Nowadays, we would call this dialogue unethical and amoral, while only a few centuries ago the idea of putting monetary value on a human being was considered absolutely normal and wide-spread. However, even after slavery was abolished, we still need a way to evaluate human life. What should be the amount of benefits to the family of a killed serviceman? Is it reasonable for the government to invest millions or even billions of dollars into citizens safety programs? How much to compensate for working at a hazardous production facility, doing night shifts or dicing with death if it’s your job to save other people’s lives? These questions are extremely hard to answer without a proper estimation of what economists call “the value of life”.

So, how can we calculate it? One way is to simply sum up all the added values a person has created during their lifespan. But then we end up having a single billionaire’s life as valuable as the whole population of a town!

Oh no, this doesn’t seem to be fair…

Looks like something’s wrong with this approach. A person is more than what he or she produces. After all, we work to live and don’t live to work. Thus, the value of life should be much more than just human capital.

Turns out, we unknowingly set a value on our own lives every single day. For example, when we buy a more expensive but safer family car, get life insurance, cross a road at undesignated areas or make any other risk related decisions, we unintentionally put a real numerical price on “the priceless”.

Imagine that you’re buying a car and are given two options: A and B that cost $20,000 and $30,000 respectively. While both cars are absolutely identical, the car B is also equipped with additional safety systems that statistically reduce the probability of dying in a car crash from 0.5% to 0.2%. Thus, by making a decision to buy the car B, you implicitly value your life at ($30,000 — $20,000) / (0.005–0.002) = $3,33 million or higher.

Thinking this way, economists have developed a quite precise methodology for calculating the value of life in different countries. For example, the value of life of an average US citizen is somewhere between $4 and $9 million, which is much higher than $1 million for an average Indian. They also figured out that if one person earns 1% more than the other, the value of that person’s life is only 0.5% higher.

As you can see now, life is not priceless at all. When we drink and drive, jaywalk or don’t buckle up, we show that our life is not worth a damn for us. Why do we think someone else would value it higher than ourselves?