Tuesday, 18 December 2018

Stalin and the value of a statistical death

The value of a statistical life (or VSL) is a fairly important concept in cost-benefit evaluations, where some of the benefits are reductions in the risk of death (and/or where the costs include increases in the risk of death). The VSL can be estimated by taking the willingness-to-pay for a small reduction in risk of death, and extrapolating that to estimate the willingness-to-pay for a 100% reduction in the risk of death, which can be interpreted as the implicit value of a life. The willingness-to-pay estimate can be derived from stated preferences (simply asking people what they are willing to pay for a small reduction in risk) or revealed preferences (by looking at data on actual choices people have made, where they trade off higher cost, or lower wages, for lower risk).

A recent working paper by Paul Castaneda Dower (University of Wisconsin-Madison), Andrei Markevitch and Shlomo Weber (both New Economic School, in Russia) takes quite a different approach. Castaneda Dower et al. use data from the Great Terror in Russia to estimate Stalin's implicit value of a statistical life for Russian citizens (or, more specifically, Russian citizens of German or Polish ethnicity). Before we look at how this worked, a little background on the Great Terror:
Coercion and state violence were important policy elements during the whole period of Stalin’s rule. In an average year between 1921 and 1953, there were about two hundred thousand arrests and twenty-five thousand executions... The years of 1937-38, known as the Great Terror, represent a clear spike in Stalin’s repressions. Approximately, one and a half million Soviet citizens were arrested because of political reasons, including about seven hundred thousand who were executed and about eight hundred thousand sent into Soviet labor camps...
In the late 1930s, the Soviet government considered Poland, Germany and Japan as the most likely enemies in the next war. After the first “national operation” against the Poles (launched by the NKVD decree No. 00485 on 11 August 1937), Stalin gradually expanded “national operations” against almost all ethnic minorities with neighboring mother-states.
Castaneda Dower et al. focus on Poles and Germans because they are the only ethnic groups for which data are available. The key aspect of this paper is the trade-off that Stalin faced:
We assume that Stalin’s objective in implementing the Great Terror was to enhance the chances of the survival of his regime in each region of the country, subject to the direct economic loss of human life. Therefore, we derive Stalin’s decisions from the presumed balance between the loss of economic output and enhancement of regime survival.
So, Stalin trades off the lost economic output of Russian citizens against the risk of regime change. More correctly then, this is Stalin's value of a statistical death (rather than life). The authors use this trade-off and comparisons between border regions (where the risk of regime change is higher because ethnic groups may have closer links with those outside the country) and interior regions, and find that:
...Stalin would have been willing to accept a little more than $43,000 US 1990 for the reduction in citizens’ fatality risk equivalent to one statistical life. This magnitude is stable across a wide variety of robustness checks. While this value is sizeable, it is far below what it could have been had Stalin cared more for the survival of his regime or would stop at nothing to ensure its survival. At the same time, the value is far from what it would be if he had not been willing to put his citizens lives at risk to improve the likelihood of his regime’s survival.
The authors show that VSLs in democracies at a similar level of development are substantially higher. This no doubt reflects Stalin's lack of concern for his people, and the people's lack of power to hold their leader to account.

[HT: Marginal Revolution, back in April]

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