2.1.5 Value of Life |
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How much is your life worth? At first blush,
the question might seem impertinent, irreverent,
even immoral. But the question -- and the
economics-based answers it has spawned -- arises
in a surprising number of legal contexts.
Society makes resource allocations based on the
value of life. Sometimes this happens implicitly,
as when criminal law sets penalties for murder,
manslaughter and reckless endagerment. Lately
it has been happening explicitly, as when safety
regulators decide whether car safety devices (such
as air bags) are worth the cost or when corporate
managers choose whether to institute workplace
safety measures. The value-of-life question
can also arise outside the context of prospective
statistical lives when courts measure the value
of life in individualized wrongful-death litigation.
Whether we notice or not, we make decisions based
on the value of our life all the time. We
rent apartments with cheap wall-to-wall carpeting,
even though carpeting carries health risks.
We purchase cars we know are less safe than more
expensive models because we value more the money
we save than the perceived risks. We eat
farm-raised salmon, even though wild salmon is
healthier, based implicitly on a cost-benefit
analysis of the value of our life. |
"Society has long displayed
more attention to identified lives than
statistical lives that prospectively might
be saved. Even beached whales and
identified animal lives often command
more attention than statistical human
lives." W. Kip Viscusi, "Misuses
and Proper Uses of Hedonic Values of Life"
(August 2000).
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This section considers legal contexts involving
the value of a statistical life:
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Value
of life in regulatory contexts.
In regulatory contexts, courts have
accepted that regulatory agencies can take into
account the costs of a particular regulatory action
as measured by the value of statistical lives
("hedonic" damages). John Ward & Thomas Ireland,
The New Hedonics Primer for Economists and Attorneys
(Lwyers and Judges Publishing Company, 2d ed.1996).
Hedonic damages can thus help answer such questions
as: How much should the government spend
to reduce the mortality risks from air pollution?
Hedonic costs also have relevance in non-regulatory
contexts. How much should a company test
a product to assess its fatality risks to consumers?
How much more pay should workers be paid to accept
a highly dangerous job? Once we know the
value of life, we can make informed cost-benefit
assessments.
Value-of-life analysis frequently
comes up in the cost-benefit analysis of environmental
regulation. One difficulty is that the loss of
life from environmental contaminants generally
does not occur right away. Rather, the harm from
exposure is latent -- or sometimes affecting only
future generations. Most empirical value-of-life
studies focus on present risks (such as workplace
safety), not latent ones.
How should valuations be adjusted?
One method might be discounting, to reflect that
the harm occurs later in a person's lifetime.
This would lead to a lower valuation. Yet the
dread of impending health problems suggests an
upward adjustment. See Richard Revesz, Environmental
Regulation, Cost-Benefit Analysis, and the Discounting
of Human Lives __ Columbia Law Review -- (1999)
SSRN
paper (arguing that failing to adjust for
latency undervalues statistical lives by as much
as a factor of six). And, arguably, latent harms
to future generations demand an even more generous
upward adjustment.
Should (and is) cost of life uniform?
According to Professor Cass Sunstein, "Are
Poor People Worth Less Than Rich People? Disaggregating
the Value of Statistical Lives" SSRN
Each government agency uses a uniform
figure to measure the value of a statistical life.
This is a serious mistake. The very theory that
underlies current practice calls for far more
individuation of the relevant values. According
to that theory, the value of statistical lives
should vary across risks. More controversially,
the value of a statistical life should vary across
individuals - even or especially if the result
would be to produce a lower number for some people
than for others. One practical implication is
that a higher value should be given to programs
that reduce cancer risks. Should government use
a higher VSL for programs that disproportionately
benefit the wealthy - and lower VSL for programs
that disproportionately benefit the poor? A serious
complication here is that sometimes the beneficiaries
of regulation pay only a fraction or even none
of its cost; when this is so, the appropriate
VSL for poor people might be higher, on distributional
grounds, than market evidence suggests. An understanding
of this point has implications for foundational
issues about government regulation, including
valuation of persons in poor and wealthy nations.
