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$s for Lives: Ethical Considerations in the Use of Cost/Benefit Analysis by For‐Profit Firms

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  • William W. May

Abstract

Cost/benefit analysis is often an imprecise tool because of assumptions that must be made about matters that are difficult to quantify. The problems become especially acute when lives or serious bodily injuries are at stake because of the serious nature of that which is being risked. Furthermore, the literature on cost/benefit analysis focuses on public decision‐making situations and decisions by individuals. This paper examines the distinctiveness of the use of cost/benefit analysis involving putting dollar values on human life by for‐profit firms. The argument developed in the paper is that the lack of participation by the affected party (or government representative) in balancing costs and benefits raises special ethical concerns. A formula that was developed by the Ford Motor Company concerning accidents involving fuel leakage and fire with resultant loss of life and serious burn injuries is used as an example of both the imprecision of the method and the distinctive factors of the decision process that raise special ethical considerations. The paper examines why the for‐profit‐decision is distinct, what the special ethical considerations are, and concludes with a discussion of several alternative procedures to monitor the use of cost/benefit analysis so that it would be an effective business tool while at the same time the individual is provided maximum protection.

Suggested Citation

  • William W. May, 1982. "$s for Lives: Ethical Considerations in the Use of Cost/Benefit Analysis by For‐Profit Firms," Risk Analysis, John Wiley & Sons, vol. 2(1), pages 35-46, March.
    • Handle: RePEc:wly:riskan:v:2:y:1982:i:1:p:35-46
    DOI: 10.1111/j.1539-6924.1982.tb01401.x
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    References listed on IDEAS

    as
    1. Linnerooth, Joanne, 1979. "The Value of Human Life: A Review of the Models," Economic Inquiry, Western Economic Association International, vol. 17(1), pages 52-74, January.
    2. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    3. Mishan, E J, 1971. "Evaluation of Life and Limb: A Theoretical Approach," Journal of Political Economy, University of Chicago Press, vol. 79(4), pages 687-705, July-Aug..
    4. Blomquist, Glenn, 1981. "The Value of Human Life: An Empirical Perspective," Economic Inquiry, Western Economic Association International, vol. 19(1), pages 157-164, January.
    5. William D. Schulze & Allen V. Kneese, 1981. "Risk in Benefit‐Cost Analysis," Risk Analysis, John Wiley & Sons, vol. 1(1), pages 81-88, March.
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    2. Balaei, Behrooz & Noy, Ilan & Wilkinson, Suzanne & Potangaroa, Regan, 2021. "Economic factors affecting water supply resilience to disasters," Socio-Economic Planning Sciences, Elsevier, vol. 76(C).

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