Kip Viscusi, who teaches economics and law at Vanderbilt Law School, has written widely and well on the risky choices that people make, especially smoking.
A new working paper, co-authored with Joni Hersch, attempts to put a price on each pack of cigarettes smoked:
This article estimates the mortality cost of smoking based on the first labor market estimates of the value of statistical life by smoking status. Using these values in conjunction with the increase in the mortality risk over the life cycle due to smoking, the value of statistical life by age and gender, and information on the number of packs smoked over the life cycle, produces an estimate of the private mortality cost of smoking of $222 per pack for men and $94 per pack for women in 2006 dollars, based on a 3 percent discount rate. At discount rates of 15 percent or more, the cost decreases to under $25 per pack.
By comparison, eating a cheeseburger is much, much cheaper.
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For individual smokers, not smokers as a group, the uncertainty regarding outcomes is very high. 3% is described by the authors as recommended by the OMB for regulatory planning. It is not a discount rate an individual would use.
$25 is a lot, although there have been days I would have paid $1.25 for a smoke.
For individual smokers, not smokers as a group, the uncertainty regarding outcomes is very high. 3% is described by the authors as recommended by the OMB for regulatory planning. It is not a discount rate an individual would use.
$25 is a lot, although there have been days I would have paid $1.25 for a smoke.
(Got an error the first time I sent this.)
Perhaps people with lower education levels tend to smoke more. The value of statistical life should be disaggregated by education as well as gender and age. Even so, I imagine that the final result would remain stunningly high.
(Got an error the first time I sent this.)
Perhaps people with lower education levels tend to smoke more. The value of statistical life should be disaggregated by education as well as gender and age. Even so, I imagine that the final result would remain stunningly high.
This is a bunch of crap.
They are using a model which takes the revealed preferences of workers in choosing how dangerous of a job to perform relative to the wages offered to infer the value those workers place on extra life years. For starters this sort of inference has crazy problems since almost by definition either a difference in risk represents a difference in job being performed (maybe risk/excitement in job correlate) OR a variable unknown to the decision makers (unless they read economics journals). But the real problem with this is that the background assumption here is that the deciscions people make about death risk reveal the value they place on life. Therefore the only coherent conclusion to draw from this analysis is that smokers value smoking at the $222/94 dollars per pack.
I think it’s horribly misleading and incoherent to assume that people’s choices about risk rationally reflect the value they put on life and then turn around and use this to suggest they are being irrational in how they choose to take risks with cigarettes. If you are going to abandon the idea that people rationally weigh life value when taking risks in your conclusion you have to throw out the whole analysis.
This is almost as bad as the disgustingly common accounting analysises of the cost of smokers to society that (even those prepared by the actuary association) fail to include the substantial cost savings resulting from the early death of smokers. In effect those purported numbers estimating the cost to society from smoking are basically statistical bait and switch tactic which smear smoking by counting situations where a death resulting from smoking heads off many years of medical care and a different medically expensive death as a cost of smoking rather than a savings.
This is a bunch of crap.
They are using a model which takes the revealed preferences of workers in choosing how dangerous of a job to perform relative to the wages offered to infer the value those workers place on extra life years. For starters this sort of inference has crazy problems since almost by definition either a difference in risk represents a difference in job being performed (maybe risk/excitement in job correlate) OR a variable unknown to the decision makers (unless they read economics journals). But the real problem with this is that the background assumption here is that the deciscions people make about death risk reveal the value they place on life. Therefore the only coherent conclusion to draw from this analysis is that smokers value smoking at the $222/94 dollars per pack.
I think it’s horribly misleading and incoherent to assume that people’s choices about risk rationally reflect the value they put on life and then turn around and use this to suggest they are being irrational in how they choose to take risks with cigarettes. If you are going to abandon the idea that people rationally weigh life value when taking risks in your conclusion you have to throw out the whole analysis.
This is almost as bad as the disgustingly common accounting analysises of the cost of smokers to society that (even those prepared by the actuary association) fail to include the substantial cost savings resulting from the early death of smokers. In effect those purported numbers estimating the cost to society from smoking are basically statistical bait and switch tactic which smear smoking by counting situations where a death resulting from smoking heads off many years of medical care and a different medically expensive death as a cost of smoking rather than a savings.
Also I should add that the risk is almost certainly not linear in the number consumed so giving a price per pack is a big confusing.
Also I should add that the risk is almost certainly not linear in the number consumed so giving a price per pack is a big confusing.