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Examples
The federal Superfund program
is meant to clean up waste sites whose
special hazard to human health places
them on a national list. The program
is funded by the government (which until
1995 collected special taxes from the
chemical and petroleum industries) and
from responsible parties (such as polluters,
transporters and property owners).
How much does the Superfund
program value human lives? According
to a study by Professors Hamilton and
Viscusi, the program spends approximately
$6 billion per case of cancer prevented.
[is this right?] See James Hamilton
& Kip Viscusi, Calculating Risks:
The Spatial and Political Dimensions of
Hazardous Waste Policy (MIT Press 1999).
Does this mean that the
federal program is out of control?
Although some might argue this, it should
also be borne in mind that the program
produces other health and safety effects
-- and reduces risks whose costs may not
be readily measured.
OSHA has proposed a regulation
that _____ . OSHA officials estimate
that the regulation will save 5,000 lives
every year, but that it will cost companies
$500 million a year to implement.
Is it worth it?
OSHA estimates the "cost
of death" to be the present value of the
lost earnings and medical expenses of
the 5,000 persons who would likely die
without the regulation, and concludes
_____ . Is this the appropriate
comparison? If we value the lives
of these people according to how they
value their lives, we reach a quite different
companson. See Viscusi "The Value
of Risks to Life and Health" 31 Journal
of Economic Literature 1912-46 (1993)
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Value-of-life
computations.
So how can life be valued?
Consider a somewhat simplified valuation.
Suppose you are a foreign service officer working
for the State Department. It's interesting
work, in exotic places, with a good salary and
a great pension. You have a nice posting
in a Scandanavian country, where security and
personal risks are low. You are offered
a posting in a turbulent Latin American country
-- where risks are higher. In fact, the
annual fatality risk would increase in this new
posting by one chance in 1,000. Would you
be willing to take the higher-risk Latin American
posting (assuming you weigh all other factors
equally) if paid an extra $5,000? an extra $9,000?
If your answer is no to $5,000, but yes to $9,000,
you have valued your statistical life. You
are worth (to yourself) somewhere between $5 million
and $9 million -- where the value of life is computed
as the compensation you'd accept divided by the
fatality probability.
As you might imagine, the value of life varies
from person to person -- according to age, wealth,
perceptions of risk, and degree of risk.
For example, wealthy tourists refuse to travel
to certain destinations, no matter how good the
travel bargains, even though the risk is quite
small. Young workers will refuse dangerous
jobs that older workers are willing to take.
Poverty-stricken young men will run drug shipments
for a few thousand dollars, despite a high chance
of being killed. But the same young men
would not accept being a suicide bomber even for
a million dollars. That is, "value of life"
computations change dramatically when the probability
of death goes from being remote to certain. See
Thomas Schelling, The Life You Save May Be
Your Own in Problems in Public Expenditure
Analysis (Brookings Institution 1968).
Also complicating calculations of how people
value life is the "endowment" phenomenon.
We value those things we have (when asked to part
with them) more than those things we don't have
(when asked to acquire them). This means
that persons will pay less to buy out a risk than
they would accept to be paid for the same risk.
For example, our foreign service officer might
accept a "high risk" stipend of $6,000 to be posted
in dangerous Colombia, but would accept no more
than a $3,000 salary cut to stay posted in a Scandanavian
haven.
Over the last couple decades, numerous studies
have sought to measure the statistical value we
place on our lives. Data has come from the
labor market (worker and job characteristics),
the housing market, and automobile purchases.
In present dollars, estimates in the United States
have run between $3 million and $9 million.
See Kip Viscusi, "The Social Costs of Punitive
Damages against Corporations in Environmental
and Safety Cases," 87 Georgetown L. J. 285-345
(2000). Similar valuations hold for other
developed countries (Japan and Australia). Thomas
Kniesner & John Leeth, Compensating Wage Differential
for Fatal Ijury Risk in Australia, Japan and the
United States, 4 Journal of Risk and Uncertainty
75-90 (1991).
