Haute Lumière
Commerce · V.01 · MMXXVI · daylight
ASSESSMENT · Chapter V.01 — What a Person Is Worth
Three instruments: a ten-point quiz, eight reflection questions, five essay prompts. The quiz checks comprehension rather than recall. The reflections are private and first-person. The essays are arguable from more than one side.
THE QUIZ — ten points
Four on recall.
1. Write the monopsony wage expression and define each term.
w = MRP · e / (1 + e), where MRP is marginal revenue product andeis the elasticity of labour supply to the individual firm. One mark for the expression, one for stating thate → ∞is the competitive case in which the wage equals the whole product — that limit is what the textbook assumes and what the evidence does not find.
2. State the definition of a value of a statistical life in one sentence, and say what it is not.
Willingness to pay divided by the change in risk, re-scaled to one whole statistical death. It is the price of a unit of risk across a population; it is not a valuation of any individual, and no individual appears in the division.
3. Name the five questions this chapter separates, and the instrument that answers each.
What does one more hour add to revenue — marginal revenue product. What should we spend to cut a small risk across many — value of a statistical life. What does this budget displace when spent — cost per QALY or per WELLBY. What income disappears if this person is gone — human capital and human life value. What transfer settles this dispute finally — tort and compensation rules.
4. Why may a published life price never be applied to a named individual?
Because it is derived from a population's own willingness to pay for unattributed risk, and it loses its warrant the moment the person is known. The withdrawn "senior death discount" of 37.0 per cent is the standing example: arithmetically consistent with annuitising, and indefensible as soon as it named a group.
Four on application.
5. A colleague says: "The market pays what people are worth." Respond in three sentences using the chapter's arithmetic.
The market pays a markdown on marginal revenue product wherever leaving is costly, and at an elasticity of 2.50 that markdown puts the wage at 71.4 per cent of product. The rent-sharing evidence points the same way: a 10 per cent rise in value added per worker passes 0.5 to 1.5 per cent into pay. Full marks require the third sentence — that marginal product is a ceiling and a statement about the firm's revenue function, never a statement about the person.
6. A board paper says a safety retrofit "cannot be justified on cost grounds." What single line would you require before the paper is tabled, and why?
The implied price of a life: cost divided by statistical deaths avoided. The paper already contains a valuation; requiring the line makes it visible and therefore challengeable. Credit any answer noting that the line usually makes the easy cases obvious — 400,000 USD per statistical life against a published 13,200,000 USD is 33.00 x clear and needs no debate.
7. Two agencies of the same government value a year of life at 571,063 USD and at 16,429 USD. Is one of them wrong?
No. The first is an annuitised willingness to pay for risk reduction; the second is the shadow price of a fixed health budget — what that budget displaces at the margin. The stronger answer notes that only the second falls when the budget rises, which is what tells you they are different kinds of number.
8. Why is an unindexed damages cap a policy change that nobody voted for?
Because inflation lowers it continuously. A cap set at 250,000 USD in 1975 is worth 45,951 USD in the money it was written in — 18.4 per cent of its original value — and would need to read 1,457,714 USD to hold that value in 2024.
Two that require the arithmetic to be done.
9. A site declines a retrofit costing 1,800,000 USD that the engineers estimate would avoid 0.45 statistical deaths a year for twenty years. What life price has the site implicitly adopted, and how does it compare with a published figure of 13,200,000 USD? Show your working.
Deaths avoided: 0.45 × 20 = 9.0. Implied price: 1,800,000 / 9.0 = 200,000 USD per statistical life. The published figure is 66.00 x higher. The point of the question is that the decision contained a price whether or not anyone wrote one — and that at sixty-six times below policy, the paper now has to argue rather than assert.
10. A fitted hour produces 62.00 USD of gross margin. The firm faces a labour supply elasticity of 2.50. What wage does the markdown predict, what is the gap, and what is it over a 1,900-hour year?
w = 62.00 × 2.50 / 3.50 = 44.29 USD, which is 71.4 per cent of product. The gap is 62.00 / 3.50 = 17.71 USD an hour, or 33,657 USD a year. Credit any method reaching the same figures. The stronger answer states what the number is and is not: it is the markdown the market's frictions produce, not a theft, and it moves when the frictions move.
REFLECTION — eight questions, for one person and a pen
These are not for a room. Write the answers by hand if you can; the slowness is the point.
- What number have you privately attached to your own worth, and which of the five instruments in this chapter did it come from? Be exact about which.
- Think of a decision you have made that traded money against someone's risk, including a small risk. What price did it imply? Do the division.
- Where have you refused to put a number on something because numbering it felt cold — and what happened to the thing you were protecting?
- Who in your life is doing work of great value that no instrument in this chapter would register at all? What would it take for that to stop being invisible in the places where money is allocated?
- Recall a time you were paid conspicuously less than you produced, and a time you were paid conspicuously more. What was true about the market in each case, rather than about you?
- If your own human capital is a payroll forecast, what does that forecast leave out that you would want a serious person to know about you? Write it as a list, not a sentence.
- What price would you want a regulator to use for the risks your own family lives with? Would you want it applied to your family by name?
- Where are you currently letting an implicit number stand because making it explicit would require you to defend it? What would defending it actually cost?
ESSAY PROMPTS — five
Each is arguable from more than one side. Each requires at least one source the chapter cites and at least one it does not.
1. The transferred value. Viscusi and Masterman find an international income elasticity near 1.00, which implies a value of a statistical life in a country with one thirtieth the income of 440,000 USD. Argue either that transferring values this way is the only defensible method — because it reflects the real trade-offs available to people at that income — or that it exports a standard of safety that no one in the receiving country chose. Use Viscusi and Masterman, and one source on global health or occupational safety standards that the chapter does not cite.
2. What Feinberg concluded. The Special Master of the September 11th fund computed awards on economic loss and has since said he would pay every family the same. Write the strongest case for the formula he used, then the strongest case for the position he now holds, and say which you find more persuasive and why. Use the Final Report, and one source on compensation scheme design or distributive justice that the chapter does not cite.
3. Is the productivity–pay gap an artefact? The gap's magnitude depends on the deflator, on wages versus total compensation, and on the median versus the mean. Take a position on how much of the divergence survives the most generous defensible methodological choices, and on what follows either way. Engage Mishel and Bivens and Feldstein directly, and at least one source published since 2015 that the chapter does not cite.
4. Monopsony as a design problem. If the wage markdown is a property of the market's frictions rather than of the worker, then it is movable. Argue for the intervention you think does most — non-compete reform, portable benefits, sectoral bargaining, wage transparency, minimum wages — against at least one serious objection to it. Use Sokolova and Sorensen or Cengiz et al., and one empirical evaluation the chapter does not cite.
5. Adaptation and the wellbeing instrument. Measured life satisfaction recovers substantially after severe injury, so a strictly wellbeing-based appraisal rule will underweight preventing disability relative to a health-state rule. Argue either that this is a fatal objection to putting WELLBYs at the centre of appraisal, or that it is a finding about adaptation that appraisal should honour rather than correct. Use Brickman et al. or Dolan and Kahneman with the HM Treasury guidance, and one source from disability studies or health economics that the chapter does not cite.