« Economic Effects of Tsunamis and Other Catastrophes | Main | Response to Tsunami Comments--Posner »



Feed You can follow this conversation by subscribing to the comment feed for this post.


I agree with spending more on disaster precautions, and while we are at it, spending more on war precautions also, like not starting them. But to stick to the issue...

You said:

"Because value of life is positively correlated with income, this figure cannot be used to estimate the value of life of most of the people killed by the Indian Ocean tsunami."

Oh come on, economists and judges can't lose their stomach for estimating values of human life just because tragic events make it unseemly! That's what we pay them for! Look at the fallout from the Bush Admin's lowballing of the US aid pledge. That's the kind of embarassment that happens when economists slack off! I'll help start
us off...

The CIA world fact book gives the per capita share of GDP for an American as $37,800. The same figure for an Indian is $2900. So, with a simple ratio, we can deduce that an Indian is worth 1/13th of an American. So if an American is worth $7M, an Indian is only worth about $540K. Indonesians are more productive, so they are worth about $40K more... kudos to them.

But of course I don't believe that nor do I think the problem here (or the solution) is perfection of the cost-benefit analysis. These countries have long been on the short end of the policy stick. Why do they get paid poverty wages to make goods for the American market? Why do we support regional dictators and juntas that continually oppress and slaughter their people? We have exported jobs to these countries but have consistently failed to export the myriad pro-worker reforms and standards of decent treatment that 99% of Americans think were worth fighting for decades to achieve. Our administration initially thought $35M would seem generous!

It is horrible that the Indian ocean did not have a Tsunami warning system like the comparatively richer Pacific rim countries do. However, I place the blame for that lack on those who would only choose to install such a system if it were "cost justified". Who would only give worker's rights if they are proven to increase productivity. Who deny benefits to all in order to avoid the possibility of freeloaders. If you are going to put a number on human life, then I say you must also put a number on moral outrage, despair, empathy, and fairness. The People know how to value these things, as evidenced by the outpouring of private aid. Everyone would and does agree there should have been better warning systems, but I think the reason there was not is more systemic and sinister than those proposed.

Michael Francisco

Dear Mr. Posner,

I believe that your risk-probability calculations would provide greater insight for politicians if one particular assumption you seem to make were true. If politicians had unlimited resources, risk-calculus would work wonders for injecting rationality into politics.

However, resources are finite. This means that politicians never consider possible expenditures in isolation. Using resources to prevent one possible harm necessarily entails not spending to prevent a different risk.

Your article strongly suggests that the true political problem is a lack of respect for small probabilities, even when there are large possible consequences. (�The risk may be slight, but if the consequences, should it materialize, are great enough, the expected cost of disaster may be sufficient to warrant defensive measures.�)

However, consider the Spanish Flu pandemic. Just how much money would need to be expended to prevent that possible harm? Just how much resources would need to have been dedicated in war ravished Europe to prevent the flu? Could it have been prevented at all?

I conjecture that politicians face two more immediate problems. First, as Mr. Becker suggests, politicians recognize competing interests for finite resources and thus allocate for those they deem most valuable. This even fits your cost benefit calculus. The only change is that politicians must sometimes spend on either education or asteroid detection, and I hope most chose the former. Considering any risk in a vacuum does not tell politicians that much. Almost any risk-prevention is rational when considered in a vacuum.

Second, many low probability risks, such as Tsunami�s and Asteroids have low probabilities that are themselves subject to question. Politicians perhaps rightly second guess the reliability of probabilities as small as once a century or more.

Michael Francisco

Big waves - small pond

Man can move mountains. Yet where is the plan for Cumbre Vieja? http://www.infoplease.com/spot/disaster2.html
"The 500 billion tons of rock plunging to sea would create a splash more than 2,100 feet high and 25 feet across that would surge across the ocean toward America at 450 mph.
By the time it reached the U.S., the killer wave would be only about 160 feet tall. Even so, it could sweep inland for 12 miles. "

Boston would be gone. So would Washington DC. Yet Man has the technology to move mountains - where is the mountain moving to 'protect' the value of the 2 million+ dollar homes in Boston?

Nuclear power. Would there be nuke power in the US of A if the government had not stayed the hand of the free market with the Price-Anderson bill that limits liability to 12 billion? So much for 'economic analysis' and 'the free hand of the market'.

The 'risk analysis' ignores the "I've got my lifevest - too bad for you" answer:
Policy Makers have warning systems in place for thier evacuation. They need nothing else. If the potential problems are identifed and then do nothing, the policy makers are 'held accountable' - even if the most correct answer is "do nothing".