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Criticisms of value-of-life
computations. Some have criticized
value-of-life computations as unrealistically
high. How can a regulatory agency
value a worker's life at $5 million,
when the worker has neither the prospect
of earning that much (on a present value
basis) nor having that much to pay to
prevent his death?
The question is misplaced.
An individual's earning power or budget
constraint has nothing to do with how
the individual values his life.
Rather, a worker willing to take a $2000
pay cut to reduce the chances of dying
on the job (let's say by 1 out of 10,000)
reflects a valuation of $20 million.
This valuation is real, since it reflects
how much pay cuts an employee would
be willing to accept for the employer
to eliminate those risks.
Others criticize the value-of-life
studies for producing such a wide range
of results. But the studies are
actually remarkable in their consistency.
Variance across different populations
(factory workers compared to automobile
purchasers, for example) suggests there
should be variance in tradeoffs and
risk perceptions. Certainly, life
valuations that average $6 million (with
a high of $9 million and low of $3 million)
provide a quite useful range for making
statistical cost-benefit assessments.
Moral philosophers might
question whether human life can be reduced
to a dollar equivalent. In fact,
one philosopher concluded that value-of-life
computations are the "most immoral"
academic exercise he has encountered.
[See Viscusi, at 11] Yet, these
computations are not meant to measure
what should be paid for somebody to
forfeit his life, but rather how that
person values risk-reducing or risk-increasing
activities. They are useful in
setting levels of deterrence or safety.
For example, is it worth requiring that
everybody own and drive a Hummer (assuming,
perhaps wrongly, their incomparable
safety)? Given that many people
would be priced out of the vehicle market,
such an imposition on personal choice
might well itself be immoral. |
Example
Suppose we value a statistical
life at $10 billion. This would be tantamount,
as then-Professor and now-Justice Stephen
Breyer has observed, to saying that
consumers would pay an extra $48,077
for a car that is 5% safer than those
we now drive. Stephen Breyer, Breaking
the Vicious Circle: Toward Effec-tive
Risk Regulation (1993) (proposing new
institutional solutions for calculating,
regulating, and reducing health risks).
That we do not notice
people spending this much for marginally
safer cars reflects the limits we place
on car safety. Indeed, the tradeoffs
revealed by consumer purchases of used
cars indicate that consumers are willing
to pay approximately $3 million for
each statistical life saved by the decreased
risk of death offered by the purchase
of a safer used car. See Mark K. Dreyfus
& W. Kip Viscusi, Rates of Time
Preference and Consumer Valuations of
Automobile Safety and Fuel Efficiency,
38 J.L. & Econ. 79, 102 (1995) (finding
implicit value of life estimates for
automobile owners in the range of $2.6
to $3.7 million).
How does the dismal science
apply to your life. Is your life worth
$10 million? Nope. But your grandson's
will be. (more>>)
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Value of life in
individual wrongful death cases.
Can hedonic damages be used to measure compensation
in individual wrongful-death cases? In the
usual wrongful death case, damages are measured
as (1) pain and suffering of the victim - recovered
by the victim's estate, (2) emotional loss of
the survivors, and (3) the present value of the
earnings (net of the vicitim's living expenses)
that would have been available to the survivors.
Arguably, another way to measure the lost "value
of life" is the value assigned by the vicitm himself.
Does this make sense? Professor Viscusi argues
that while measures of how much people value their
lives may be useful in regulatory contexts, hedonic
values are a poor measure of compensation in individual
cases:
The value-of-life estimates are based
on a deterrence or prevention concept rather than
an insurance concept and will provide overinsurance
to accident victims. Value-of-life estimates are,
however, pertinent for use as reference points
in assessing liability. Possible examples of where
it can be used include cases such as the Ford
Pinto and GMC truck burn cases.
In a litigated individual case, the question
of the value of life will often be one of compensation.
(In fact, Viscusi asserts that pain and suffering
awards compensate for lawyer fees, generally tracking
the percentage of compensatory damages that would
go to contingent legal fees. See Viscusi (1991)
(finding that pain and suffering awards in 10,000
products liability cases are roughly the percentage
one would expect for attorney's fees). This
will typically be based on what the victim would
have provided his survivors -- a kind of insurance.
