How Much Are You Worth?

Some experts claim to measure these losses empirically; perhaps the most prominent is Stan V. Smith, Ph.D. In the 1980s, Smith coined the term “hedonic damages” to refer, in his words, to “the value of the enjoyment of life beyond the human capital value.” Since then, he and a few other economists employing his methods have purported to quantify hedonic damages by using a methodology based on their assessment of the value of an “average” human life. Juries are then invited to apply this value of an average person to the unique individuals whose losses are at issue in civil litigation. In a recent case in Michigan, for example, Smith asserted that an average human being’s life is worth $4.3 million in 2011 U.S. dollars.

The fact that states allow plaintiffs to recover for the loss of enjoyment of life does not mean that expert testimony on this issue is admissible. In fact, most courts and economists now reject the idea that an economic methodology can be employed to quantify hedonic damages. Consequently, proposed expert testimony on the value of life can and should be challenged. This article provides a brief overview of value-of-life methodology and its primary evidentiary challenges.

Value-of-Life Methodology in Practice

Because Smith is the most well-known advocate of the value-of-life methodology, his methods provide an appropriate case study on how these damages are calculated. According to a report recently submitted in a case before the U.S. District Court for the Eastern District of Michigan, Smith claimed to measure the value of a normal life by examining three sources: (1) studies measuring purchases of safety devices like smoke detectors (based on the assumption that the amount consumers spend on such items corresponds in some way to their estimate of the dollar value of their own lives); (2) studies measuring premiums paid to workers in exchange for assuming greater on-the-job risk (based on the assumption that the decision to put oneself at greater risk in exchange for greater pay arises from an implicit assessment of the value of one’s life); and (3) value-of-life estimates used in the cost-benefit analyses underlying government regulations.

Smith conducted what he called a “meta-analysis” of these data. This meta-analysis produced a range of value-of-life estimates that others have calculated in vastly different contexts. He then drew his own conclusion about the central tendency in the data.

These data are derived ex ante—before the loss of the human life under consideration. They also concern human beings in the abstract rather than specific individuals. As we’ll examine, Smith and his followers apply these ex ante data in a very different context—to the ex post assessment of the value of specific individuals after their deaths or injuries. Indeed, Smith goes one step further. Instead of presenting a range derived from other studies, he picks a dollar value slightly outside of that range and offers it as a conservative estimate.

When using this value-of-life methodology to assess the value of human relationships, Smith applies a benchmark to this central tendency. In the Michigan case previously mentioned, this benchmark was derived from interviews with the decedent’s surviving family members. One of Smith’s employees (who lacked training in psychology or any relevant field of inquiry) asked family members what percentage of their enjoyment of life had been lost because of the decedent’s death. Smith then multiplied that percentage against the value-of-life figure he derived from other economists’ studies, and the resulting figure was offered in his report as an example for the jury to use in determining the plaintiffs’ ex post damages. There are at least four primary grounds for challenging this value-of-life testimony, which we’ll now explore.

Evidentiary Challenge #1: Irrelevance

The value-of-life methodology championed by Smith is based on the value of an average human life. Assuming this notion of an average human being has some coherent meaning, there is an enormous conceptual leap from that average to the value of a specific plaintiff’s or decedent’s life, as held in cases like Brereton v. United States.

The U.S. District Court for the Northern District of Illinois noted this problem when it excluded Smith’s value-of-life testimony in Ayers v. Robinson. The Ayers court explained that Smith’s analysis compared “a statistical life—a nameless, faceless member of society,” with “a specific individual…the quality of whose life may have been substantially richer or poorer than the statistical mean.” As the court explained, the person at issue could be wealthier or poorer than average, more sickly or in better health, younger or older, or part of a loving community or isolated and lonely.

Another problem arises when value-of-life testimony is applied to determine the value of lost relationships. Simply put, there is no logical connection between the value of a statistically average life and the value of a relationship with a unique human being. The U.S. District Court for the Eastern District of Michigan observed this problem in Brereton. There, the plaintiffs offered Smith’s testimony to “assist the fact-finder in placing a value upon the survivors’ loss of society and companionship caused by” the decedent’s death. The court found Smith’s conflation of the two to be unfounded and held that this analysis compared “apples to oranges.”

Courts also have held that juries do not need expert testimony to measure the value of a human life or relationship. As the California Court of Appeals put it in Loth v. Truck-A-Way, “Life is not a stock, car, home, or other such item bought and sold in some marketplace.” Fact-finders are fully capable of determining the value of lives and relationships based on the evidence and their own experiences. After all, jurors are regularly called upon to measure pain and suffering, loss of consortium, and other damages that defy empirical quantification.

