Using VSLs in State and Local COVID-19 Policy

In the COVID-19 pandemic, policymakers at all levels of governance are being asked to trade off lives, health, and money. Federal regulators have been making these types of tradeoffs for many decades and have developed tools that may help decision makers faced with terrible choices. Among these tools, the value of a statistical life (VSL) may be the most portable and most immediately helpful.

VSLs help make policy questions that look tragic and impossible—such as “is it worth spending ‘x’ amount of dollars to save 10 lives?”—more tractable, even if they remain tragic. Based on decades of research on how much people are generally willing to pay in money to reduce small risks of dying, many federal agencies use a population-average VSL estimate of about $10 million per life saved.

Although VSLs are a familiar tool for those working in federal regulation and cost-benefit analysis, they are less commonly used at state and local levels of governance. Unfortunately, the COVID-19 pandemic has created a situation where state and local governments are increasingly facing tradeoffs between health, lives, and money—exactly the context in which VSLs were originally developed to be used, and in which they remain particularly valuable.

VSLs are a well-established tool in federal regulation, but the $10 million estimate is not perfect. Indeed, scholars continue to debate both the best way of calculating VSL and the best way of implementing it within policy analyses. Still other scholars prefer different tools for evaluating risks entirely. Furthermore, as I explain further elsewhere, the general estimate of $10 million almost certainly undervalues COVID-19 risks, possibly by several factors.

But even with all of those caveats, VSLs offer decision makers at state and local levels a well-established, well-researched tool for addressing mortality risk. In current circumstances, thousands of policymakers at multiple levels of governance, many with no experience in risk regulation, must quickly make complex decisions that will determine whether many people live or die. It is therefore important that scholars as well policymakers recognize how helpful an easily-administrable starting point, such as the VSL, can be for comparing economic and health risks. Even with imperfections, the VSL is a powerful tool—and right now, policymakers need all the help they can get.

In many cases, decision makers—such as county health boards, school superintendents, and corporate officers—may find that simply including a generic VSL in their decision making process will identify COVID-era policies that are obviously cost-justified because of the lives these policies will save. For example, school superintendents are now faced with the question of whether to reopen school districts, and, if so, with which precautions in place. Right now, many U.S. superintendents are not only permitted to make this choice; they are required to do so. Some—perhaps many—will face budget cuts if they do not reopen. As an Arizona superintendent, Jeff Gregorich, featured in a story in the Washington Post, explained his thinking about reopening schools:

The governor has told us we have to open our schools to students on August 17, or else we miss out on five percent of our funding. I run a high-needs district in middle-of-nowhere Arizona … I already lost one teacher to this virus. Do I risk opening back up even if it is going to cost us more lives? Or do we run school remotely and end up depriving these kids?

For Gregorich, “five percent of our budget is hundreds of thousands of dollars. Where is that going to come from? I might lose teaching positions or basic curriculum unless we somehow get up and running.”

Yet as Gregorich explains it, he is convinced that if the school opens, “kids will get sick, or worse. Family members will die. Teachers will die … If you think anything else, I am sorry, but it is a fantasy.”

Decisions on reopening schools are deeply fraught, and Gregorich, like thousands of other policymakers, has much to balance. But that is all the more reason why policymakers like him need the analytical help VSLs can provide. In this case, even quick application of a generic $10 million VSL can illustrate how wildly out of whack it would be to reopen a school district for a few hundred thousand dollars. If a policymaker truly believed that reopening would cause even one death—much less multiple deaths, as Gregorich assesses to be likely—even several million dollars would be a poor trade.

The point here is not to oversimplify an awful set of choices. Superintendents, like other policymakers, have many factors to balance in managing reopening, and there will be costs and benefits on both sides of the equation. But in making choices in this terrible context, education and other policymakers are likely to do much better using the VSL—an estimate of monetized mortality risk that has been studied, tested, and implemented for decades in most of the nation’s highest-stakes administrative regulations—than in trying to rely on their own overburdened intuitions. Often, simply using a generic VSL of $10 million will tell policymakers some of what they need to know, while also giving them an additional way to discuss their decisions with stakeholders.

Importantly, VSLs can add value even without a full cost-benefit analysis of the type that federal agencies have traditionally done. Such analyses may be particularly beyond the reach of many state and local policymakers. And indeed, a full cost-benefit analysis will be challenging now even for the best-resourced actors, both because of the uncertainty in COVID-related predictions, and because generic VSLs fail to capture many of the most important and horrific aspects of COVID-19 risks.

As I expand upon in part II of this feature, these challenges should make policymakers hesitate before using VSLs to put a ceiling on COVID-related expenditures, because they suggest that generic approaches, such as the $10 million VSL, may underestimate total COVID-19 harms. Yet even generic VSLs remain a valuable way of establishing a floor—for identifying which policies are clearly cost-justified in light of lives saved, or for identifying break-even policies when policy impacts are difficult to quantify. In this sense, VSLs provide a starting point for policymakers faced with grave and urgent decisions that will save or cost lives.

Arden Rowell is a professor at the University of Illinois College of Law.