Professor Viscusi argues that setting compensation
in a wrongful-death case based on "value of life"
would overcompensate the survivors. He gives
an example. Suppose that a product carries
a 1 in 10,000 risk of death and a consumer values
his life at $5 million. Viscusi asks, "Would
this consumer pay $500 more for the product on
the assurance his survivors would be compensated
$5 million if he died?" Since most people
do not carry such high life insurance coverage,
Viscusi assumes compensation based on "value of
life" would be inefficiently high.
But the failure of the product manufacturer to
take risk-reducing steps that would cost less
than the amount consumers would pay on a "value
of life" basis might well be evidence supporting
liability. That is, if the manufacturer
could have made a safe product (that is, eliminating
the risk of death) for an additional $200 per
unit, well below the $500 that consumers would
have valued this reduction of risk, failure to
take this cost-efficient step would be evidence
of product defect or negligence. Arguably,
this approach gets closer to the cost-benefit
analysis of the Learned Hand formulation of negligence
better than impressionistic views of jurors.
How might jurors respond to evidence that a company
engaged in a cost-benefit analysis, concluding
that the costs of safety were greater than the
costs of risks. In a study of how potential
jurors would respond to "value of life" levels
used by the government (the National Highway Traffic
Safety Administration assumes in setting vehicle
safety standards a value of $3 million/life) compared
to a signficantly lower valuations once used by
auto companies, the results were suprising.
As Professor Viscusi explained, "The distrubing
result was that jurors were somewhat more likely
to award punitive damages than if the company
undervalued life byu using a figure such as $200,000.
.... By using a higher value of life number, jurors
felt they would send the company a message by
imposing a higher damages award than they would
have had the company undervalued life."
Viscusi argues that the appropriate liability
question is whether on a prospective basis
the total cost of the safety measure in dispute
exceeded the loss of the statitsitical lives due
to the prospective accidents. Thus, if a
saftey measure costing $5 million would save three
statistical lives (each properly valued at $3
million), then failing to adopt the measure would
be negligent. But if the measure would have
cost $12 million, society (and jurors) should
conclude it was not worth it. On a perhaps
a naively optimistic note, Viscusi concludes,
"Whether corporations undertaking risk analyses
can ever be successful in convincing jurors of
the rationality of this approach has yet to be
seen."
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Example
In 1999 a California jury
awarded six passengers of a Chevrolet
Malibu $100 million in compensatory damages
and $4.8 billion in punitive damages after
they were severely burned, but not killed,
in a rear-end collision. The evidence
showed that GM engineers who designed
the car's rear gas tank used a "value
of life" calculation in deciding against
a safer gas tank design.
A memo prepared by Edward
C. Ivey, a GM engineer who was asked to
preapre a cost-benefit analysis of fuel
tank design of GM cars, estimated the
number of fatalities from post-accident
fuel-related fires and assumed a value
of $200,000 per fatality (the present
value of the net earnings of an average
wage earner). By dividing by the number
of GM cars on the road, Mr. Ivey came
up with an estimate of the cost to GM
of $2.40 per vehicle. Mr. Ivey cautioned
that "it is really impossible to
put a value on human life" and that
"a human fatality is beyond value,
subjectively."
How should this evidence
be used? The lawyers for the passengers
argued that the company's craven decision
that the benefits of saving on gas tank
design were greater than human life justified
a finding of recklessness -- and punitive
damages. Does this make sense? (More>>)
For more on the case (and cost-benefit
analysis using the value of life):
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| W.
Kip Viscusi, Corporate
Risk Analysis: A Reckless Act? 52 Stanford
Law Review 547-597 (2000) SSRN
paper
Balancing
of risk and cost lies at the heart of
standard negligence tests and policy analysis
approaches to government regulation. Notwithstanding
the desirability of using a benefit-cost
approach to assess the merits of safety
measures, in many court cases juries appear
to penalize corporations for having done
a risk analysis in instances in which
the company decided not to make a safety
improvement after the analysis indicated
the improvement was unwarranted.
