[jandrese]

That's not a measure of your wellbeing though. Usually they just assume that if you have more money you'll be happier.

Maybe a fancy car will increase your happiness, but there is no unit of measure you can divide the purchase price of that mid-life crisis car by.

The value of a life is roughly how much money they would have made if they had lived until some arbitrary end date. Happiness doesn't figure into it at all. It's calculated so life insurance companies know how to price their product, which is ultimately just paying off some fraction of the remainder of someone's theoretical lifetime income if they die early.

[gjm11]

That isn't how the various things called "value of a life" are calculated.

The Wikipedia article linked above describes some ways to do it, and if you look at them you will see that with one exception they are not estimating, nor trying to estimate, expected future earning power or anything like it. (Though that might affect the answer.)

The first approach they describe: take N people and ask each of them how much they would pay to reduce their chance of dying in the next year by 1/M. Then the average of M times this figure is the group's estimate of the value of their lives. (The description in the article simplifies the calculation by taking N=M, but there is no need to.)

The second approach: look at what people are willing to forgo in order to reduce their chance of dying a bit, or willing to increase their chance of dying a bit in order to have. If you're willing to increase your chance of dying by X in order to get Y, that suggests you value your life at no more than (the value to you of Y) / X. Look at lots of different X and take some sort of average of the resulting estimates.

The third approach is looking at future earnings. The page adds this caveat: "Another potential issue when using wages to value life is that the calculation does not take into account the value of time that is not spent working, such as vacation or leisure."

The fourth approach is more or less the same as the first.

It's obvious that aside from the second these are not the same as a person's future earnings. And we shouldn't expect them to be; people generally value other things about their future lives besides the money they may earn.

(A kinda-artificial example that I think makes the point. Suppose the following things happen: 1. Economic growth stops or slows sufficiently that no one expects investments to grow appreciably an more. 2. You get rich. 3. You retire, intending to supply your needs and wants simply by spending some of your mountain of cash. In this situation your expected future income is zero. But I bet you would still be willing to pay something to reduce your chance of early death.)

Also, though this is a less important point: Life insurance is not only for paying off some fraction of your theoretical lifetime income. E.g., you can buy life insurance policies even after you have retired, even if you have no income. Obviously one reason why you would buy life insurance is to make up for loss of future income; but it could be e.g. that one thing you do is to care for other family members, and that if you died they would need someone else to do that who would need paying, and if you were buying life insurance that would be something you would take into account.

[jandrese]

All of those are still just asking "how much is your life worth in dollar terms?" Not "how happy are you". The assumption is the more money you're willing to spend to stay alive the happier you must be.

> Also, though this is a less important point: Life insurance is not only for paying off some fraction of your theoretical lifetime income. E.g., you can buy life insurance policies even after you have retired, even if you have no income. Obviously one reason why you would buy life insurance is to make up for loss of future income; but it could be e.g. that one thing you do is to care for other family members, and that if you died they would need someone else to do that who would need paying, and if you were buying life insurance that would be something you would take into account.

If you have no income you can't buy life insurance. How would you pay for it?

Retirement income is still income. You're still buying insurance to provide that income in the event you die before your dependents. It should be noted however that those polices tend to be very expensive as the insurance company calculates that you may not be paying into it for very long before they have to start paying out.

[gjm11]

I agree that "what is the monetary value of your life?" is not the same question as "how happy are you?", and so far as I can tell no one was saying otherwise.

Presumably the two are related; if you are miserable and expect to remain so, you will probably be less willing to pay for more life. Clearly the two are not the same; if you have no money, your ability to pay will be greatly constrained.

You can deal with that latter problem to some extent by asking hypothetical questions: suppose your net wealth were exactly $1M, then how much would you pay for a 0.1% reduction in your chance of dying this year? But of course people don't necessarily have that much insight into what they would do in hypothetical situations. Or by asking people what they would pay for other people's lives, which is kinda what e.g. national healthcare institutions like the NHS in the UK or Medicare in the US have to do to decide what treatments they are willing to pay for. But of course that also isn't measuring happiness, nor even other people's estimates of it.

Or, of course, you could use the same techniques as you use for calculating a "statistical value of a life" to put a value on things other than merely being alive or not. Ask people about things that trade off money against some probability of disfigurement, depression, being abandoned by their spouse, etc., etc. Or look at the tradeoffs they actually make.

----

If you have capital but no income then you can buy life insurance, at least until the capital runs out. Of course, if you have capital then you can also buy income.

I agree that retirement income is still income, which is why I bothered to add "even if you have no income". (Of course being retired and having no income of any sort is a highly unusual situation, because there are state pensions and the like.)

But, I repeat, it is simply not true that the only possible reason for buying life insurance is to make up for the loss of your income after you die. Here is a concrete situation to imagine:

You have some investment that provides income. It will continue to do so after you die. It's enough for you to live on, reasonably comfortably but not at all extravagantly. Your needs are few, so you don't take a job, you just live off your investment income.

The investment will not change as a result of your death. No one will be financially worse off when you die. But you have an aged parent who needs a lot of help: something like one person, full time. You do it for free -- you have plenty of time and you love them and care about them. But there is no one else who would be willing and able to do it for free.

So when you die, your parent will need a lot of help, and it will need to be paid for. They can inherit that investment and the income it brings, but that may not be enough to pay for the help they need. You are still fairly young and healthy, so you can get life insurance cheaply. That way, if you get hit by a bus or have an unexpected heart attack or something, your parent will be able to afford the care they need.

(This is a situation in which life insurance is bought for a reason other than replacing income. It is not a situation in which life insurance is bought by someone who has no income to be replaced. Those are separate possibilities, and I suspect there is no plausible scenario in which they both happen at once.)

[vlovich123]

If you ask a billionaire how much they’re willing to spend to save their life (or significantly improve their health) and you ask someone with a $1000 dollars in their bank account, is the answer to that question measuring the worth of a life or how much that capital is worth? Very wealthy people would be more willing to trade wealth for health/happiness whereas poorer people are less willing to make that trade off since they need that capital for more basic necessities (eating, rent, having kids, etc).

[gjm11]

It's measuring the value of their life relative to the value of money, for them. In many situations that isn't the statistic you actually care about.

(For the avoidance of doubt: my previous comment wasn't trying to claim that the "statistical value of a life", measured in such a way, is a good measure of how much a person values their life in non-monetary terms, or anything like that. I was just objecting to the specific claim I was responding to, namely that the "statistical value of a life" is measuring only its value as a future income stream.)

Very very crudely, the value of a small gain in money is something like inversely proportional to the amount you have already, which means that the value of a given amount of wealth increases something like logarithmically with the amount of money, and either of these means that financial institutions like markets care about people's interests roughly proportionally to their wealth. Everything in this paragraph is pure handwaving, but I find it a useful intuition.

[drdeca]

I imagine one could, in principle, look at how this varies (on average) with how much money a person has and/or their income.

Hm, if one did, then perhaps one could use this as a basis for expressing how much people value other things?

Though, I suppose there's the question of like, how would someone trade off risk of dieing within N years vs dying within 2N years. Like, if something would increase one's chances of dieing within 2N years by some quantity, but decrease one's chances of dieing withing N years by some other quantity, at what values would people make or not make that choice? (or, in the other direction).

Depending on how that works out, maybe that would mean that this isn't a great foundation for translating between "how much do they value this (in dollars), at their current income level" and "how much do they value this (in some other unit which is hopefully more natural in some sense)".

Is there something else that would be a better basis?