Pricing Lives for Corporate and Governmental Risk Decisions

Journal of Benefit-Cost Analysis, Vol. 6, No. 2, 2015, Forthcoming

Vanderbilt Law and Economics Research Paper No. 15-5

32 Pages Posted: 24 Jun 2015 Last revised: 31 Dec 2015

See all articles by W. Kip Viscusi

W. Kip Viscusi

Vanderbilt University - Law School; National Bureau of Economic Research (NBER); Vanderbilt University - Department of Economics; Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - Strategy and Business Economics

Date Written: June 19, 2015

Abstract

The value of a statistical life (VSL) is the most influential single parameter used in calculating the benefits of governmental regulations. While there are some inter-agency differences, there is a commonality in the conceptual approach, the central role of mortality risk valuation in benefit assessment, and the general range of valuations used. Corporate risk decisions are based on a less rigorous risk analysis procedure. As typified by the GM ignition switch recall problems and the company’s lax corporate safety culture, there often is little systematic corporate balancing of cost and risk. This suppression of safety concerns may be attributable to the adverse experiences automobile companies had after conducting risk analyses which valued fatalities based on damages awards for wrongful death, and in response juries levied blockbuster punitive damages awards. Instead, companies should adopt the value of a statistical life in its product risk decisions. Companies also should be provided with a safe harbor reference point for responsible risk decisions. Regulatory agencies should use the VSL in setting regulatory sanctions.

Keywords: value of a statistical life, GM ignition switch, safety, risk, VSL

JEL Classification: I10, I18, K32, J28, J17

Suggested Citation

Viscusi, W. Kip, Pricing Lives for Corporate and Governmental Risk Decisions (June 19, 2015). Journal of Benefit-Cost Analysis, Vol. 6, No. 2, 2015, Forthcoming, Vanderbilt Law and Economics Research Paper No. 15-5, Available at SSRN: https://ssrn.com/abstract=2621596

W. Kip Viscusi (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States
615-343-7715 (Phone)
615-322-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Vanderbilt University - Department of Economics

Box 1819 Station B
Nashville, TN 37235
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

Vanderbilt University - Owen Graduate School of Management

401 21st Avenue South
Nashville, TN 37203
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

Vanderbilt University - Strategy and Business Economics ( email )

Nashville, TN 37203
United States

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