Friedman teaches by anecdote and example about how individuals, corporations, and governments explicitly and implicitly place a value on life. In previous literature, this discussion can wade deep into the weeds and leave “the uninitiated” with a feeling they were mired 400 pages into a dense regulatory impact analysis. Friedman takes a different approach: he opens the book with an anonymized example of 9/11 victims: their network, income, family, and potential future earnings. When it came time to compensate their families through the September 11th Victim Compensation Fund, each “payout” reflected various socioeconomic factors. That conflicts with one of the central arguments in Ultimate Price: “all lives are worth the same.” The complexities of following this ethic in practice — especially in the regulatory world — make it more difficult to enforce than it is to write, but Friedman’s tour through the value of life is an excellent work for those willing to dip their toes into these regulatory waters without drowning in the scholarship.
Legality of life / Most voters would likely revolt at the idea that life can be assigned a monetary value. Especially revolting is asking parents to place a value on the lives of their children. Despite this impulse, Friedman demonstrates that consumers and even the justice system routinely quantify and monetize life. When we buy life insurance or a car without certain safety features, and when a civil jury is asked to compute compensatory damages, there are implicit and explicit values on life in common activities.
To explain this, he uses a real‐life civil case over the accidental drowning of a disabled patient at a New York state mental institution. The patient had no lost earnings, no insurance, and no nest egg, so the initial case was dismissed with no damages awarded. However, one judge condemned the ruling, writing, “The ultimate scandalous irony is that had [the decedent] been chattel rather than a human being, Claimant could recover the lost value of her property. It is repugnant to the Court to have to enforce this law which places no intrinsic value on human life.” Contrast this case to the $33.5 million awarded in 1997 to the families of murder victims Nicole Brown and Ronald Goldman and it is easy to see that some institutions in the United States place vastly different values on human life.
The benefit–cost state and life / At its core, Ultimate Price is not about the regulatory state but the overall value society and government place on disparate human lives. However, that is seen partly in the laws and regulations that put a value — often implicitly — on life.
Friedman identifies nine steps for a comprehensive benefit–cost analysis, including selecting measurement indicators, predicting costs and benefits over time, obtaining a net present value, and performing a sensitivity analysis. That, of course, is in an ideal world. The reality is that “perfect” benefit–cost analyses are unicorns in the regulatory arena and courts and regulated entities often fault agencies for either errors in their analysis or failure to properly follow the Administrative Procedure Act. For example, even though the regulatory process on the federal level costs tens of billions of dollars annually, the use of deadweight loss calculations for that money can be counted on one hand during an entire presidential administration. Political forces, resource constraints, and a host of other factors often prevent the “perfect” benefit–cost analysis.
For Friedman, the inputs and outputs of a regulation should include not only financial factors but also “more diverse items, including the environment, health, crime, and quality of life.” Of course, veterans of the Obama administration’s regulatory wars can recount executive agencies considering factors like the environment, public health and safety, distributive effects, and equity. Barack Obama’s Executive Order 13563 requiring these considerations was somewhat controversial at the time but there was little doubt those factors were already being included in regulatory considerations. The Trump administration may have quickly abandoned this type of decision‐making, but the next president can readily reinstitute it on the first day in office. Friedman cites EO 13563 but does not give it much consideration — again, because Ultimate Price is less of a regulatory treatise than a moral case for why society should treat all life equally.
A point on which many can agree with Friedman is how federal agencies monetize the value of a statistical life (VSL). Currently, different federal agencies use different VSLs and the differences between them can be more than a million dollars. According to Friedman, these differences do not make sense, a point echoed by Sunstein; both have urged policymakers to abandon the process of monetizing lives differently at the regulatory level. Indeed, even a cursory examination of the Federal Register reveals one Coast Guard rule placed the VSL at $9.6 million while a Trump administration transportation rule put the value at $10.4 million. Past estimates have shown even wider cleavages. Friedman argues an equal VSL across agencies is logical and — more importantly — just.
Discounting / Some regulatory scholars might disagree with Friedman on the use of discount rates when considering future costs and benefits. OIRA typically employs discount rates of 3%–7% but has used lower rates for events that are likely to take place in the distant future (like the effects of climate change).
