Fair Innings: The Utilitarian and Prioritarian Value of Risk Reduction over a Whole Lifetime

45 Pages Posted: 9 Dec 2019

See all articles by Matthew D. Adler

Matthew D. Adler

Duke University School of Law

Maddalena Ferranna

affiliation not provided to SSRN

James K. Hammitt

Harvard University

Nicolas Treich

University of Toulouse 1 - Toulouse School of Economics (TSE)

Date Written: November 16, 2019

Abstract

The social value of risk reduction (SVRR) is the marginal social value of reducing an individual’s fatality risk, as measured by some social welfare function (SWF). This is the linchpin concept for applying social welfare functions to the domain of fatality risk regulation. This Article investigates SVRR, using a lifetime utility model in which individuals are differentiated by age, lifetime income profile, and lifetime risk profile. We consider both the utilitarian SWF and a “prioritarian” SWF, which applies a strictly increasing and concave transformation to individual utility.

We show that the prioritarian SVRR provides a rigorous basis in economic theory for the “fair innings” concept, proposed in the public health literature: as between an older individual and a similarly situated younger individual (one with the same income and risk profile), a risk reduction for the younger individual is accorded greater social weight even if the gains to expected lifetime utility are equal. We also systematically compare the SWF framework to benefit-cost analysis (BCA), which is currently the dominant policy-analysis method in governmental practice and applied economics. The value of statistical life (VSL) is BCA’s measure of the social value of reducing an individual’s risk. The comparative statics of prioritarian and utilitarian SVRRs with respect to age, income, and baseline survival probability are significantly different from VSL.

Finally, we illustrate how the SVRRs and VSL assign priority in risk reduction, via an empirical simulation based upon the U.S. population survival curve and income distribution. This empirical exercise shows that prioritarian SVRRs with a moderate degree of concavity in the transformation function conform to lay moral judgments regarding lifesaving policies: the young should take priority but income should make no difference.

Keywords: social welfare function (SWF), benefit-cost analysis (BCA), value of statistical life (VSL), fair innings, social value of risk reduction (SVRR), utilitarian, prioritarian, risk regulation

JEL Classification: D04, D61, D63, D81, I18, J17

Suggested Citation

Adler, Matthew D. and Ferranna, Maddalena and Hammitt, James K. and Treich, Nicolas, Fair Innings: The Utilitarian and Prioritarian Value of Risk Reduction over a Whole Lifetime (November 16, 2019). Duke Law School Public Law & Legal Theory Series No. 2019-79. Available at SSRN: https://ssrn.com/abstract=3493976 or http://dx.doi.org/10.2139/ssrn.3493976

Matthew D. Adler (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

Maddalena Ferranna

affiliation not provided to SSRN

James K. Hammitt

Harvard University ( email )

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

Nicolas Treich

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

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