Economic approaches to valuationThe value of a statistical life is most commonly determined by looking at a person's willingness to pay or willingness to accept. Willingness to pay can be found by asking a person how much they would be willing to pay for good health outcomes (or to reduce bad health outcomes). It can also be determined by looking at a person's purchasing choices. An example would be looking at how much more a person would be willing to pay for airbags in his/her car. To determine willingness to pay one would look at the change in the price that occurs because of the added airbags and divide that by the change in the risk of death. Willingness to accept is determined by looking at how much more you would have to pay someone to put them in a position where they are more likely to have bad health outcomes. This could be seen by changing a person's location from a less polluted city to a more polluted city and looking at the difference in wages between the two areas.
An Alternative Model
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Additionally, this method is not applicable when estimating anyone under 18, because clearly they do not meet the criteria required by the "willingness to pay" model.
A practical example of a baseline model
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- Family Income
- Family Size
- Limited educational background data
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When deciding on the appropriate level of healthcare spending, a typical method is to equate the marginal cost of the healthcare to the marginal benefits received. In order to obtain a marginal benefit amount, some estimation of the dollar value of life is required.
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. There can be no such thing as a perfectly safe or risk free system—one can always make a system safer by spending more money. However, there are diminishing returns involved.
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.
CriticismsThere are also intergenerational aspects to the value of life. Some economists calculate social discount rates based on the interest rates prevalent in financial markets. The higher the social discount rate, the more future generations are devalued relative to the current generation.
The anti-globalization movement objects to the obvious disparity between the value assigned to life in developed nations versus developing nations—most particularly as reflected in World Bank, WTO, and IMF decisions. They point to such numbers as the IPCC assumption that a developed nation can pay fifteen times more than a developing nation to avert a death due to climate change, as evidence of systematic neglect of the value of statistical life in the poorer South, as opposed to the more developed North. Some also fear that more standard global value of life mechanisms could have consequences for the working people in the developed nations.
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A few also debate as to whether animal life deserves to have a value assigned to it, such as in the field of biodiversity. A moral argument associated with this is the Great Ape personhood debate, which has become especially poignant since the recent advocacy by some scientists to move the two chimpanzee species into the genus Homo (previously it was considered a hominid).