The Real Cost of Government Regulation is Paid With Human Lives

The US government has set the price of a human life for the purposes of new regulations at 7 million dollars.

The US government does a cost benefit analysis on proposed regulations to see if they make economic sense. This seems like a good idea. Certainly we don’t need regulations that have greater costs than benefits. Now, when it comes to health and safety regulations, in order to perform this analysis the government has to put a value on a human life. The number the government has come up with is somewhere between 7 and 8 million dollars per human life.

As an aside, it’s nice to know they value my life at 7 or 8 million dollars. That’s more than I have it insured for. Maybe I should get a bigger life insurance policy.

The way the government uses this number is, if proposed regulations cost no more than 7 million dollars for each life that is saved then the bean-counters consider the regulations prudent. This makes sense as far as it goes. It accounts for the effects that are seen. But what about the unseen effects?

It is a truism that in every economic transaction there is the seen and the unseen. When 7 million dollars is taken out of productive uses and put into complying with regulations the complying companies lose 7 million dollars of something else. That “something else” is the unseen in this transaction. In the case of money spent by companies on regulations, that money would have otherwise been spent directly or indirectly on employment. Reinvestment, tool and material purchases, and other expenditures cause the money to be circulated in the economy. This means jobs, no matter how it works. Either the business would have employed someone with that money, or it would have invested or spent the money. The economy wide effect of a regulation that imposes 7 million dollars of additional cost will be 7 million dollars worth of unemployment.

How many unemployed? The median annual income is roughly 40 thousand dollars. If you divide that out, you get 175 jobs lost from a 7 million dollar regulation.

What is the effect of unemployment on human lives? According to a National Institute of Health study, unemployment reduces life expectancy by about 10 years for 25 year olds, 8 years for 45 year olds, and 3 years for 65 year olds. Assuming an even distribution among ages, I get about 1,225 human life years of total reduction in life expectancy when I work the numbers. That is 35 lost adult lives, if you go by standard life expectancy tables.

Now, to be fair to the regulating bureaucrats, In the long run most of those 175 people their regulation drove out of work will get new jobs, but at lower income levels. Not only will their income levels be lower, so will lots of other people. If income levels are 5% lower, then 20 times as many will have lower incomes because of our 7 million dollar regulation. If we accept 5 percent as the reduction in salaries, that makes for a total of 3,500 people with 5 percent reduced salaries. According to the same National Institute of Health website, lower incomes also reduce life expectancy. For those with median salaries, 5 percent drops them from 40 thousand to 38 thousand. The table shows that life expectancy drops about 2 years from the above 50 thousand range to just below 25 thousand. That’s about .08 years of life expectancy per thousand dollars, or .16 years for our average worker. Multiplying 3,500 by .16 years gives 560 life years lost, or 16 lost adult lives of 35 years each.

What is the cost of a human life, again? It appears that for the US government it is 7 million dollars and between 16 and 35 other human lives lost.

Summing up, doing the math based on permanent unemployment says that each 7 million dollar regulation costs 35 lives. Based on reduced income levels a 7 million dollar regulation costs 16 lives. It is likely that the actual answer is somewhere in-between the two figures, as some people never do get lost jobs back. In either case the lives lost by the costs of the regulation are more than the 1 life justification for the rule.

This should be a reminder to government regulators that the unseen effects of their regulations can do a lot more damage than the danger they are trying to regulate out of existence. It should also be a call to arms for Americans. Government regulations are literally killing us and our fellow citizens, and they grow every single day.

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