The World Health Organization noted that 1.17 million people died due to automobile accidents in 1998. http://www.safecarguide.com/exp/statistics/statistics.htm

According to the statistics available in that report, wealthy nations have a significantly lower fatality rate from traffic deaths than the poorer nations.

While the damage and death in the wake of the boxer day tusnami are horrible and shocking, if the finite resources of those governments was spent improving their traffic system and automobile safety standards, even a 10% reduction in fatalities from auto accidents would save as many people annually as were killed in this "once per century" event.

I'm sure a tsunami warning system will be put into place now, but I can understand why such a system was not put in place prior to the incident.


I cannot possibly see how people think that it is more important for NASA to spend money (LOTS of money- as in BILLIONS of dollars)on things like the space shuttle or the International Space Station and spend but a few million on the NEO search program.

None of NASA's programs will be more of a priority if an impactor is discovered. And it would not take an enormous allocation of funds to take large steps to tackle this issue. Private organizations such as the B612 Foundation ( www.b612foundation.org ) should not have to take the lead.

The probability of a civilization ending impactor is indeed very low, but that doesn't change the fact that it is very possible, and has happened in the past. And few people discuss the fact that even a Tunguska size impactor, such as the one Posner speaks of, could still cause massive damage, and the probability of that impact is notably higher.

In fact, many astronomers feel we are due for another Tunguska within the next 50 years. Will it take yet another devastating loss of life before we take this issue as serious as it should be taken?

Robert Schwartz

Dear Judge Posner:

Above you wrote:

"First, although a once-in-a-century event is as likely to occur at the beginning of the century as at any other time, it is much less likely to occur in the first decade of the century than later."

In a series of independent trials (e.g. the proverbial flip of a fair coin) that statement is clearly not true, as any given result (e.g. heads) may occur in any given trial regardless of the results of other trials. That much I remember from Statistics and Probability 101 taken many long years ago.

Whether or not an earthquake/tsunami is like a coin flip is a subject I will leave to the scientists in the audience. However, even if they are not independent of each other, I do not see why they should arrange themselves according to human calendric conventions.

It may be the first decade of the 21st century of the Christian era, but that is hardly a fact of universal significance. It is the third decade of the 15th century of the Muslim era a fact that may be as important in Indonesia. And in the Chinese system, also very important culturally in that part of the world, it is the year of the , (jia or wood) Monkey in the 78th cycle. See the Calendar FAQ:

I think that what may be of more importance is that modern bureaucratic government is relatively young in South Asia. The cultures in that area maybe ancient, but the states formed as a result of de-colonization and anti-imperialism in the middle of the twentieth century. As those governments mature they may well develop the institutional mechanisms to deal with these types of problems.


Robert, you misunderstood Judge Posner. The reason a once-in-a-century event is less likely to occur in the first decade of a century than later is that the first decade is only ten years long, while "later" is ninety years long. He is not saying that events "arrange themselves according to human calendric conventions." On the contrary, he wrote that "a once-in-a-century event is as likely to occur at the beginning of the century as at any other time."


While I find much agreement with your belief that low or even near-zero probability events should be guarded against, I have some reluctance with your enthusiasm to take precautionary measures against every possible catastrophe. There is, of course, the difference between certain and uncertain catastrophies. Not whether we know an accurate probabality, but simply if we have confidence that such an event will occur given enough time (human, not geologic). For instance, we know Tsunamis occur, and while the results of the recent Indian Ocean Tsunami was tragic, its destructive power is not unbelievable or unfathomable. As you suggest, perhaps this is something which happens on average every 100 years. It is quite a different proposition, however, to venture into unknowns. There is most certainly a nero zero probability of invasion from an alien race. Again, I'm not making fun--I agree uncertainty is no excuse for inaction, especially when the costs could be total destruction of humankind. But my question is how do you handle or manage this uncertainty? Scarcity demands we prioritize and limit our investment in our prevention and response measures. How do we rank the immensely uncertain events? How probability is low enough to justify dismissing it?


Robert Schwartz,

He was perfectly accurate.

"First, although a once-in-a-century event is as likely to occur at the beginning of the century as at any other time, it is much less likely to occur in the first decade of the century than later."

I think he meant the probability of the event happening within 10 years is less than it happening in the following 90. Which is correct. He is pointing out that politicians have a limited tenure, and will thus plan accordingly--not long term. We see the same myopia with respect so Social Security.


