Why they might drum me out of the Economists’ Corp

Some of you are still asking me what I think of Steve Landsburg’s argument that we should pull the plug on people who did not buy (would not have bought?) fairly priced ventilator insurance. 

If you like invective, here is what Kevin Drum thinks.  Daniel Davies distinguishes between willingness to pay and willingness to be paid; fair enough.  You might also wonder how much long-term insurance is available in the first place.

But my objection is more fundamental.  I do not accept that ex ante choices provide definitive information about ex post values.   Taking another context, assume you think the chance of cancer is only five percent when in fact for you it is (for genetic reasons) fifty percent.  You fail to buy insurance, but does that mean you don’t value your life much?  In this case I am willing to downgrade the economic values we might infer from market behavior; it was based on faulty information.

Now take the underinsured, now-dead woman (Tirhas Habtegiris).  She thought, either implicitly or explicitly, that her chance of needing "plug-pulling insurance" was small.  Maybe this seemed reasonable at the time.  But in reality she needed that insurance with p = 1.  She was wrong.

Does the cancer case differ from the ventilator case?  Perhaps they are not identical in their moral implications (the probability mistakes may differ in their ex ante reasonableness), but in both cases, if we are going to use economic methods, I prefer to use the valuations based on better rather than worse information.  And based on correct information, the now-dead woman had a high value for that plug not being pulled.  Look at the ex post valuation, not the ex ante valuation.  After all, we know she is (was) on the ventilator, why go back to an imaginary state of affairs where this information is missing?

For selfish people, the value of life will be, in terms of willingness to pay, their entire wealth.  In terms of willingness to be paid, the value of life will be infinite or undefined.  When the "perfect information market valuations" turn out so screwy and disparate, that is a sign the whole method has broken down.  Note also the neat trick that altruistic people, who care about bequests, will appear to have lower values of life; that is fishy too.

Mark Kleiman makes some related (but non-identical) points, and here are his lecture notes on the topic.

I don’t buy Rawls or Harsanyi, both of whom begged the question on the moral force of ex ante agreement.  I also don’t think we should value human lives by looking at the value of risk reduction, although this may provide broadly relevant information.  You’ve just got to decide how much a particular life is worth.  If you are thinking "yikes," you are right, but, forgive the pun, that is life.

Are we spending too much money keeping people alive in their final throes?  From a rules perspective, yes.  On a case-by-case basis, maybe not.  I don’t know how to reconcile "rules" and "act" perspectives, even in simpler contexts. 

In any case our decision comes down to an ethical judgment, where the money and the life meet each other, mano a mano, on an open plain.  When it comes to this lady, a terminal cancer patient who was alert at the time, the marginal costs of keeping her going just didn’t seem that high.

Addendum: If you are interested in pursuing these issues, try John Broome’s "Trying to Value a Life," Journal of Public Economics 1978, and the discussion in the 1982 M. Jones-Lee book, The Value of Life and Safety.  Or read the comments below.