Automobile
accident cases provide the most prominent
examples of such juror sanctions. This
paper tests the effect of corporate risk
analyses experimentally by using a sample
of almost 500 juror-eligible citizens.
Each individual considered an automobile
accident scenario, but these scenarios
differed in terms of whether the company
undertook a risk analysis and in terms
of the nature of the risk analysis.
Somewhat
surprisingly, even sound benefit- cost
analyses of safety measures did not reduce
the likelihood of punitive damages. If
a company follows the procedures used
by government agencies and uses a higher
value of life in its analyses, the penalty
levied on the corporation increases. Internal
use of higher value of life numbers serves
as an anchor that boosts rather than reduces
jury awards.
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Bibliography
| JOSEPH E. ALDY & W. KIP
VISCUSI, "Age Variations in Workers'
Value of Statistical Life" SSRN
607204 (March 2004) |
This paper develops a life-cycle
model in which workers choose
both consumption levels and job fatality risks,
implying that
the effect of age on the value of life is
ambiguous. The
empirical analysis of this relationship uses
novel,
age-dependent fatal and nonfatal risk variables.
Workers' value
of statistical life exhibits an inverted U-shaped
relationship
over workers' life cycle based on hedonic
wage model estimates,
age-specific hedonic wage estimates, and a
minimum distance
estimator. The value of statistical life for
a 60-year-old
ranges from $2.5 million to $3.0 million -
less than half the
value for 30- to 40-year-olds.
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| PHILIP J. COOK & JENS
LUDWIG, "The Social Costs of Gun Ownership"
SSRN
586647 (Sep. 2004)
|
This paper provides new estimates of the
effect of household gun
prevalence on homicide rates, and infers the
marginal external
cost of handgun ownership. The estimates utilize
a superior
proxy for gun prevalence, the percentage of
suicides committed
with a gun, which we validate. Using county-
and state-level
panels for 20 years, we estimate the elasticity
of homicide with
respect to gun prevalence as between +.1 and
+.3. All of the
effect of gun prevalence is on gun homicide
rates. Under certain
reasonable assumptions, the average annual
marginal social cost
of household gun ownership is in the range
$100 to $600. |
ROBERT E. HALL & CHARLES
I. JONES, "The Value of Life and the
Rise in Health Spending" SSRN
587949
(September 2004) |
Health care extends life. Over the past
half century, Americans have spent a rising
share of total economic resources on health
and have enjoyed substantially longer lives
as a result. Debate on health policy often
focuses on limiting the growth of health spending.
We investigate an issue central to this debate:
can we understand the growth of health spending
as the rational response to changing economic
conditions - notably the growth of income
per person? We estimate parameters of the
technology that relates health spending to
improved health, measured as increased longevity.
We also estimate parameters of social preferences
about longevity and the consumption of non-health
goods and services. The story of rising health
spending that emerges is that the diminishing
marginal utility of non-health consumption
combined with a rising value of life causes
the nation to move up the marginal-cost schedule
of life extension. The health share continues
to grow as long as income grows. In projections
based on our parameter estimates, the health
share reaches 33 percent by the middle of
the century. |
| ORLEY C. ASHENFELTER & MICHAEL GREENSTONE,
"Estimating the Value of a Statistical
Life: The Importance of Omitted Variables
and Publication Bias" SSRN
510122 (March 2004) |
In this paper we show that omitted variables
and publication bias lead to severely biased
estimates of the value of a statistical life.
Although our empirical results are obtained
in the context of a study of choices about
road safety, we suspect that the same issues
plague the estimation of monetary trade-offs
regarding safety in other contexts. |
Orley C. Ashenfelter & Michael Greenstone,
"Using Mandated Speed Limits to Measure
the Value of a Statistical Life" Journal
of Political Economy, Vol. 112, No. 1, Pt.