I take issue with this statement by Judge Posner:

"If from behavior toward risk one infers that a person would pay $70 to avoid a 1 in 100,000 risk of death, his value of life would be estimated at $7 million ($70/.00001)."

First, I doubt that most people have computed what they believe to be the monetary value of their lives. While lawyers and judges must do so in wrongful death actions (or perhaps policymakers in other contexts), most individuals do not engage in such cold, numerical analysis. Similarly, the fact that someone is wiling to spend, say, $500 per year for homeowner's insurance cannot be multiplied by the risk of loss to determine what they think the value of their property is. Most people's decisions are not so scientific.

Rather, the amount that any individual is willing to spend on precautions tells you more about how risk averse the person is and how wealthy he is (the wealthy can afford to be more risk averse). A wealthier person can afford better health insurance; that does not mean that he values his health more than does a poorer person. The same is true for nations. Wealthy countries like the United States and Japan have more money to spend on tsunami warning systems. The poorer countries abutting the Indian Ocean probably have not been wealthy enough for long enough to become as risk averse (and as willing to spend money to protect lives) as we are. This terrible disaster might serve as a wake up call for all countries to heed the risk of catastrophe.

Ari Tai

How do we measure the effect (NPV) of any tax on "maximal productivity?" i.e. a tax that degrades individual and/or community ability to react to a new (unknowable) challenge? My Gedanken experiment (used to be): Given that G. Kennan's containment policy (v. militarily defeating the USSR over the Polish elections or Berlin or Hungary or ... any provocation prior to the communists becoming a competent nuclear power in the 60s, i.e. a war that would have cost 100Ks of lives, v. millions) had a documented cost to mankind of 100M to 1B productive intellects (by death and enslavement), I argue that (punitive offense would have been a more humane strategy and that) one of these lost souls would have invented the "asteroid destroyer" (or another obviator of the problem) by now (at odds greater than those of the postulated disaster)..

So, (how much) should we tax (slow down) our productivity and technical accomplishments to provide for remediation of unlikely events (including global warming) or rather should we strive for the maximum rate if individual and community advancement to be best able to survive both the known and unknowable threat? At what point does a tax create a probability of greater harm? We can also have the same discussion about the merits of defense (building walls) v. offense (destroying a malefactor), both cost and loss-of-liberty.


P.s. Near-instant warning (delivering an SMS message) is nearly free. I suspect that today's civil defense network / early warning system should (at least) be a standard alerting mechanism i.e. an inverse 911-ish (aka Amber-alert universalized) mechanism. i.e. an emergency message system that delivers a couple of hundred characters using all existing comms mechanisms in a geographic area: sms, email (ISPs), billboards, etc. All those devices on networks, point-to-point and broadcast. Tested regularly, say, every 3 months. Everyone (even in the poorest countries) is within shouting distance of someone carrying a cell phone.

pps. note that we are roughly 660,000 years into a 600,000 year cycle on the greater Yellowstone (Nebraska-sized) caldera cooking-off (and covering half-the-country with 10-100 feet of ash). I think we should be running just as fast as we can :-) (and, yes, let the devil take the hindmost).

Robert Schwartz

AF and Palooka: I see your point.Judge Posner wrote:"First, although a once-in-a-century event is as likely to occur at the beginning of the century as at any other time, it is much less likely to occur in the first decade of the century than later."The sentence is elliptical. Your reading, which fills in the ellipsis as "the later 90 years of the century" renders the clause true, but trivial.I had filled it in as "the later decades of the century" which made it less trivial but more incorrect.Your reading, which gives the learned Judge more credit should be preferred. But I think my point that the real issue being the maturity of the governmental institutions in these countries is of some importance.



It is an ambiguous sentence, but in context it's meaning is not trivial. He is pointing out that because of the limited time for which a politician has responsibility over a country they will not properly plan for the long term. The probability of an event happening within one year is smaller than ten, and smaller in ten than in 100. The point, I think, is that the public needs to understand the danger over the long term and insist their leaders plan accordingly.


I share your concerns about calculating the value of lives, but Posner is using such calculations to properly restrain the analysis. One can always make a car, house, or country safer. The question is one of balance, one of justification. When one buys a Honda over a Volvo with more safety features, they are trading safety for savings. Just as individuals must make difficult questions which balance these competing objectives (safety and savings), so must societies. To do so, however, requires the unpleasant task of valuing human life. The fact that Japan and Indonesia have different levels of precautionary expenditures means little--they have made different value judgments and struck a different answer. That doesn't negate the need to contrain precautionary measures somehow. And while you may disagree with Posner's particular formula, you cannot assail the need for some quantitative measure of human life. Different societies with different levels of wealth and different value systems will come to different solutions. Clearly poorer countries, as poorer individuals, will choose the less safe, more cost-effective alternatives.


