Living Economics

Statistical Victims
When identifiable victims are involved, people are willing to spend disproportionally more resources to save a few lives rather than spending the same amount to save a much larger number of statistical victims.

In late 1987, 18-month old Jessica McClure spent 58 hours trapped in a well. Media attention made it into a national tragedy. Immense resources were spent to rescue her. And the outpouring of sympathy and donation seemed to be out of proportion to the importance of the event. But the far larger number of children at risk from exposure to lead paint would be lucky if people even give them a moment of thought.

This seemingly curious imbalance in care distribution has been called the identifiable victim effect or the proportionality effect. Although the number of lives involved is small, Jessica was certain to die if not removed from the well, and she comprised 100% of the risk group. The risk of lead paint, on the other hand, is less certain and the probability of death is far lower than 100% even though more lives might have been saved or improved. In other words, people worry more about the proportion of risk reduced than about the number of people helped.

But this human tendency has significant implications on societal resource allocation. Jessica’s situation is much like the one faced by a family with a dying loved one. It is natural for the family to spare no resource to save the life of a dying family member. But society cannot afford to spare no resource to save all dying patients. Yet most of the health-care dollars are spent on saving far fewer life years among adults with acute and/or chronic illnesses than on the infant population with preventable diseases.

The explosion of health-care cost is a prime example of the proportionality effect at work. Whatever its emotional or psychological basis, the effect is strengthened by the logic of collective action. In other words, it is easier for small single-interest organized groups to gain political support because they have much to gain at the expense of the collective interest and are more willing to pool their lobbying resources. Large unorganized groups with diffuse interests usually lose out for lack of pooled resources (see Collective Action).

  • Jenni, K. E. & George Loewenstein. "Explaining the "Identifiable Victim Effect." Journal of Risk and Uncertainty, 14:235-257 (1997).
  • Olsen, M. The Logic of Collective Logic. Harvard University Press. 1965.
  • Sunstein, C.R. Risk and Reason. Cambridge University Press.
Access Tools
• Advanced Search
• Browse Micro
Comparative advantage (14) Competitive strategy (27) Costs and opportunities (53) Entrepreneurship (3) Externality (28) Free Market Solutions (17) Free Ridership (3) Game Theory (22) Incentives (13) Income Distribution (25) Information (19) Labor Market (24) Marginal optimization (33) Market Demand (17) Market Entry (9) Market Exit (2) Market Intervention (12) Market Structure (29) Market supply (4) Material Flow (2) Miscellaneous (3) Price Discrimination (17) Pricing Strategy (46) Profit maximization (48) Property Rights (42) Regulation (16) Rent Seeking (2) Risk Taking (12) Scarcity (10) Tastes & Preferences (27) Taxes (7) Technology (9) Type of goods (31) What Price Means (27)
• Browse Macro
Boom and Bust (9) Budget Balance (12) Comparative advantage (13) Economic Development (1) Economic Indicators (6) Fiscal Policy (12) Incentives (1) Income and output (25) Income Distribution (5) Labor Market (6) Money and Credit (20) Regulation (5) Rent Seeking (1) Saving (6) Taxes (4) Technology (1) Trade and Foreign Exchange (30)
• Glossary
List All

• Microeconomics Lectures • Macroeconomics Lectures
• Instructor Log in • Sample TOC • Demo/Register • Video Tour
• Student Log in
Instructor Log in

Student Log in

Open Menu