The Journal of Socio-Economics 39 (2010) 692–695 Contents lists available at ScienceDirect The Journal of Socio-Economics journal homepage: www.elsevier.com/locate/soceco The value of planned death Leo Chan a,∗ , Donald Lien b a Department of Finance and Economics, Woodbury School of Business, Utah Valley University, 800 W University Parkway, Orem, UT 84058, United States b Department of Economics, University of Texas at San Antonio, San Antonio, TX, USA article info Article history: Received 29 June 2009 Received in revised form 1 June 2010 Accepted 21 June 2010 JEL classification: I12, I18, D81 Keywords: Euthanasia Physician assisted suicide Planned death abstract In this paper we propose a theoretical model of evaluating the economic costs and benefits of physician assisted suicide (euthanasia). The contemplation of euthanasia is modeled akin to the valuation of a real option. Our modeling of the decision shows that euthanasia is optimal when certain conditions are satisfied. The findings in this paper suggest that if more money is spent on medical research (such as pain management), the demand for Euthanasia could be reduced. © 2010 Elsevier Inc. All rights reserved. 1. Introduction The US Supreme Court ruled in 1997 that the average American has no constitutional right to a physician assisted suicide. How- ever, the court also implied that there is no constitutional bar that would prevent a state from passing a law permitting physician assisted suicide. Subsequently, Oregon became the first state in the US in which physician assisted suicide is legalized. Around the world, Switzerland has the longest history of allowing euthana- sia (allowing both physician and non physician assisted suicide since 1941). In 2002, Belgium and the Netherlands joined the list of European countries in which physician assisted suicide is legal. In 2008, the state of Washington in the US also passed a referen- dum that legalizes physician assisted suicide. While its legal status is unclear in most states in the US, physician assisted suicide (or euthanasia 1 ), when considered implicitly, is a relatively common practice in the United States. Markson (1995) points to the Amer- ican Hospital Association’s recognition that in the United States as many as 6000 deaths per day are in some way planned by the patients, their families or physicians. There have been a large number of published literatures that deal with the legal and ethical issues of euthanasia, particularly ∗ Corresponding author. Tel.: +1 801 863 8428. E-mail addresses: leohchan@yahoo.com, lchan@uvu.edu (L. Chan). 1 We feel that euthanasia is a broader term that includes physician assisted sui- cide and non physician assisted suicide. Any form of planned death can be seen as euthanasia. Thus, we use euthanasia, physician assisted suicide and planned death interchangeably in this paper. since the Supreme Court’s ruling in 1997. Few attempts, however, have been made in the field of economics to tackle the issue of life and death analytically. The earliest attempt was Hamermesh and Soss (1974), in which they propose a model of suicide and suggest that a person will commit suicide when the expected remaining lifetime utility from living is negative. Their conjecture is tested with empirical data. Their empirical results show that the elderly, as a group, have a higher suicide rate. The suicide rate also increases as the unemployment rate goes up. These results suggest that there is a correlation between income, age, and the likelihood to commit suicide. The elderly, as a group, have lower income and are more likely to suffer medical conditions that require a large sum of money to cure or manage. Following Dixit and Pindyck (1994), the suicide model of Hamermesh and Soss is not complete because it ignores the uncertainty factor and, thus, the option value of living. Since the option value to live usually is very large, the circumstances under which suicide is rational must be far bleaker than those found by Hamermesh and Soss (1974). What circumstances can be bleaker than a diagnosis of terminal illness? For terminally ill patients, death is not the only certainty, but so are physical pain and mental suffering. In a way, we can view life after a diagnosis of terminal illness as a period of time in which the patient’s overwhelming experience is that of futil- ity. This period can be viewed as an experience of disutility. There are also high medical costs that must be borne by the patient, the patient’s family, or the society to prolong life. Thus, the decision to not prolong death could be beneficial to all parties involved. On the other hand, the active decision to not prolong life beyond its natural course can have a direct economic cost. For instance, the legal preparation (e.g., obtaining and possibly enforcing the pro- 1053-5357/$ – see front matter © 2010 Elsevier Inc. All rights reserved. doi:10.1016/j.socec.2010.06.007