"Clearly poorer countries, as poorer individuals, will choose the less safe, more cost-effective alternatives."

No actually, poorer countries CANNOT choose because the safer technologies are beyond their purchasing power. It is false to characterize their policy decisions about these matters as free choice.

This is the ugly truth under the analysis, Indonesia could NOT afford a tsunami warning system, just as someone living on $7 an hour in the US can't afford a Volvo with side airbags, no matter how much they value the lives of their children. You want to characterize this as a autonomous choice between safety and efficiency, because Americans collectively have forgotten what it is like to have a BUDGET, our unlimited borrowing capacity makes us insensitive to the coercive realities of not having enough money to pay for everything that would otherwise be "cost justified"

If Indonesia and Sri Lanka had the per capita GDP of Japan, they too would almost certainly have invented in an emergency warning system.
Everyone is assuming here that the only reason precautions were not taken is a misunderstanding about the relative probabilities, but no one has proven there was any money available for the system even if the probability was 1 in 10.



India had the money, they chose not to. Thailand, while not rich by any means, had attempted to get other countries to cooperate but were turned down.

I agree with you that the other nations didn't have the money, but India alone could have employed a system that would have thousands of their own people.



I haven't overlooked the fact many (including myself) cannot afford a Volvo or that some countries can not afford some technologies. The point of my last post is that is precisely why we must make difficult choices and strike a balance--scarcity. That balance is different for each individual or country. The fact that some must forego certain alternatives is implicit in the dilemma of scarcity and that is what necessitates the valuation of human life in the first place!

However, you are just wrong that Indonesia or India, et al cannot afford Tsunami detection and alert infrastructure. This is something which, tragically, could have been greatly reduced in magnitude at minimal cost. We are talking millions, not billions, and India, Indonesia and the like have that money. The problem is in having the bureacracy identify which risks are worth addressing, and then effectively addressing it.


Palooka - I think we agree that, while the practice is distasteful, it is sometimes necessary to place a monetary value on human life. For instance, a cost/benefit analysis is necessary when making policy decisions about what safety measures government should either pay for or require of private actors, through legislation, regulation, or tort judgments. I took issue only with Judge Posner's suggestion that an individual's reaction to risk constitutes an accurate valuation of his or her life. I do not believe that most people are "rational economic actors" in that sense.

On a related note, I also have problems with the notion that the value of a human life varies from country to country (or state to state, or county to county), depending on a resident's expected income. Of course, in a wrongful death suit, expected lifetime income is an important factor in assessing damages. But there is a difference between the "value of human life" in the abstract and the amount that courts are prepared to award as compensation for a wrongful death. I submit that, when making decisions about basic societal safety -- like tsunami warning systems -- we should value all people equally and should not take measures to protect only those with higher incomes. The government should not buy a better tsumani warning system for Orange County than for East L.A. simply because it has wealthier residents. By the same token, we should not relocate police from inner cities to wealthy suburbs because the value of a suburbanite's life is greater.


I think you underestimate the amount of choice being exercised in Indonesia. According to http://w3.whosea.org/EN/Section1174/section1462/pdfs/surv/indonesia.pdf, Indonesians consumed 210 billion cigarettes in 2000 at an average retail price of about US$.70 per 20 sticks, which works out to about US$7 billion -- per year. Every one of those cigarettes represents a choice.
Nor am I criticizing that choice: far be it from me to dictate the minutiae of the lives of people I don't even know. Choices made by poor, faraway people often look wrong to us rich westerners not because they are incompetenly made but because we don't understand the context -- the probabilities and the values -- in which they are made.


I understand scarcity, I simply refuse to admit that it is right (morally if you will) to allow the rules of supply and demand to operate here. If the cost of tsunami warning systems are truly in the millions, then EVERY country with coastline should have one. Yes even if the rich countries have to subsidize the poor.

And before anyone gets hot and bothered over wealth redistribution, go to your closet and around your house and read the "made in _____"
labels. For every single one of those products, a US corporation banked a larger share than the entire foreign supply chain. An Indonesian made 24 cents fabricating those Nikes that you bought for $70.

