Priceonomics

Pricing a product can be difficult. Should you sell it for a slight markup on the production cost? Charge a lot like it's a luxury product? Allow people to pay what they want? Despite Econ 101’s promise of finding the right price by simply looking at the intersection of a supply and demand curve, pricing strategy advice accounts for countless books, blog posts, and Harvard Business Review cases. 

When it comes to pricing a human life, the answer seems simple. Human life is precious, unquantifiable, priceless. In practice, however, court cases, insurance claims, and victim funds often demand a monetary value for a lost life. 

In some cases, such as distributing privately donated funds to victims of the of the Boston Marathon bombing, organizations draw up criteria based on the severity of the distress and disburse money evenly according to those categories. Others require drawing upon a framework of the value of a human life, and the results are revealing.

Wrongful death claims often allow a victim’s family to demand compensation from the negligent party. In 1896, for example, the parents of a 2 year-old killed by the negligence of the Southern Railroad Company of George argued that their child performed errands and other tasks worth $2 per month in value. But the judge concluded “that the child was ‘of such tender years as to be unable to have any earning capacity, and hence the defendant could not be held liable in damages.’”

Today parents do not need to prove the economic value of a lost child to receive compensation. Instead they refer to their emotional pain. On this basis a 1970 case in which a 3 year-old died from fluoride at the dentist awarded the child’s parents $750,000.

Both cases are described in the book Pricing the Priceless Child by sociologist Viviana Zelizer. The work traces the evolution in how Americans and Europeans conceived of children beginning in the 19th century from economically valuable but unsentimentalized little people to economically useless but socially priceless people enjoying a sacred time in their life. 

Zelizer writes that in 18th century Europe, “the death of an infant or a young child was a minor event, met with a mixture of indifference and resignation.” She quotes a French philosopher of the time who wrote, “I have lost two or three children in infancy, not without regret, but without great sorrow.” 

Historians find, for example, no evidence during the period that the English wore or displayed symbols of mourning when young children died and that the French commonly buried young children in the backyard like Americans bury pets today. Colonial Americans called newborns “it” or “the little stranger.” While the death of young children was greeted with sorrow, the next born child often took the name of its departed sibling. 

Today that seems shocking, and Zelizer shows how reverence for young life developed in the 1800s. The deaths of young children became a great tragedy, inspiring memorials for young victims, movements focused on child mortality and health, and literature for parents on how to cope with the unbearable loss of a young child. Attitudes reflected this as childhood became the coddled, special time that we consider it today. 

As childhood became “sacralized,” economic reality adjusted. Child labor laws removed children from factories and workplaces whereas they once were expected to contribute wages to their family. Instead they babysat and took on paper routes to earn pocket money and learn individual responsibility. Insurance and wrongful death claims switched from compensating parents for the small economic value of children’s wages or burial costs to the emotional pain of losing their priceless child. Advocates opposed the formerly common practices of placing orphans in working homes or with parents who sought economically useful children. Instead, parents were expected to adopt a child to fill their lives with joy.

Pricing the Priceless Child has become a signature work for its record of how the meaning of childhood changed over time, similar to descriptions of how the idea of “teen-age” boys and girls was born in the 1940s. 

But Zelizer also saw herself as critiquing writers “from Karl Marx to Gary Becker, whose explanatory models assume the primacy of economic motivation." At a glance, the increasing need for a long period of education before entering the workforce could seem to provide an economic basis for the changing social understanding of childhood. Zelizer acknowledges that some of these changes reflected economic interests, primarily workers seeking less wage competition through child labor laws. However, she believed that the movement to sacralize childhood represented too many diverse parties seeking an outcome not in their economic interest for economics rather than culture to be in the driver’s seat. 

The dramatic changes in how we conceive of childhood and how we value it remind us that ascribing outcomes to “the market” can easily obscure how the inputs of supply and demand are coloured by social and cultural factors that change over time. A cost-benefit analysis of national parks will yield very different answers to a nation of couch potatoes compared to a nation of John Muir outdoorsmen. Space tourism will be viable if people highly value the experience and unviable if risk-aversion wins out. 

Children are our future, but it’s only recently that they’ve been valued as such.

This post was written by Alex Mayyasi. Follow him on Twitter here or Google Plus. To get occasional notifications when we write blog posts, sign up for our email list.


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