In this sense, value-of-life testimony tells the jury only what it already knows. The U.S. District Court of the Western District of Michigan observed in Kurncz v. Honda North America Inc. that Smith’s meta-analysis is just a “compilation of lay responses.” It is based in part on studies measuring consumer behavior in purchasing safety devices and premiums implicitly demanded by workers for high-risk jobs. Both categories of studies focus on lay behavior, yet “[g]iving the jury a number based on lay preferences in and of itself is no more helpful or appropriate than informing them of other jury verdicts or of the gallery’s preferences.” For all of these reasons, value-of-life testimony provides little assistance to jurors and is, therefore, inadmissible under Michigan Rules of Evidence (MRE) 702.

Evidentiary Challenge #2: Unreliability

In determining whether testimony is reliable, courts may consider factors such as whether the expert’s theory or methodology (1) has been or can be tested; (2) has been subject to peer review and publication; (3) has a high rate of error and is subject to controlling standards; and (4) enjoys general acceptance within a relevant scientific community. Value-of-life testimony fails on every score.

One of the hallmarks of the scientific method—as noted by the U.S. District Court for the Northern District of Illinois in Mercado v. Ahmed—is verifiability, or the ability of other experts in the field to determine whether one expert’s conclusions are correct. In determining whether proposed expert testimony is sufficiently reliable, a court must examine whether it can be verified through testing. But there is no way to verify if the value-of-life methodology accurately measures the life or relationship at issue, as the Kurncz court held. Even if one employs this methodology faithfully, no amount of testing can determine whether $4.3 million is an accurate valuation for either a human life or a human relationship.

The impossibility of verifying a value-of-life estimate arises from the inherently subjective nature of the enjoyment of life. The U.S. District Court for the District of Massachusetts noted this problem in Saia v. Sears Roebuck and Co. Inc. explaining that, even if it accepted the premise that “the amount that individuals are willing to pay to reduce the probability of death accurately reflects the value society places on the average human life,” that premise did not prove that Smith’s figure “accurately reflects the value society places on the quality of human life.”

Smith describes his valuations as conservative, and this characterization shows exactly why his procedure is unscientific. The Ayers court described this problem succinctly: “[A] conservative opinion in that sense does not equate to a scientific one. Someone who states on the basis of a dull pain in his right knee that he thinks it will rain less than a tenth of an inch expresses a conservative, but surely an unscientific, opinion.”

Evidentiary Challenge #3: Lack of General Acceptance

Smith’s expert reports aver that his methodology is almost universally accepted among economists. Recent data suggest otherwise.

In a 2009 survey in the Journal of Forensic Economics, the authors posed the following question to forensic economists: “A plaintiff’s attorney asks you to calculate lost enjoyment-of-life (hedonic) damages in an injury case. Would you be willing to calculate such damages?” Of the 173 forensic economists who responded, only 16.2 percent said they would calculate hedonic damages. In contrast, 83.8 percent—an overwhelming majority—responded that they would not. Economists who responded that they would not author a report in which they purported to use economic methods to quantify hedonic damages gave reasons such as “far too speculative to quantify,” and “no basis for measuring the value of an individual life.” These recent data show that the methodology behind hedonic damages testimony lacks general acceptance.

Evidentiary Challenge #4: Prejudice

In light of the factors noted above, it is not surprising that courts have found that any potential benefit of value-of-life testimony is outweighed by prejudice. The Kurncz court explained: “Where there is so much flux in the applicable ‘science,’ much time will be spent debating its merits.”

Moreover, because jurors must be instructed that an expert’s testimony is not gospel, time spent debating its merits “will not be well spent.” Worse, the Kurncz court noted that jurors may simply accept pseudo-economic testimony about the value of human life because it is presented with an expert’s imprimatur.

Looking Forward

Value-of-life testimony has been rejected by courts and economists alike. What, then, explains the persistence of expert reports purporting to use this methodology?

For one thing, some courts—certainly a minority—occasionally allow its admission. In addition, some attorneys who employ Smith’s method and other economists adopting his methods do so with the hope that this proposed testimony will raise the settlement value of their cases. They also may anticipate that value-of-life testimony will anchor a jury’s damages estimate in the millions, creating an artificial floor from which damages can quickly rise once juries consider evidence about the deceased or injured party.

Until courts decisively assign value-of-life methodology to the dustbins of pseudoscience, these expert reports likely will persist. In the meantime, risk managers must be aware that this testimony can be challenged and that there is a strong and growing tide against its admission.