The US consumes 25% of the world's resources. In the US, ONE percent of the people control 40% of the wealth! (That share grows by the minute.) Scarcity is a marketing tool. It is a construct of the capitalists. Your belief that scarcity is OK is what keeps the system running. So go on out and buy your Limited Edition Holiday Spice Pepsi! They might run out before you get there! I hear the Pepsi reserves are low.

I think we should all be like David and "have problems" with the notion of a variable dollar figure on the value of a human life. But we should all remember that notion is being applied every day in our courts, by people like Posner. By our policy-makers, on recomendations from people like Becker. Police ARE relocated from inner cities to the suburbs. Japan DOES have a better warning system than Indonesia. 3000 dead Americans sends us off to war while 800,000 dead Rwandans did not. Inequality is systemic.

Reducing people to numbers does not help their case. It is done solely for purposes of administrative efficiency. One week in any law school in the country will teach you that.

So don't believe the hype. Warren Buffet could afford to buy every country a Tsunami warning system for Christmas. Unless you are a millionaire, there is no reason for anyone reading this blog to prefer that scale of wealth inequality over universal access to universally affordable life-saving technologies.

And if that pitch doesn't work on you, I guess you can go ahead and tax the cigarettes some more.


"Yes even if the rich countries have to subsidize the poor."

The technology and investment necessary to provide for detection and warning systems is, as I understand it, negligible, even for "poor" countries. There is simply no need for the rich countries to provide the service or the funds for this particular service. Despite your lack of confidence in them, they ARE capable of this sort of thing. And they CAN afford it.

As for the rest of your rant, I'm not sure where to begin. But I'll give you a little tip--coming off as a Noam Chomsky toady doesn't impress. If pretending scarcity is some sinister machination of evil capitalists helps you sleep at night, then that's OK with me.


"On a related note, I also have problems with the notion that the value of a human life varies from country to country (or state to state, or county to county), depending on a resident's expected income"

It's not that the inherent value of people is different--on a religious or ethical level. But it IS necessary for a given country or society to manage its resources. It must decide what precautions are justified on a cost-benefit analysis, and doing so REQUIRES constraints placed on the "value of a human life." That is just the fundamental problem here.

A society cannot, for example, seek to just minimize the threat. If that were there only goal they would expend all of their resources on that objective until hitting (if they ever did) negative marginal returns. We can always be safer from global warming, terror attacks, etc, but we must balance those goals with economics realities.

Because each society has different value judgments and economic resources, each society will come to different solutions.

While Judge Posner's estimate of $7 million per life seems to offend many here, it is as Becker suggests quite generous. The net present value of life earnings of the average American is much, much lower than $7 million. His number is not a "right" number. It is just one of many ways to put a number on human life so that we must do the inevitable--manage our resources in an intelligent manner.


The total extinction of the human race due to the effects of an asteroid? Hmm. The destruction of civilization I can see, but all 6 billion+ humans unable to figure a way through seems unlikely.


"coming off as a Noam Chomsky toady doesn't impress."

What an excellent way to avoid discussing the substance of my post. So I should assume that you agree with 1% of the population controlling 40% of the wealth? Perhaps you think that by emulating the rich and endorsing their economic ideology they will allow you into the club? Good luck with that. Work hard, that's the road to billions I tell ya!

If Indonesia can afford a warning system without sacrificing any equally or more crucial programs, then great. Perhaps now that the genocide has slacked off and the tyrannical government that the US supported for decades is partially replaced, their leaders will take Posner's advice and install one.

"Because each society has different value judgments and economic resources, each society will come to different solutions."

Right, and when one society gives up on safety or education because of lack of resources while another society is draining Billions in profits off the goods produced by the first society... well I guess that's just manifest destiny eh?

There are non-economic ways to determine if a policy or precaution should be implemented. For example, referendum voting. It is funny how many people who profess to love freedom freak out when someone mentions direct democracy. But just think of how many "assumptions" and questionable "valuations" we could avoid just by asking the people what they think is reasonable.

Libertarian Girl

I don't think the American taxpayer would go for spending billions of dollars on asteroid defense.


I must side with Corey on his general lean. The day that we begin to run a cost-benefit analysis on human lives is the day that we lose our humanity.

The comments to this entry are closed.

Become a Fan

May 2014

Sun Mon Tue Wed Thu Fri Sat
        1 2 3
4 5 6 7 8 9 10
11 12 13 14 15 16 17
18 19 20 21 22 23 24
25 26 27 28 29 30 31