The Social Value of Mortality Risk Reduction: VSL vs. The Social Welfare Function Approach

31 Pages Posted: 5 Apr 2012

See all articles by Matthew D. Adler

Matthew D. Adler

Duke University School of Law

James K. Hammitt

Harvard University

Nicolas Treich

French National Institute for Agricultural Research (INRA); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: March 1, 2012

Abstract

We examine how different welfarist frameworks evaluate the social value of mortality risk-reduction. These frameworks include classical, distributively unweighted cost-benefit analysis — i.e., the “value per statistical life” (VSL) approach — and three benchmark social welfare functions (SWF): a utilitarian SWF, an ex ante prioritarian SWF, and an ex post prioritarian SWF. We examine the conditions on individual utility and on the SWF under which these frameworks display the following five properties: i) wealth sensitivity, ii) sensitivity to baseline risk, iii) equal value of risk reduction, iv) preference for risk equity, and v) catastrophe aversion. We show that the particular manner in which VSL ranks risk-reduction measures is not necessarily shared by other welfarist frameworks, and we identify when the use of an ex ante or an ex post approach has different implications for risk policymaking.

Keywords: law and economics, risk policy, uncertainty, cost-benefit analysis, CBA, value of statistical life, VSL, social welfare functions, SWF, welfare economics, welfarism, wellbeing, utilitarianism, prioritarianism, social choice theory, equity, fairness

JEL Classification: D04, D61, D63, D81, I18, K32, Q51

Suggested Citation

Adler, Matthew D. and Hammitt, James K. and Treich, Nicolas, The Social Value of Mortality Risk Reduction: VSL vs. The Social Welfare Function Approach (March 1, 2012). U of Penn Law School, Public Law Research Paper No. 12-29; U of Penn, Inst for Law & Econ Research Paper No. 12-16. Available at SSRN: https://ssrn.com/abstract=2034934 or http://dx.doi.org/10.2139/ssrn.2034934

Matthew D. Adler (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

James K. Hammitt

Harvard University ( email )

718 Huntington Avenue
Boston, MA 02115
United States
617-432-4343 (Phone)
617-432-0190 (Fax)

Nicolas Treich

French National Institute for Agricultural Research (INRA) ( email )

147, rue de l'Universite
Paris Cedex 07, 78-Yvelines 75338
France
+33 0 1 42 75 90 00 (Phone)
+33 0 1 47 05 99 66 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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