Taking "All Men Are Created Equal" Seriously: Toward a Metric for the Intergroup Comparison of Utility Functions Through Life Values

The use of wage differential techniques to estimate the value of a statistical life (VSL) leads to the conclusion that willingness to pay for risk reduction increases with income. However, the use of this result in policy-relevant calculations, such as benefit-cost analysis, has led to criticism among ethicists and the lay public, at the same time as it has been defended in the economic literature. In this paper, we argue that differential valuation measures not a differential value that individuals place upon their own lives, but a differential value that they place upon marginal economic resources. Using two sets of VSL estimates from metastudies, we provide an initial estimate of the relative marginal value of income, allowing interpersonal comparison at the societal level. With these results, we propose an empirically determined, ethically justifiable social welfare function that can be easily incorporated into benefit-cost analysis and that has important implications for development economics, although more work is necessary to provide a robust estimate.