Abstract

http://ssrn.com/abstract=421341
 
 

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Lives, Life-Years, and Willingness to Pay


Cass R. Sunstein


Harvard Law School

June 2003

U Chicago Law & Economics, Olin Working Paper No. 191; AEI-Brookings Joint Center Working Paper No. 03-5

Abstract:     
In protecting safety, health, and the environment, government has increasingly relied on cost-benefit analysis. In undertaking cost-benefit analysis, the government has monetized risks of death through the idea of "value of a statistical life" (VSL), currently assessed at about $6.1 million. Many analysts, however, have suggested that the government should rely instead on the "value of a statistical life year" (VSLY), in a way that would likely result in significantly lower benefits calculations for elderly people, and significantly higher benefits calculations for children. I urge that the government should indeed focus on life-years rather than lives. A program that saves young people produces more welfare than one that saves old people. The hard question involves not whether to undertake this shift, but how to monetize life-years, and here willingness to pay (WTP) is generally the place to begin. Nor does a focus on life-years run afoul of ethical limits on cost-benefit analysis. It is relevant in this connection that every old person was once young, and that if all goes well, young people will eventually be old. In fact, a focus on statistical lives is more plausibly a form of illicit discrimination than a focus on life-years, because the idea of statistical lives treats the years of older people as worth far more than the years of younger people. Discussion is also devoted to the uses and limits of the willingness to pay criterion in regulatory policy, with reference to the underlying welfare goal and to the nature of moral and distributional constraints on cost-benefit balancing.

Number of Pages in PDF File: 49

Keywords: safety, health, cost-benefit analysis, environment, value of a statistical life, value of a statistical life year, discrimination

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Date posted: July 21, 2003  

Suggested Citation

Sunstein, Cass R., Lives, Life-Years, and Willingness to Pay (June 2003). U Chicago Law & Economics, Olin Working Paper No. 191; AEI-Brookings Joint Center Working Paper No. 03-5. Available at SSRN: http://ssrn.com/abstract=421341 or http://dx.doi.org/10.2139/ssrn.421341

Contact Information

Cass R. Sunstein (Contact Author)
Harvard Law School ( email )
1575 Massachusetts Ave
Areeda Hall 225
Cambridge, MA 02138
United States
617-496-2291 (Phone)
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