A recent paper published by the EPA provides up to date governmental thoughts on attempts to put a value on a statistical life (VSL) in the context of “good” and “bad” environmental regulation. From the intro:
Valuing the reduced risks of mortality, 4 in particular, poses a special set of conceptual, analytical, ethical and empirical challenges for economists 5 and policy analysts. This white paper addresses current and recent U.S. Environmental Protection 6 Agency (EPA) practices regarding the valuation of mortality risk reductions…
One of the biggest problems associated with VSL estimates are that the general public really dislikes the idea that the government is willing to put a monetary value on a human life. In 2003 the Bush administration caught flack from the AARP as EPA contemplated using a lower VSL estimate for the elderly.The current estimate appears to be standardized, age-independent, at a value of $4.8 million in 1990 dollars (approx. $7.8 million in $2009).
On the individual level, most place a very high level on the value of their own life, but might place a much smaller value (even zero) on the life of someone they don’t know. The idea that individuals place a limitless value on their own life seems intuitively correct, though people engage in (slightly) risky behavior all the time: driving fast, smoking, boarding an airplane, bicycling, etc.
While some political activists would prefer an approach that includes much more risk reduction, this has an underappreciated downside. Burdensome regulations often reduce macro-level economic growth, and a world with more wealth is a world where everyone is healthier. As an example, compare life-expectancy in the third world with life expectancy in the United States. Wealth allows individuals to life less stressful lives, have better healthcare, drive safer vehicles, participate in less-risky occupations, etc. History is ripe with examples of government regulations that likely increased net mortality as the regulations did little to reduce mortalities but came with high costs.
To solve the public relations dilemma, EPA wants the “value of a statistical life” to be changed to “value of mortality risk.” I’m not convinced this will have much effect, as any explanation of the statistic will indicate that it still involves the government making decisions as to the cost/benefit ratio of statistical lives saved compared to the monetary cost inflicted upon businesses or individuals.
Ideally, the EPA would allow more of these cost/benefit analyses to be considered by individuals (or at least down to state policies), as differences in age, wealth, gender, ethnicity, etc. all have a large effect on the valuation of one’s risk preferences — a top down centralized approach is often too blunt an instrument.