Value of life
[3][4] The motivation for placing a monetary value on life is to enable policy and regulatory analysts to allocate the limited supply of resources, infrastructure, labor, and tax revenue.
Estimates for the value of a life are used to compare the life-saving and risk-reduction benefits of new policies, regulations, and projects against a variety of other factors,[2] often using a cost-benefit analysis.
However, when looking at risk/reward trade-offs that people make with regard to their health, economists often consider the value of a statistical life (VSL).
From the EPA's website:Suppose each person in a sample of 100,000 people were asked how much he or she would be willing to pay for a reduction in their individual risk of dying by 1 in 100,000, or 0.001%, over the next year.
Then the total dollar amount that the group would be willing to pay to save one statistical life in a year would be $100 per person × 100,000 people, or $10 million.
[6]This again emphasizes that VSL is more of an estimate of willingness to pay for small reductions in mortality risks rather than how much a human life is worth.
Using government spending to see how much is spent to save lives in order to estimate the average individual VSL is a popular method of calculation.
[7] Using the EPA as an example, the Agency uses estimates of how much people are willing to pay for small reductions in their risks of dying from adverse health conditions that may be caused by environmental pollution in their cost-benefit analyses.
One potential source of variability is that different discount rates can be used in this calculation, resulting in dissimilar VSL estimates.
[10] As a result, VSL estimates may be inaccurate because time spent on leisure could be valued at a higher rate than an individual's wage.
[7] Economists might estimate the VSL by simply asking people (e.g. through questionnaires) how much they would be willing to pay for a reduction in the likelihood of dying, perhaps by purchasing safety improvements.
When calculating value of statistical life, it is important to discount and adjust it for inflation and real income growth over the years.
The value of statistical life (VSL) estimates are often used in the transport sector[16] and in process safety (where it may be coupled with the ALARP concept).
Both of these measures are used in cost-benefit analyses as a method of assigning a monetary value of bettering or worsening one's life conditions.
The WTP of the U.S. population was estimated and summed for separate categories including mortality, chronic bronchitis, hypertension, IQ changes, and strokes.
Thus, the individual WTPs were added to get the value of a statistical life (VSL) for each category considered in the valuation of the act's benefits.
[33] Studies by Hacettepe University estimated the VSL at about half a million purchasing power parity adjusted 2012 US dollars,[34] the value of a healthier and longer life (VHLL) for Turkey at about 42,000 lira (about $27,600 in PPP-adjusted 2012 USD), and the value of a life year (VOLY) as about 10,300 TL (about $6,800 in PPP-adjusted 2012 USD), all as of 2012[update].
[46] Historically, children were valued little monetarily, but changes in cultural norms have resulted in a substantial increase as evinced by trends in damage compensation from wrongful death lawsuits.
Public programs that deal with things like safety (i.e. highways, disease control, housing) require accurate valuations in order to budget spending.
One notable example was found by Stanford professor Stefanos Zenios, whose team calculated the cost-effectiveness of kidney dialysis.
His team found that the VSL implied by then current dialysis practice averages about US$129,000 per quality-adjusted life year (QALY).
"[51]In risk management activities such as in the areas of workplace safety, and insurance, it is often useful to put a precise economic value on a given life.
[53] In transportation modes it is very important to consider the external cost that is paid by the society but is not calculated, for making it more sustainable.
Some economists have argued that the value of a statistical life should be "disaggregated" to better capture the differences in mortality risk reduction preferences.
[55][56] Elizabeth Anderson and other philosophers have argued that the methods for measuring the value of a statistical life are insufficiently accurate as they rely on wage studies that are conducted in non-competitive labor markets where workers have insufficient information about their working conditions to accurately determine the risk of death from taking a particular job.
[62][57][63] Economists have responded to the more superficial concerns by advocating renaming or rebranding the value of a statistical life as a "micromort" or the amount someone would be willing to pay to reduce a one in one million risk of death, though philosophers contend that this does not resolve the underlying issues.