2, pp. S226-S267, February 2004
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In 1987 the federal government permitted
states to raise the speed limit on their rural
interstate roads, but not on their urban interstate
roads, from 55 mph to 65 mph. Since the states
that adopted the higher speed limit must have
valued the travel hours they saved more than
the fatalities incurred, this institutional
change provides an opportunity to estimate
an upper bound on the public's willingness
to trade off wealth for a change in the probability
of death. Our estimates indicate that the
adoption of the 65-mph limit increased speeds
by approximately 4 percent, or 2.5 mph, and
fatality rates by roughly 35 percent. Together,
the estimates suggest that about 125,000 hours
were saved per lost life. When the time saved
is valued at the average hourly wage, the
estimates imply that adopting states were
willing to accept risks that resulted in a
savings of $1.54 million (1997 dollars) per
fatality, with a sampling error roughly one-third
this value. We set out a simple model of states'
decisions to adopt the 65-mph limit that turns
on whether their savings exceed their value
of a statistical life. The empirical implementation
of this model supports the claim that $1.54
million is an upper bound, but it provides
imprecise estimates of the value of a statistical
life. |
Aldy, Joseph E. and Viscusi, W. Kip, "Age
Variations in Workers' Value of Statistical
Life" (January 2004). SSRN
paper. |
This paper develops a life-cycle model in
which workers choose both consumption levels
and job fatality risks, implying that the
effect of age on the value of life is ambiguous.
The empirical analysis of this relationship
uses novel, age-dependent fatal and nonfatal
risk variables. Workers' value of statistical
life exhibits an inverted U-shaped relationship
over workers' life cycle based on hedonic
wage model estimates, age-specific hedonic
wage estimates, and a minimum distance estimator.
The value of statistical life for a 60-year
old ranges from $2.5 million to $3.0 million
- less than half the value for 30 to 40-year
olds. |
| Kniesner, Thomas J., Viscusi, W. Kip and
Ziliak, James P., "Life-Cycle Consumption
and the Age-Adjusted Value of Life" (January
2004). SSRN
paper |
Our research examines empirically the age
pattern of the implicit value of life revealed
from workers' differential wages and job safety
pairings. Although aging reduces the number
of years of life expectancy, aging can affect
the value of life through an effect on planned
life-cycle consumption. The elderly could,
a priori, have the highest implicit value
of life if there is a life-cycle plan to defer
consumption until old age. We find that largely
due to the age pattern of consumption, which
is non-constant, the implicit value of life
rises and falls over the lifetime in a way
that the value for the elderly is higher than
the average over all ages or for the young.
There are important policy implications of
our empirical results. Because there may be
age-specific benefits of programs to save
statistical lives, instead of valuing the
lives of the elderly at less than the young,
policymakers should more correctly value the
lives of the elderly at as much as twice the
young because of relatively greater consumption
lost when accidental death occurs. |
Viscusi, W. Kip, "The Value
of Life: Estimates with Risks by Occupation
and Industry" (May 2003). SSRN
paper
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The worker fatality risk variable
constructed for this paper uses BLS data on
total worker deaths by both occupation and
industry over the 1992-1997 period rather
than death risks by occupation or industry
alone, as in past studies. The subsequent
estimates using 1997 CPS data indicate a value
of life of $4.7 million for the full sample,
$7.0 million for blue-collar males, and $8.5
million for blue-collar females. Unlike previous
estimates, these values account for the influence
of clustering of the job risk variable and
compensating differentials for both workers'
compensation and nonfatal job risks. |
| Costa, Dora L. and Kahn, Matthew E., "Changes
in the Value of Life: 1940-1980" (December
2002). SSRN
paper |
We present the first nation wide value of
life estimates for the United States at more
than one point in time. Our estimates are
for every ten years between 1940 and 1980,
a period when declines in fatal accident rates
were historically unprecedented. Our estimated
elasticity of value of life with respect to
per capita GNP is 1.5 to 1.7. We illustrate
the importance of rising value of life for
policy evaluation by examining the benefits
of improved longevity since 1900, showing
that the current marginal increase in longevity
is more valuable than the large increase in
the first half of the twentieth century. |
Dionne, Georges and Michaud, Pierre-Carl
C., "Statistical Analysis of Value-of-Life
Estimates Using Hedonic Wage Method" (May
2002). SSRN
paper |
This research analyses the variability of
value-of-life estimates. We find evidence
that this variability may in large part be
explained by differences in the methodologies
used to estimate the value of life. Income
elasticity for the value of life is found
to be in the 1.07 to 1.72 interval, a result
similar to that obtained by Miller (2000)
and de Blaeij et al. (2000). We also analyze
the relationship between the value of life
and the initial probability of a fatal accident,
often used in the literature as a proxy for
the variation in the probability of death.
