- “The best-laid schemes o’ mice an’ men. Gang aft agley” – Robert Burns
The only certainty in life is uncertainty. Individuals make plans for their future without knowing how long they will live in reality. Retirement planning, for instance, is very difficult due to uncertain life expectancy. Would you be willing to trade some of your life expectancy in order to be more certain of the date you will perish?
This is the question Ryan Edwards attempts to answer in his 2008 NBER working paper. Countries such as the U.S. and France have a relatively high variance of life expectancy while Sweden and Japan have very low levels of life expectancy variance.
He calculates that “one less year in standard deviation is worth about half a mean life year.” Further, “health inequality must be larger between rich and poor countries than is implied by life expectancy alone, since life-span uncertainty is surely higher in developing countries.”
- Edwards, Ryan (2008) “The Cost of Uncertain Life Span” NBER WP #14093.