, in a 1997 aritcle in said it best:
"The impact of the Daubert decision is clear. In every reported case in which Daubert, the Federal Rules of Evidence or their state statute derivatives, or even Frye, have been mentioned as a basis for the admissibility of scientific evidence, “hedonic damage” testimony has been disallowed. Furthermore, in every case in which the scientific accuracy of “ hedonic damage” testimony was considered as a basis for the evidentiary decision, this testimony has failed the various tests of scientific accuracy posed by the courts.” (p. 155)"
Everyone realizes that a person's life is worth more than what they could have earned in the labor market over their working life. A typical person does a lot more than work. For example, the average person spends over 15 hours a week on household production related activities such as maintaining the lawn and chores. People spend over 40 hours a week on leisure activities such as going to movies and socializing with friends.
(See expecantacy data website for Time Value of Day publication)
The question posed in legal cases where there is a death or significant injury is how do you put a price tag on the value of the non-labor market time? One approach is simply to let the courts decide. That is let the jury place a value on the lost of non-labor market life. Others think that the court system would be better served by providing some guidance to courts and juries on this issue.
Act Two: The solution?
Enter the economists. Starting in about the 1980's economists, who since the begining of modern economics period have been researching and studying human behavior thru utlity models, began formulating specific models to attempt to address this types of issues in court cases. Generally speaking the models and concepts offered by modern economists fall into two catagories.
One class of models attempts to value a person life by looking at how much people would pay not to have their life taken away from them. These types of models involve measuring how much people are willing to pay to reduce the probablity of death. Market measures of people's actions can be seen thru the insurance people buy and implictly thru the things that they buy. For example, how much more would you pay for an automobile that would increase your chance of survival by 25%? How about 75%?
The second class of models attempts to value a person's life by looking at what it would cost a person to replace or purchase all the things, out side of the labor market that the person does. For example how much would it cost you to hire a person to take care of your lawn? How about to watch over your kids at night? The replacement value of these activities is determined by estimating the number of hours spent by the applicable hourly wage.
See: Economic/Hedonic Damages, by Michael Brookshire and Stan Smith (1993) for an excellent overview of the approach.
Act Three:The re-realization of the problem
Economist Exits, Stage Left Daubert and related cases,has significantly effected how these actual issues are handled in the courts. In short, while most economist realize the power and the value of these types of economic models when applied to large groups of individuals, the same economist recognize the substantial problems when trying to apply these models to individuals. Thomas Ireland, et al, in a 1997 aritcle in said it best:
"The impact of the Daubert decision is clear. In every reported case in which Daubert, the Federal Rules of Evidence or their state statute derivatives, or even Frye, have been mentioned as a basis for the admissibility of scientific evidence, “hedonic damage” testimony has been disallowed. Furthermore, in every case in which the scientific accuracy of “ hedonic damage” testimony was considered as a basis for the evidentiary decision, this testimony has failed the various tests of scientific accuracy posed by the courts.” (p. 155)"
Labels: divorce, hedonic damages
posted by The Experts @ 9:02 AM
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