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When is a Man's Life Worth More Than His Human Capital?

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Author Info
Ted Bergstrom (University of California, Santa Barbara)

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Abstract

This paper develops a "subjectivist" theory of the value that individuals place on risks to their lives. It explains the paradox that although individuals may view their lives as priceless, they still will take small risks for a finite amount of money. Typical public projects that alter risks to life result in small changes in survival probability for a large number of people. Standard tools of benefit cost can therefore be applied, where statistical lives saved are valued at a price equal to the marginal rate of substitution between survival probability and wealth. This "value" is compared to human capital measures of the value of saving a life and is shown under reasonable assumptions to exceed the human capital value.

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File URL: http://repositories.cdlib.org/cgi/viewcontent.cgi?article=1160&context=ucsbecon
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Paper provided by Department of Economics, UC Santa Barbara in its series University of California at Santa Barbara, Economics Working Paper Series with number 1982d.

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Date of creation: 01 Nov 1982
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Handle: RePEc:cdl:ucsbec:1982d

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Related research
Keywords: value of life; benefit cost;

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  1. Javier Birchenall & Rodrigo Reis Soares, 2007. "Altruism, Fertility, and the Value of Children: Health Policy Evaluation and Intergenerational Welfare," Textos para discussão 537, Department of Economics PUC-Rio (Brazil). [Downloadable!]
    Other versions:
  2. Per-Olov Johansson, 1992. "Altruism in cost-benefit analysis," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 2(6), pages 605-613, November. [Downloadable!] (restricted)
  3. Theodore C. Bergstrom, 2006. "Benefit-Cost in a Benevolent Society," American Economic Review, American Economic Association, vol. 96(1), pages 339-351, March. [Downloadable!]
    Other versions:
  4. Yew-Kwang Ng, 1992. "The older the more valuable: Divergence between utility and dollar values of life as one ages," Journal of Economics, Springer, vol. 55(1), pages 1-16, February. [Downloadable!] (restricted)
  5. Messer, Kent D. & Poe, Gregory L. & Schulze, William D., 2008. "The Value of Private Risk Versus the Value of Public Risk: An Experimental Analysis of the Johannesson et al. Conjecture," Working Papers 51141, Cornell University, Department of Applied Economics and Management. [Downloadable!]
  6. Sherman Folland, 2006. "Value of life and behavior toward health risks: an interpretation of social capital," Health Economics, John Wiley & Sons, Ltd., vol. 15(2), pages 159-171. [Downloadable!]
  7. Strand, Jon, 2009. "Individual and household value of mortality reductions with intrahousehold bargaining," HERO On line Working Paper Series 2004:2, Oslo University, Health Economics Research Programme. [Downloadable!]
  8. María Vázquez Rodríguez & Carmelo León, 2004. "Altruism and the Economic Values of Environmental and Social Policies," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 28(2), pages 233-249, June. [Downloadable!] (restricted)
  9. Strand, Jon, 2003. "Public-good valuation and intrafamily allocation," Memorandum 28/2002, Oslo University, Department of Economics. [Downloadable!]
  10. Olof Johansson-Stenman, 1998. "The Importance of Ethics in Environmental Economics with a Focus on Existence Values," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 11(3), pages 429-442, April. [Downloadable!] (restricted)
  11. HAMMITT James K & TREICH Nicolas, 2006. "Statistical vs. Identified Lives in Benefit-Cost Analysis," Working Papers 06.11.204, LERNA, University of Toulouse. [Downloadable!]
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  12. Johansson-Stenman, Olof, 2004. "Global environmental problems, efficiency and limited altruism," Working Papers in Economics 139, Göteborg University, Department of Economics. [Downloadable!]
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  13. Winslott Hiselius, Lena, 2003. "The Value of Road and Railway Safety - an Overview," Working Papers 2003:13, Lund University, Department of Economics. [Downloadable!]
  14. Strand.J., 2001. "Public- and private-good values of statistical lives : results from a combined choice-experiment and contingent-valuation survey," Memorandum 31/2001, Oslo University, Department of Economics. [Downloadable!]
  15. Ted Bergstrom & Rod Garratt & Damien Sheehan-Connor, 2008. "One Chance in a Million: Altruism and the Bone Marrow Registry," University of California at Santa Barbara, Economics Working Paper Series 3-07, Department of Economics, UC Santa Barbara. [Downloadable!]
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  16. William T. Harbaugh, 2001. "Valuing Children’s Health and Life: What Does Economic Theory Say About Including Parental and Societal Willingness To Pay?," University of Oregon Economics Department Working Papers 2001-13, University of Oregon Economics Department, revised 01 Jun 2001. [Downloadable!]
  17. DREZE , Jacques H. & RUSTICHINI, Aldo, 2000. "State-dependent utility and decision theory," CORE Discussion Papers 2000007, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  18. Anna Alberini & Aline Chiabai, 2006. "Urban Environmental Health and Sensitive Populations: How Much Are the Italians Willing to Pay to Reduce Their Risks?," ERSA conference papers ersa06p293, European Regional Science Association. [Downloadable!]
    Other versions:
  19. Josephine Borghi, 2008. "Aggregation rules for cost-benefit analysis: a health economics perspective," Health Economics, John Wiley & Sons, Ltd., vol. 17(7), pages 863-875. [Downloadable!]
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