Re: Rational Pricing and Terrorism

I Find Karma (
Thu, 5 Sep 96 03:00:28 PDT

Ah, the good old "what is a person's life worth?" economics of scale
reared its ugly head again...

> Is the price worth paying? This question will never pass the lips of public
> officials who value their jobs.
> ...
> Is this a good investment? The very idea of "investing" in lives the way,
> say, AT&T invests in telephone switches, is repulsive to most people.

As well it should be. The truth that I can calculate exactly how much
wealth someone is expected to generate before s/he dies, thereby giving
me a "rational" price value of that person, is just plain repulsive.

> More generally, Kip Viscusi, an economist at the Harvard Law School, has
> estimated that saving a life at a price of more than $50 million is
> self-defeating because it drains resources from other life-saving purposes.
> While it is impossible to trace cause and effect, $50 million funneled into
> antiterrorism (or anything else) that marginally reduces expenditures on
> mammograms, street lights and fresh veggies costs a statistical life.

It's difficult because there are tradeoffs, and no public policy maker
wants to be stuck being seen as cold and uncaring by the press (and
therefore the public).

But is it worth it that 50% of medical expenditures in the U.S. go to
cover costs incurred by people in the last 6 months of their lives?
In purely money terms, probably not. Is it worth the millions we end up
spending per AIDS patient? In purely money terms, probably not. But
what can you do when the country continues to perpetuate the myth that a
human life is worth as much money we can spend on it, not as much money
as a rational market would expect us to pay for it? The inequity has
got to rear its ugly head in a less-than-charming way.

> But such arguments work both ways. If the point of terrorism is to disrupt
> the society and economy, much of the reward is in the excessive response.
> It is not far-fetched, after all, to imagine a day when the quality of
> American life is seriously sacrificed on the altar of deterrence.

Terrorism seems to be a paradox to rational market forces. If you deal
with a terrorist, you give him incentives to terrorize some more; if you
don't deal with a terrorist, you give him incentive to find more vicious
brands of terrorism to get you to deal with him. So what is the proper
way to respond to terrorism? Or is there none by definition?

> The moral, Hahn argues, is not to give up vigilance, but to understand
> that too much of it can be a bad thing.

Too much of ANYTHING can be a bad thing.


PS - Rob, recognize the quote below? 8)


I was wondering if it would be reasonable to model the Stalinist terror as a sudden chaotic nonperturbative backfiring of the smooth linearly perturbative engine of the Hegelian dialectic? -- Patricia Schwarz