We show that although the willingness to pay
may increase with the probability of death,
the value of life will decrease with this
probability if the initial probability is
less than one half. We draw conclusive evidence
of such a relationship from a sample of 38
value-of-life estimates based on the hedonic-wage
method. |
Jason Shogren & Tommy Stamland, Skill
and the Value of Life 110 Journal of Political
Economy (2002) SSRN
paper |
The value of statistical life (VSL) can
be inferred through real-world wage-fatality
risk trade-offs made across different occupations.
This paper shows that the VSL based on the
wage-risk trade-off tends to be biased upward
if it does not account for the diversity of
workers; unobservable skill to cope privately
with job risk. This upward bias arises because
the highest required wage differential among
the workers is divided by their average risk
across the population. |
Viscusi, W. Kip, "Misuses and Proper
Uses of Hedonic Values of Life" (August
2000). SSRN
paper / Download
|
Estimates of the statistical value of life
have become the standard reference point for
valuing risks to life and health in regulatory
contexts. Attempts to use these estimates
in courtroom settings as a measure of compensation
are misdirected. The value-of-life estimates
are based on a deterrence or prevention concept
rather than an insurance concept and will
provide overinsurance to accident victims.
Value-of-life estimates are, however, pertinent
for use as reference points in assessing liability.
Possible examples of where it can be used
include cases such as the Ford Pinto and GMC
truck burn cases. |
W. Kip Viscusi, Corporate Risk Analysis:
A Reckless Act? 52 Stanford Law Review 547-597
(2000) SSRN
paper
|
Balancing of risk and cost lies at the
heart of standard negligence tests and policy
analysis approaches to government regulation.
Notwithstanding the desirability of using
a benefit-cost approach to assess the merits
of safety measures, in many court cases juries
appear to penalize corporations for having
done a risk analysis in instances in which
the company decided not to make a safety improvement
after the analysis indicated the improvement
was unwarranted. Automobile accident cases
provide the most prominent examples of such
juror sanctions. This paper tests the effect
of corporate risk analyses experimentally
by using a sample of almost 500 juror-eligible
citizens. Each individual considered an automobile
accident scenario, but these scenarios differed
in terms of whether the company undertook
a risk analysis and in terms of the nature
of the risk analysis. Somewhat surprisingly,
even sound benefit-cost analyses of safety
measures did not reduce the likelihood of
punitive damages. If a company follows the
procedures used by government agencies and
uses a higher value of life in its analyses,
the penalty levied on the corporation Increases.
Internal use of higher value of life numbers
serves as an anchor that boosts rather than
reduces jury awards. |
Richard Raymond, The Use, or Abuse, of Hedonic
Value of Life Estimates in Personal Injury
and Death Cases 9 Journal of Legal Economics
(date) SSRN
paper
|
This paper presents a nontechnical account
of the theory underlying value-of-life (VOL)
research and many of the objections that have
been made to the procedures used in the empirical
estimations of these VOLs. Recent research
results relating to factors affecting risk
preference and differences in the public's
valuation of various types of risk are incorporated
into the discussion. The conclusion reached
is that the application of hedonic VOL estimates
in injury or death cases is theoretically
incorrect, potentially misleading and therefore
inappropriate. It is further argued that a
crucial ingredient for the application of
the questionable VOL estimates to injury cases
has yet to be established; there is no tested,
reliable and valid method available to determine
what percentage of an individual's VOL has
been destroyed by a particular injury. |
| Ludwig, Jens and Cook, Philip J., "The
Benefits of Reducing Gun Violence: Evidence
from Contingent-Valuation Survey Data"
(June 1999). SSRN
paper |
This paper presents the first attempt to estimate
the benefits of reducing crime using the contingent-valuation
(CV) method. We focus on gun violence, a crime
of growing policy concern in America. Our
data come from a national survey in which
we ask respondents referendum-type questions
that elicit their willingness-to-pay (WTP)
to reduce gun violence by 30 percent. We estimate
that the public's WTP to reduce gun violence
by 30 percent equals $23.8 billion, or $750,000
per injury. Our estimate implies a statistical
value of life ($4.05 to $6.25 million) that
is quite consistent with those derived from
other methods. |
JEROME M. STALLER, BRIAN P. SULLIVAN, EDWARD
A. FRIEDMAN, "Special Problems with Value-of-Life
Estimates: A Reply to Dr. Gilbert " SSRN
paper |
This note is a Reply to Dr. Gilbert who
criticizes our assertion that in value-of-life
studies the proper measure of on-the-job death
risk is by occupation, and that the failure
of researchers to find evidence that death
risk tabulated by occupation is an important
determinant of wages implies that the value-of-life
studies using death risk by industry are flawed.
