WFU Law School
Law & Valuation
2.1.4 Fair division procedure

2.1.5 Value of Life

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).

This section considers legal contexts involving the value of a statistical life:

For a somewhat different take on the "value of life," see the "best TV commercial ever."

 


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.

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)


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).

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>>)

 


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."

 

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):

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.

 


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.

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

 

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
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.

2.1.4 Fair division procedure

©2003 Professor Alan R. Palmiter

This page was last updated on: March 15, 2005