How Much Is Your Life Worth? Google Thinks $31.2 Billion Sounds About Right

You've got to hand it to Google (GOOG -1.96%) (GOOGL -1.97%). The company that remade the online advertising game sure does know how to make headlines.

Last week, Google announced plans to launch a fleet of 100 "self-driving cars" onto American roadways. Equipped with an on/off switch and a navigation system to take you where you're going, and not much more, the new cars are part of an ongoing industry push to develop a truly autonomous car -- and to save hundreds, if not thousands of American lives in the process.

According to the company, Google's self-driving car project aims to build a car so autonomous that it can "take you where you want to go at the push of a button." No car keys, no steering wheel, no gas pedal -- no driver's license! -- required. The project may take years to complete, but it's already showing promise.

Photo: Google.

Great minds think alike
"We started with the most important thing: safety," says Google of its project. And Google's not the only one.

As April's issue of Consumer Reports reveals, many of the world's biggest car companies -- Ford (F 0.69%), General Motors (GM 1.20%), Nissan, Toyota (TM -3.23%), and Volvo -- are thinking along the same lines, and integrating safety devices such as "forward-collision warning," "blind-spot monitoring," and "adaptive cruise control" into their upper echelon luxury vehicles. The idea is that, once you've loaded up a car with sensors and cameras and the software to make sense of the data they provide, it's not too hard to train the car to warn the driver of objects in front and to the rear, and even over your shoulder in the blind spot. You can even teach the car to make decisions based on the simple objective of not running into any of these objects while moving from Point A to Point B.

And as cool as this idea sounds from a techie perspective, it's actually even bigger news for the U.S. economy at large.

Cars don't kill people. People kill people
According to data from the National Highway Traffic Safety Administration, the number of lives lost in car crashes "increased in 2012 after six consecutive years of declining fatalities." In 2012, 33,561 people died in car crashes, a 3.3% increase from 2011 fatalities. Worse, the National Safety Council estimates that fatalities grew even faster in 2013, rising 4.9% to 35,200 lives lost -- plus an additional 3.8 million crash injuries requiring medical attention.

Open season on pedestrians
And that's just the start of the bad news. NHTSA's most recent report shows an even more shocking rise in deaths among pedestrians struck by automobiles, and bicyclists as well. In 2012, 4,743 pedestrians and 726 cyclists died as a result of automotive accidents, increases of roughly 6.4% over 2011 fatalities. Pedestrian injury statistics were even more frightening -- 76,000 pedestrians were struck and required medical attention, 10% more than in 2011.

Not coincidentally, one of the self-driving-car technologies being most actively researched today, by the automakers and by Google itself, is "pedestrian-sensing" technology. This tech trains a car's sensors and cameras to keep special lookout for pedestrians, sounding an alarm when the car gets too close to a car-less human, and even braking in time to avoid an accident.

Google math
Now, what does all of this fancy tech mean in dollars and cents? Let's run through a few numbers.

According to AAA, the annual cost of traffic crashes -- in litigation, in damage to automobiles, in hospitalization costs, and lost productivity -- amounts to $299.5 billion. That's our starting point -- the economic price tag we can put on 35,200 car-related deaths and 3.8 million injuries annually.

According to Consumer Reports, about 90% of these deaths were due to "human error," errors that could be minimized through self-driving car technology. Research conducted by the Insurance Institute for Highway Safety (IIHS) shows that the use of Forward Crash Warning (FCW) sensors, which sound an alarm to alert a driver of an imminent crash, reduces the number of automobile crashes by 7%. That's 2,464 lives, and about $21 billion, saved annually.

Add automatic braking to FCW, and it more than doubles these savings to nearly 5,000 lives saved and $42 billion in costs avoided.

And this was just from IIHS testing the real-world effects of two out of several crash avoidance technologies now on the market. Integrating the rest of these technologies into a true self-driving car, such as Google is building, would save even more lives, and save more billions of dollars for the economy.

And the cost?
Of course, the crass question must still be asked: How much would saving these lives cost us? Well, Consumer Reports notes that when bundled with other "premium" options on luxury vehicles, currently available self-driving car technology adds about $2,000 to a vehicle's cost. Last year, Americans bought 15.6 million new cars -- which could have been equipped with crash avoidance features now on the market.

Mind you, much of the $2,000 spent on a bundle of options that only include self-driving car technology presumably went to paying for heated leather seats, moon roofs, and satellite radios. But even if we ascribe the entire $2,000 price tag to crash avoidance, the cost of installing self-driving car tech in all new cars sold in the country last year would work out to only $31.2 billion.

That's $10.8 billion less than the annual savings from installing just FCW and automatic braking on America's car fleet.

So is it worth it?
From an economic perspective, there are of course caveats. For example, getting the full $42 billion worth of savings out of FCW and automatic braking would probably require retrofitting America's entire car fleet -- 253 million vehicles strong, give or take a million. This implies a total cost of as much as $506 billion to install the technology on all U.S. cars -- and suggests it could take as long as 12 years to "break even" on the investment.

Or it could take less than 12 years. If installing just two simple crash avoidance features can save America $42 billion a year, then installing the whole complex of safety features now available would likely save more than $42 billion, reducing the time needed to recoup the investment. And that's not even counting the economic boost to the economy from automakers such as Ford and General Motors, and their suppliers, as they manufacture and sell the equipment, hire workers to build and install it, and so on.

From a purely economic point of view, independent of the moral argument for pursuing this technology as a means of saving lives, self-driving cars just plain make sense. And dollars, too. Billions, and billions, and billions of dollars.