Benefit-Cost Analysis
According to the National Highway Traffic Safety Administration (NHTSA), 41,800 people were killed in highway crashes in 2000, up from 41,611 in 1999, a 0.5% increase. The fatality rate per 100 million vehicle miles was 1.6, which means that 1.6 people were killed for every 100 million miles traveled. This figure is up from a record low fatality rate of 1.5 in 1999. "These statistics underscore the challenges facing this country in highway safety," said U.S. Transportation Secretary Norman Mineta. "Safety is an individual as well as government responsibility, and we must work together to improve it."
As a practical matter, it is important to recognize that almost all of the tens of thousands of highway fatalities per year are preventable. Using current technology, highway fatalities could be substantially reduced or eliminated by draconian public policy measures such as a strictly enforced nationwide 20 mph speed limit. Needless to say, popular opposition would be intense for any such proposal. Speed limits as high as 75 mph on major highways are widely popular because consumers derive significant economic and social benefits from speedy auto- mobile transportation. However, by failing to sharply reduce or eliminate highway fatalities, speed limit policy places a finite and measurable value on human life.
A. From an economic standpoint, explain how practical public policy sets a dollar value on human life. Is it efficient to do so?
B. Are there equity considerations one must weigh in judging the fairness of dollar estimates of the value of human life?