Generally, Friedman is no fan of discounting present benefits. He notes that under existing practice it might not ever pay to spend a small amount now to prevent a global environmental catastrophe that happens far out in the future. That has not stopped regulators from trying, however, and they have routinely used rates under 3% to help justify climate change rules.
He provides a helpful example for mathematically challenged readers: $1,000, discounted at 7% over a 100‐year horizon generates a present value of just $1.15. If the goal is to avert a distant but enormous disaster, using any discount rate above 3% makes that task almost impossible within the limits of benefit–cost analysis. However, a future administration dedicated to combating climate change could easily employ lower discount rates to pass new regulations.
When companies calculate / Virtually every regulatory book that deals with the VSL must mention the Ford Pinto. The Ford Motor Company used benefit–cost analysis to decide not to redesign the car’s fuel system when, in the early 1970s, it was found to be vulnerable to fire in certain collisions. This decision probably set general approval of corporations back decades.
Friedman spends time discussing the Pinto. He also ventures into generalizations that might upset some readers of these pages: “External costs are ignored when companies perform cost–benefit analyses.” Some will surely bristle at that statement. Corporate reputations — especially today — are often just as important as profits and earnings per share. There are, of course, plenty of risk‐averse companies that consider possible externalities and the backlash of putting unsafe products on the market. Given the myriad of products and services on the market, are the Pinto and the 2008–2015 Volkswagen emissions scandal the rule or the exception?
The book also ventures into corporate pay and the gap between high‐earning chief executives and the median worker in their firms. Courtesy of the 2010 Dodd–Frank Act, most large companies are required to compute the median pay of all employees — including any outside of the United States — and compare it to the pay of the company’s CEO. Before the regulation, there were several estimates of the median pay ratio, ranging from 200:1 to 344:1. When the official figures were released, the numbers were deflating for those who had alleged sky‐high ratios: according to research from Harvard, the ratios ranged from 70:1 to 166:1. Friedman appears to have missed that finding, writing, “Extreme ratios in the United States indicate that companies value the time of their CEOs hundreds of times more than that of their average workers.” The figure is closer to a hundred rather than “hundreds,” but the pay ratio is an easy target when discussing the value of work and the value of life. The ratio might be extreme for some companies, but it often is not because of extreme CEO pay, but more so the nature of each company. At the company with the highest recorded median pay, the ratio is just 6:1. Is that too high or too low? Is the work of the employees overvalued at this firm? No, but it is nearly impossible for regulators and scholars to discern for the rest of the world what the “correct” ratio is for business.
Equal protection / The book ends with a simple plea: we should treat all lives equally. This does make intuitive sense, whether for corporate America, juries, or regulatory benefit–cost analyses. From a political perspective, it is also far more defensible than valuing some lives differently. Just ask the George W. Bush administration about the “Senior Death Discount.”
For some reason, benefit–cost analysis is still a controversial topic on Capitol Hill and in some regulatory circles. Friedman notes this controversy might quiet a little if the VSL treated all lives equally. He implores regulators to incorporate benefit–cost analyses in regulatory planning. This is already occurring, of course, although the quality varies from administration to administration and agency to agency. However, Friedman would borrow a few qualities from EO 13563 and incorporate “ethics, politics, and fairness.”
Some might argue whenever politics are inserted, ethics and fairness will surely be tossed out the window. Given that the vast majority of the regulatory state is overseen by political appointees at OIRA, the Office of Management and Budget, the White House, and the sundry agencies that promulgate rules, it is natural to assume “ethical” considerations might slip from time to time. However, we can also assume the regulators tasked with writing regulations think they are acting ethically. Whether those specific ethics are shared by political appointees and the public is another matter.
Conclusion / Friedman’s book is an excellent tour of how society and regulators value life. Often, the public does not pay much attention to this process — until someone makes a mistake and there is public outcry. Whether it is valuing lives of 9/11 victims or Pinto burn victims, Ultimate Price demonstrates the value we place on life is more widespread than we would care to admit. Whether regulators heed his advice and adopt a uniform VSL across all people and agencies is far from certain.
