Valuing Changes in Mortality Risk: Lives Saved Versus Life Years Saved
* Harvard University, Cambridge, MA, USA
This paper provides theoretical background for a symposium on whether the monetary value of changes in mortality risk resulting from environmental policy is best summarized in terms of a ‘value per statistical life’ (VSL) or ‘value per statistical life-year’ (VSLY). The relationship between VSL and VSLY may be clarified by recognizing that any change in an individual's mortality risk can be described by a corresponding shift in her survival curve, which can be summarized by the expected number of lives saved (as a function of time or within a specified time period) or by the expected number of life-years saved. An individual's willingness to pay (WTP) for a shift in her survival curve can be summarized by her average VSL or VSLY for that change. Economic theory suggests that both VSL and VSLY may depend on the individual's initial survival curve, characteristics of the shift, and individual characteristics such as health and income. Neither VSL nor VSLY is likely to be constant across changes in mortality risk. Hence, accurate valuation requires the use of scenario-specific values. The choice between VSL and VSLY summary measures is largely one of convenience.