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Arnold & Itkin LLP Truck Accident Blog2018AprilWhy Truck Safety Laws Hinge on American Spending Habits

Why Truck Safety Laws Hinge on American Spending Habits

Do you know how much your life is worth to the U.S. government?

It's an ominous question, but for the rulemakers at the Department of Transportation, it's a question they have to grapple with on a daily basis. See, every federal regulation set by the DOT has to undergo a detailed cost-benefit analysis. Even the laws that save lives have to gauge whether it's worth the cost it would take to save those lives.

For instance, if a law requiring seat belts were written today, the DOT would need at least 2 pieces of information:

  • How many lives would be saved by requiring manufacturers to build seatbelts
  • How much it would cost manufacturers to put seat belts in all of their vehicles

"But," you might ask, "how can you compare the economic impact of a rule against the value of a human life?"

Philosophically, that's a question that could take a millennium to debate. Economically, for the sake of government analysis? It's easy: every person is worth approximately $9.6 million. It's a measuring stick that the DOT calls "the Value of a Statistical Life" or VSL. 

Life Value According to the DOT

When the DOT says that a person's life, for the sake of calculation, is worth $9.6 million, they're not making a statement about the person's individual worth. Rather, what they're calculating is how much the average person is willing to pay in order to decrease the fatality risk of an event by 1.

The DOT uses the example of a fatal car crash to explain the idea. Let's say you can pay extra money to buy a safer car. How much would you be willing to pay to reduce the risk of a fatal crash by 1-in-10,000 trips? If a person is willing to pay an extra $1,000 for a car that reduces fatality risk by 1-in-10,000 drives, then he/she would have a VSL of $10 million.

10,000 drives (the lifetime of the risk) x $1,000 = $10 million value of a statistical life.

When the DOT does nationwide cost-benefit analysis, they're assuming that the average American is willing to pay $960 in order to decrease a risk by a 1-in-10,000 chance. The VSL also assumes a straight line between the risk and the cost to reduce that risk. For example, to reduce the risk of a fatal event by 2-in-10,000, the VSL model assumes people would be willing to pay twice as much. For high-risk events, the DOT recognizes that the model starts to break down (since many people don't have thousands of dollars to spend on safety). 

When Safety Laws Don't Get Passed

Regulators like the DOT have to maintain a balance between keeping the economy healthy and protecting the public. Imagine that an all-powerful airbag is invented that protects a person's whole body in a potentially fatal crash...but it costs car buyers an additional $1 million. What would keep the DOT from making such an airbag mandatory?

The obvious reason: most Americans don't have $1 million to spend on a car, not even one that keeps them safe in a serious crash.

If the DOT made this hypothetical invention a necessity, it would force car manufacturers to spend exorbitant amounts of money to make an addition that no one would be able to afford. Obviously, this is an extreme example, but that's why calculations like the VLS exist: as a shorthand for how the economy would be affected by new safety laws.

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