Economist Writing Every Day

Bryan Caplan has kindly responded to my latest blog post, which was in turn a response to his blog post on the relative value of human lives by age. Caplan has always been kind in his responses, even when responding to pesky graduate students — kind in both his approach and the time he dedicates to responding thoughtfully. So I appreciate his taking the time to respond to me, and I will offer a few more thoughts on the matter.

To briefly summarize: Caplan believes that young lives (10 year olds) are worth 100-1,000 as much as old lives (80 year olds). I contend that they are closer to roughly equally valued. My disagreement with Caplan can be broken down into two categories:

• A. Caplan’s three reasons why young lives are worth more (a lot more!) than old lives. I didn’t respond to that directly, but I will do so here. I think Caplan is narrowing the goalposts.
• B. A disagreement over the shape of the VSL curve over the lifetime, specifically whether an inverted-U-shaped curve makes sense. I’ll say more about this too, but Caplan doesn’t just have a beef with me, but with almost everyone in the VSL literature!

Let’s start with Caplan’s three reasons, which he calls “iron-clad”: young people have more years to live, those years are generally healthier, and young people will be missed more when they are gone. The first in undeniably true on average, the second is probably true almost all the time, and I’m not sure on the third, but I’m willing to admit it’s not a slam dunk either way.

So how can I disagree? These are only three things. There are many other considerations, and we can imagine other reasons that old lives are valued as much or more than younger lives! I’ll call mine 4-6 to go with Caplan’s 1-3:

4. Old age spending is the largest component of public budgets in developed countries (and this is unlikely mostly due to rent seeking or the self interest of younger generations).
5. The elderly possess wisdom which is highly valuable and that the young benefit from.
6. The last years of your life are, on average, worth a lot more — you are usually very wealthy, have no employment obligations, you have grandchildren you love (without the responsibilities of parenting), and are (until the very end) generally healthy too.

Taken as a whole, I think these three reasons present a strong counterargument to Caplan’s three reasons. And I think we could certainly come up with more! My point being that Caplan has picked three areas where clearly young lives have the advantage, but ignored all the good reasons why old lives are more valuable. These is what I mean by we shouldn’t rely on our intuitions. Neither of our lists are exhaustive, but let me elaborate on a few of these.

When it comes to public budgets, old lives have the clear advantage. The old age portion of Social Security is now over $1 trillion annually, easily the largest government program in the US. And the second largest? Medicare at over $700 million. K-12 education is quite large too, at just under $700 million. I’m not saying young lives don’t matter! But in terms of policy priorities (if we can interpret public budgets that way), society clearly favors the old.

But should we interpret the large spending on the elderly as an indication of social priority? I think yes. First, it’s not just rent seeking by the elderly: young people are slightly more likely than the elderly to support Social Security. I learned this from years of reading Bryan Caplan! And the young don’t support Social Security because they expect to benefit from it: about 2/3 think they will receive nothing! I firmly believe they will end up being wrong, but that’s what they say. In some cases, it might be difficult to judge whether public spending accurately represents social priorities. For old-age spending today, I think it’s pretty clear.

On my #5 point, I think it’s pretty widely agreed that elders in a society possess knowledge that is beneficial for all, including the young. If you are a young parent and you have a question about raising your own children, who do you call? If a quick Google search and Emily Oster‘s book don’t give you the answer, you probably call your parents. Have a question about your career? Marriage? Consulting your peers is our first instinct, but often we also want the wisdom of ages.

But maybe by age 80, we’ve milked all the wisdom we can out of our elders? I doubt it. On average, someone who reaches age 80 will live almost another decade. That’s a lot of wisdom lost. Supreme Court justices often serve into their 80s now (RBG was 87!), and arguably their writings get better over time. Perhaps high court justices are an aberration, but I don’t think so. While some comments from the elderly may have the flavor of yelling at a cloud, they do have genuine wisdom as well. Older people have better knowledge of politics, for example (though some of this is just the effect of education, as I believe Caplan shows in his MRV book — still, the older are better educated!).

On #6, I won’t go into much detail, other than to say that old people report being very happy, roughly as happy as young people and much happier than those at mid-life! My points in #6 also feel “iron clad” to me.

Value of a Statistical Life, Again

Caplan also disagrees with the “inverted-U shape” of the lifetime VSL graph from Aldy and Smyth. Specifically, he finds it “positively insane” that the value of life would be increasing over some age range. I agree it seems counterintuitive. And I don’t mean to appeal to authority here, but Caplan does not just have a beef with me, but with almost the entire VSL literature.

For example, here is a chart from Aldy and Viscusi (2008). This is the same Aldy as the other chart, but this is published along with Viscusi, who essentially invented this literature. And it’s in a top journal, the Review of Economics and Statistics. Again, I’m trying hard not to appeal to authority here, but this is standard in the literature!

Here’s another estimate from Murphy and Topel (2006) in the Journal of Political Economy. In this case, the increase from young to middle age is not as steep, but it is still increasing up to about age 30. The estimate here is that a young life is worth about 6-7 times an 80-year-old. I’m willing to accept this could be more accurate than equal values. But it’s nowhere near the 100-1,000 times range that Caplan gives.

I think this graph from Blomquist et al. (2011) is the most interesting one I have seen. It deals with WTP for asthma treatment. Most importantly, for those age 4-17, they ask the parents of the children how much they would pay. This should get around Caplan’s “run into traffic to save Pokemon cards” argument about 10-year-olds. Notice there are two inflection points here, and while really young children have the highest VSL, a 10-year-old is only about double an 80-year-old. And 23- and 80-year-olds are roughly equal. Once again, this isn’t quite “everyone is equal,” but it’s much closer than 100-1,000 fold difference.

But maybe showing this is a consistent result in the VSL literature just proves there’s a problem with that literature. Tyler Cowen weighs in today to basically say that. Of course, Tyler has long taught us that there is a problem with every literature (we got this wisdom in grad school from him too). And Tyler’s critique is probably narrowly true: WTP calculations overweight high-wealth, low-human capital individuals because their wealth is not destroyed at death. But human capital is destroyed at death.

I do find it curious though that Tyler says he agrees with Bryan. Does he agree with the 1,000 times valuation on young lives? We can agree that WTP is not a perfect measure, but still that the actual value is closer to 1-7 times rather than 100-1,000 times as much.

I’ve covered a lot of ground in this post, so I’ll stop for now. All I can say is that it is a good day when two of your professors from grad school criticize you, but do so in a thoughtful way that advances the discussion.

For my last point, let me zoom out and mention again why we are discussing this question in April 2021. It’s related to COVID-19. If indeed Caplan is correct, and an elderly life is only worth 1/1,000 of a young life, not only are “lockdowns” not justified, we would be foolish to take any steps to protect the elderly. In this case, we not only need to junk Social Security and Medicare, we need to junk the Great Barrington Declaration too. Focused Protection of the elderly? What foolishness, those lives aren’t worth more than a few pennies!

But if old lives are roughly equal to young lives, or even worth 1/10 of young lives, it does make sense for us to take precautions. Alter our behavior. Maybe even have some government restrictions on behavior (maybe).

The stakes are big.