Imagine that you have been elected to serve as a member of
your local town council. The town engineer comes to you with a proposal. The
town can spend $10,000 to build and operate a traffic light at a town
intersection that now has only a stop sign. The benefit of the traffic light is
increased safety. The engineer estimates based on data from similar
intersections that the traffic light would reduce the risk of a fatal traffic
accident over the lifetime of the traffic light from 1.6 to 1.1 percent.
To answer this you turn to costs-benefit analysis. But you
quickly run into an obstacle. The costs and benefits must be measured in the
same units if you are to compare them meaningfully. The cost is measured in
dollars but the benefit the possibility of saving person’s life is not directly
monetary. To make your decision you have to put a dollar value on a human life.
At first you may be tempted to conclude that a human life is
priceless. After all there is probably no amount of money that you could be
paid to voluntarily give up your life or that of a loved one. This suggests
that a human life has an infinite dollar value.
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