Estimating an Altruism Adjusted Measure of the Value of a Statistical Life

University Of Washington, Seattle WA

Investigators

Abstract

This research project generates the first empirical estimate of Jones-Lee's "Value of a Statistical Life" multiplier, which is a function of individuals' marginal rate of substitution of own wealth for others' probability of survival and marginal rate of substitution of own wealth for others' wealth. If people are more "safety-focused" altruists (i.e., caring more for others' safety than for others' wealth), then traditional benefit-cost analysis has undervalued life as a result of ignoring altruism. Conversely, if people are more "wealth-focused" altruists, then traditional benefit-cost analysis has overvalued life. This research can greatly advance the knowledge about how and whether the value placed on a "statistical" life needs to incorporate altruistic concerns. To estimate these multipliers, the researchers created a stated-preference survey that Knowledge Networks will administer to over 1,000 survey respondents. The survey investigates altruism as a function of the other person's age and social proximity (family, friends, co-workers, acquaintances, U.S. and foreign strangers). Many public policies impact citizens' longivity.In regulatory analyses of these policies, benefit-cost analysts are used to estimate whether the benefits of these policies outweigh their costs. This requires estimation of the value of a life saved (or, alternatively, extended) as a result of the policy. Because the federal government requires numerous regulatory policies to be evaluated each year, it has a large stake in having an accurate measure for the "Value of a Statistical Life" (VSL), the value used to measure the mortality-related benefits or costs associated with a policy. Conventional methods for estimating the VSL have used both revealed- and stated-preference data to evaluate an individual's value of his or her own life. Current VSL estimates do not consider the value that others may place on a person's life. Thus, these estimates may under- or overestimate the total social value of this individual to all concerned people once altruistic sentiments are included in the valuation. The ultimate goal of the project is to produce evidence about whether altruistic sentiments are likely to be important in estimating the VSL. If the VSL multiplier turns out to be substantially greater than one (as suggested by the pilot study results), then these results should cause public officials to question their methods for evaluating policies. Undervaluing a life in benefit-cost analyses could have large consequences in determining whether regulation passes the benefit-cost test, and thus affect what public policies are adopted or rejected.