Friday, September 28, 2012

What’s it worth to you?



The civil courts are one of the most humane systems society has invented.  We take the pain and suffering that have been caused by the negligence or even the willful actions of others and translate it into a dollar amount.  This system allows people to settle their disputes fairly and without revenge.  But it does rely on our ability to translate things like pain and suffering into a monetary value.

There was an interesting paper exploring this issue in the August, 2008 issue of Psychological Science by Eugene Caruso, Dan Gilbert, and Tim Wilson.  They looked at the value that people give to things in the past and in the future.  Consider, for example, an auto accident.  A woman in her car is struck head-on by another car driven by a man who didn’t pay attention to a stop-sign.  The man is clearly at fault.  The woman is injured and it will take 6 months for her to heal.  How much should she be awarded by the insurance company for her pain and suffering?  The researchers asked this question in two ways.  In one situation, the accident was 6 months ago, and the woman is now completely healed.  In the other, the accident just happened, and she is beginning her recovery period.  They found that people were willing to award the woman twice as much when the pain and suffering was yet to happen than when it was now over.  So, future pain and suffering was more valuable than past pain and suffering. 

One interesting side-note, people do not believe that they ought to value the present and future differently.  The researchers did some studies in which they asked both the past and future questions to the same people.  In this case, people gave the same value to past and future events.  However, if they saw the past question first, then the values they gave to both events was lower than if they saw the future question first. 

It is also worth pointing out that this effect was not limited to negative events.  In another study, people were asked how much they would want to be paid for 10 days worth of boring work.  People asked for more money if they were asking for work they had yet to do than if they were being asked for payment for work they had already completed.

So, what does this mean?  I guess that depends on whether you are the insurance company or the person who has suffered damage…Insurance companies ought to wait to place any value on pain and suffering until they are over.  They will seem less valuable when they are finished than while they are ongoing.  On the other hand, if you have suffered damage, your pain and suffering will have the most value while you are going through it.   

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