Dr. Gilbert challenges us to support empirically
our assertion that prospective employees would
focus more on death risk by occupation rather
than death risk by industry. Our reply is
based upon a review of data categorizing on-the-job
deaths from the 1996 Census of Fatal Occupational
Injuries. This data shows that deaths on the
job are more likely to be associated with
"what you do" rather than "where
you do it". |
Richard Revesz, Environmental Regulation,
Cost-Benefit Analysis, and the Discounting
of Human Lives __ Columbia Law Review -- (1999)
SSRN
paper
|
Probably the most vexing problem raised
by the cost-benefit analysis of environmental
regulation is how to deal with the fact that
the loss of human life generally does not
occur contemporaneously with the exposure
to certain contaminants. In some cases, the
environmental exposure produces a harm with
a latency period whereas in others it produces
harms to future generations. Because there
are essentially no empirical studies of the
value of lives threatened by latent harms,
the valuations used in regulatory analyses
are from threats of instantaneous death in
workplace settings. Various adjustments then
need to be performed to obtain a defensible
valuation. Discounting, to reflect that the
years lost occur later in a person's lifetime,
is one such adjustment, and it leads to a
lowering of the value of life. Upward adjustments
need to be undertaken, however, to account
for the dread and involuntary nature of environmental
carcinogens as well as for higher income levels
of the victims. By not performing these adjustments,
the regulatory process may be undervaluing
lives by as much as a factor of six, or even
more for particularly long latency periods.
In the case of harms to future generations,
discounting is ethically unjustified. Because
of the long time horizons of environmental
problems such as climate change, the rejection
of discounting is likely to lead to far more
stringent responses to global environmental
problems. The Article underscores the extent
to which the cases of latent harms and harms
to future generations are analytically distinct,
even though they have generally been treated
as two manifestations of the same problem.
In the case of latent harms, one needs to
make intra-personal, intertemporal comparisons
of utility, whereas in the case of harms to
future generations what is needed is a metric
against which to compare the utilities of
individuals living in different generations.
Thus, the appropriateness of discounting should
be resolved differently in the two contexts. |
Gilbert, Roy F., "Special Problems
with Value-of-Life Estimates: A Reappraisal"
. 11 Journal of Forensic Economics (1998)
SSRN
paper
|
A recent paper titled "Special Problems
with Value-of-Life Estimates Based on Wage-Risk
Studies in The Miller Survey: A Note"
by Staller, Sullivan and Friedman (hereafter
SSF) attempts to challenge the efficacy of
previously reported empirical wage-risk studies.
These earlier papers are important because
they provide the most accurate empirical estimates
of the value of life currently available in
the literature. The SSF paper does not introduce
any new empirical evidence but rather relies
on SSF?s interpretation of the empirical results
reported in a much older paper by Leigh (1991).
This paper examines the SSF analysis and finds
that their criticism of empirical wage-risk
studies is based on a non sequitur fallacy. |
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2.1.4 Fair division procedure 