September 22, 2004

Why They Call It The Dismal Science

Today's Musical Selection: "For Love of Money" by the O'Jays

Hi, everyone. I'm pondering over a conversation I had with a friend of mine a couple days ago. Since I studied economics in school and didn't fall asleep in class or develop an undying hatred for it, friends often come to me with economic queries. This one, though, sort of came at the end of a conversation, seemingly somewhat randomly.

"You know what's interesting?" my friend said. "Families of military personnel killed in combat get all kinds of money, scholarships etc. But if you die at home in a traffic accident, your family gets none of that. Why is it that families of war casualties deserve more than families of soldiers who die in other ways?"

As you might imagine, my friend's question wasn't purely theoretical. Her father was a retired Navy man who perished in a crash. "I'm not being greedy," she said. "I'd rather have my father back than all the money in the world." But it occurred to her to wonder.

"People bend over backwards to help if your death is 'worthy' or 'heroic,'" she said. "But if it's ordinary, who cares, right?"

The unfortunate fact is that there is an economic logic to it. Economically, the remaining years of your life can be viewed in terms of expected earning potential. Let's say we can expect the average American to work for about 40 years (from age 25 to 65, say.) If you're killed in combat at age 45, you've been deprived of half of your earning potential. (More than half, actually, since your earnings tend to increase as you age.)

And if you die in combat, the government has deprived you of that earning potential by sending you to war. Therefore, they could be said to "owe" those lost earnings to your survivors, in the same way that the operators of, say, a faulty amusement park ride owe your heirs compensation if you die when the roller coaster collapses.

Now, death is part of the normal operation of a war, so the government probably wouldn't be found legally liable if it were a matter of trial. But since we have an all-volunteer force, the government has to find a way to convince people to sign up for a job with a significant possibility of death, so ensuring that the family will be compensated for the soldier's lost earning potential is one way to do it. (Other incentives, like the Mongtomery GI college bill, are particularly welcome to lower-income people who might not be able to afford these opportunities otherwise.)

On the other hand, if a soldier dies in a traffic accident, that's not the government's fault. His being in the service didn't affect his death at all. It would have been exactly the same if he'd worked in an auto factory or a university all his life. The government isn't responsible for his death, and therefore they have no other responsibility to the survivors, economically, than whatever pension the soldier might have been entitled to.

Of course, this kind of economic logic is cold comfort to someone who's just lost a parent or spouse. And my friend wasn't particularly mollified by my explanation. "My father was willing to die for his country, regardless of economic incentive," she said. She told me how he was twice on a battleship in the Persian Gulf when the country was close to war. And it's hard for her to understand why it would have been so much more financially advantageous for him to die on the battleship.

I can't fully comprehend her feeling; my father left the service before I was born, and he never came close to serving in combat. But her question made me think further, about the victims in the 9/11 attacks. It's uncomfortable to think about this, but there's no economic rationale for the enormous payouts that the families of the victims received. The government was not responsible for these deaths, certainly not in the direct sense that they're responsible if they send a soldier to die in Iraq. It was an outpouring, a purely emotional reaction by a grieving country. And I understand that. It certainly made me feel good to know that those families were taken care of. But what if a worker at the Twin Towers had died in a car wreck on his way to work that morning? Would he be SOL? Was he somehow less deserving of our financial generosity just because he died in a different way?

As an economist, I'm comfortable with the payouts extended to the families of soldiers killed in combat. I'm less comfortable with the payouts extended to the families of 9/11 victims. If it's a one-time thing, fine. The psychic comfort to the nation might be worth it. But what if, God forbid, terrorist attacks become more commonplace? Are we going to see everyone sticking their hands out, treating tragedy as a winning lottery ticket? I certainly hope not.

You see, this is precisely why people don't like to hang out with economists. People think our attempts to quantify human life in dollars and cents is cold and unfeeling. And in a way, it is. I happen to like it because it's a way to look at life, and a way that makes otherwise mysterious aspects of life quantifiable. I'm a rationalist at heart, and I like to have explanations for things. Economics offer explanations for many aspects of life. But there's a reason I don't tend to get invited to cocktail parties. For those of you contemplating a course of study in economics, I recommend it. Just be sure and develop a compensating interest, one that other people might want to hear about.

Carl over at FoolBlog is a fellow suffering skeptic when it comes to DC baseball. The buzz is growing increasingly encouraging, but we've all been burned too many times. All we can do at this point is wait, and hope. Baseball's Executive Committee meets tomorrow in Milwaukee. Things might start happening then. We shall see.

That's all for me today. See you tomorrow!

Posted by Fred at September 22, 2004 06:28 PM

You are not alone in wondering why the 9/11 victims' families got so much money. I also find it mildly bothersome that the victims have been so frequently referred to as "heroes." The firefighters, cops, etc., who lost their lives trying to save others, yes, those people are heroes, no doubt. But someone who just happened to be at work at the WTC on a floor that was hit by a plane is just an unfortunate person in the wrong place at the wrong time. Nothing particularly heroic about that, at least as far as I can see.

Posted by: Carl at September 23, 2004 09:06 AM

The government fund was created as a way to prevent litigation against the airlines, Port Authority et. al. People who opt into the fund agree not to sue these parties for their loss (though the suits against non-American actors, such as the Saudi government, may still be permissible). This is not a purely emotional reaction, but a very economically calculated decision to ensure that the airlines and other parties that could possibly be considered liable for the deaths are not bankrupted by lawsuits.

The family of a Twin Towers worker who died in a car crash on the way to work could sue the person whose negligence caused that accident, and the government would let that one play out in the courts, but there's enough litigation surrounding 9/11 as it is without having 3000 suits against American Airlines.

As for the "heroism" of the people whose entire role in 9/11 was having been so unfortunate as to die that day, I agree that calling all victims "heroes" evaporates meaning from the word. However, the people on Flight 93 who deliberately crashed the plane in Pennsylvania to keep it from hitting another target, and all those who attempted to rescue people from the Towers and Pentagon, certainly qualify as heroes for their willingness to sacrifice themselves for others. (Though it's worth noting that the Flight 93 passengers knew at that point that they probably would die in any case, whereas the first responders could have avoided their duty and saved their own hides.)

Posted by: PG at September 23, 2004 01:47 PM

Not to be an asshat, but the commission investigating the crash of United 93 concluded that the passengers were unsuccessful in breaching the door to the flight deck before impact. Whether this is true we'll never know, but it seems a bit questionable to state outright that the passengers aboard that flight deliberately crashed it to save another target in Washington (unfortunately).

Posted by: Papa Shaft at September 23, 2004 04:30 PM
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