Wednesday, 5 December 2012

If It Wasn't for Money, We'd All be Rich

Here's an interesting calculation - for geeks anyway. How much is your life worth, in money? A strange question perhaps, but one with a message.

I can think of two ways to work this out. The first is economic, using Gross Domestic Product (GDP), around which so much seems to revolve these days. UK GDP is about £1.5 trillion per year (that's 1.5 followed by 11 zeros). Divide that by the UK population of 63 million and you get a figure just under £24,000 per person. But that's per year so let's assume that on average each of us can expect to live a further 40 years. That gives the total value of around £950,000 for each person alive.

However, there's a second way to value life that includes human and emotional costs - trauma, loss of loved ones and so forth. The Department for Transport uses it to assess the cost of road casualties, and hence the value of safety improvements. It's a structured, recognised approach, the latest version of which values a human life at just under £1.88 million*. Similar figures are used elsewhere in government, for examples in calculating the cost of suicide**.

So why the difference between these two valuations? For a start it demonstrates there's more to life than money. Indeed, including human costs roughly doubles the economics-based figure. OK, this is a valuation rather than 'real money'. There isn't enough money in existence to cover all of us to this value – not even counting that stashed offshore by tax avoiders! But it's a much more realistic appraisal of the value of life than merely pounds and pence.

That's why I support methods that value non-economic aspects of our lives, such as Social Return on Investment (SROI). Not necessarily in terms of precise valuation, but helping us understand what really matters to people and what we can do about it.

I've searched the Chancellor's Autumn Statement; the words "happiness" and "wellbeing" do not appear anywhere. Perhaps he needs to think about that saying "If it wasn't for money, we'd all be rich."

*Reported Road Casualties in Great Britain: 2011 Annual Report
**No Health Without Mental Health: White Paper, 2011