Walter Oi and Armen Alchian on Value of Life
By David Henderson
I think about my own situation. My mother died of cancer in December 1969 at age 53. My brother committed suicide in July 1970 at age 22, just shy of 23. My father died in June 1997 at age 87. And my sister died in November 2018 at age 72. When I think about my degree of sadness and loss, it corresponds with what Bryan says. I’m most upset (still) by the loss of my brother, then my mother, then my sister, and then my father. Of course, one potentially confounding factor is that I didn’t like them all equally. My father was the toughest, but we had a strong finish, starting in the early 1980s.
Here’s a problem, though. This is my valuation of my siblings and parents. It says nothing about their own valuations of their lives. Clearly, my brother valued his life at zero in the moment he took his own life. Although, as I’ve learned from reading about suicide since, if I had been able to foresee his action and talk him out of it, he might have felt different even in a few days. A good rule for people who are thinking of suicide is similar to one that Mark Twain was purported to have said about the weather in New England: “If you don’t like the weather in New England now, just wait a few minutes.” Re suicide, “If you want to commit suicide, put it off until tomorrow.”
Back to my point. I remember when Walter Oi came to UCLA when I was a graduate student and presented at Harold Demsetz‘s law and economics workshop in about 1974 or 1975. My memory is a little vague here, but he presented what he found to be a quandary. His data showed that if, while driving, you hit someone and injured him badly, you or your insurance company would be required to pay $X. But if you killed him, you would be required to pay $Y, where Y is less than X. The moral of the story, he said jokingly, is if you hit him and he appears to be moving, make sure you back up and run him over.
Armen Alchian gave him another way of looking at it. In the case where you kill him, he’s not around to deal with the consequences. But if you injure him badly, he is around and wants to be compensated. The idea, said Armen, is that the rates are set on the basis of the victim’s preferences: in one case he’s not around to have preferences. They are not set on the basis of the victim’s family’s preferences, who, if they love him, would want to be compensated more for his death.
(In the comments, you might want to present alternate evidence on X versus Y. Be gentle because my memory is imperfect. Walter Oi might have been talking about workmen’s compensation or something like that.)
The picture above is of Walter Oi.