Value of life

The value of life is an economic value used to quantify the benefit of avoiding a fatality. It is also referred to as the cost of life, value of preventing a fatality (VPF) and implied cost of averting a fatality (ICAF). In social and political sciences, it is the marginal cost of death prevention in a certain class of circumstances. In many studies the value also includes the quality of life, the expected life time remaining, as well as the earning potential of a given person especially for an after the fact payment in a wrongful death claim lawsuit.There is no standard concept for the value of a specific human life in economics. However, when looking at risk/reward trade-offs that people make with regard to their health, economists often consider the value of a statistical life (VSL). Note that the VSL is very different from the value of an actual life. It is the value placed on changes in the likelihood of death, not the price someone would pay to avoid certain death. This is best explained by way of an example. From the EPA's website:Suppose each person in a sample of 100,000 people were asked how much he or she would be willing to pay for a reduction in their individual risk of dying of 1 in 100,000, or 0.001%, over the next year. Since this reduction in risk would mean that we would expect one fewer death among the sample of 100,000 people over the next year on average, this is sometimes described as 'one statistical life saved.” Now suppose that the average response to this hypothetical question was $100. Then the total dollar amount that the group would be willing to pay to save one statistical life in a year would be $100 per person × 100,000 people, or $10 million. This is what is meant by the 'value of a statistical life.” The value of statistical life (VSL) estimates are often used in the transport sector. In health economics and in the pharmaceutical sector, however, the value of a quality-adjusted life-year (QALY) is used more often than the VSL. Both of these measures are used in cost-benefit analyses as a method of assigning a monetary value of bettering or worsening one’s life conditions. While QALY measures the quality of life ranging from 0-1, VSL monetizes the values using willingness-to-pay.Value of life estimates are frequently used to estimate the benefits added due to a new policy or act passed by the government. One example is the 6-year retroactive study on the benefits and costs of the 1970 Clean Air Act in the period from 1970-1990. This study was commissioned by the U.S. Environmental Protection Agency (EPA), Office of Air and Radiation and Office of Policy, Planning and Evaluation, but was carried out by an independent board of public health experts, economists, and scientists headed by Dr. Richard Schmalensee of MIT.Knowing the value of life is helpful when performing a cost-benefit analysis, especially in regard to public policy. In order to decide whether or not a policy is worth undertaking, it is important to accurately measure costs and benefits. Public programs that deal with things like safety (i.e. highways, disease control, housing) require accurate valuations in order to budget spending. 'That means that if Medicare paid an additional $129,000 to treat a group of patients, on average, group members would get one more quality-adjusted life year.'Equivalent parameters are used in many countries, with significant variation in the value assigned.