The VSL is necessarily based on market preferences that accurately reflect society’s valuation of risks and benefits.
James Broughel wants to break the link between the willingness-to-pay principle embodied in the value of a statistical life (VSL) and the assessment of mortality-reduction benefits. The use of society’s willingness to pay for benefits, however, is not a concept that is unique to valuing mortality reduction effects. It is the approach used to value all policy benefits. Abandoning the willingness-to-pay measure for benefits would consequently cut across all policy impacts.
In Broughel’s view, valuing mortality reduction benefits based on the VSL overvalues these impacts. If basing the valuation of mortality risks on the VSL leads to benefit estimates that are too high, then all market decisions that are used to estimate the VSL are also flawed. In effect, we are supposedly living in a world rampant of market failure in which people place too great a value on safety. Should we also override all private decisions that have led to the risk-money tradeoff rates used in estimating the VSL? Based on Broughel’s logic, workers are paid too much for work on dangerous jobs, people spend too much on cars with added safety features, and we should be more willing to live in polluted neighborhoods with hazardous waste exposures. Our purportedly spendthrift ways presumably carry over to other dimensions of choice, not just safety.
Motivating Broughel’s effort to devaluate lives is his avowed concern with future generations. But future impacts are not excluded from benefit-cost assessments. Although any future impacts must be discounted appropriately, the pertinent VSL that applies to future impacts is increased because of the positive relation between income levels and the VSL. Benefit-cost analyses of regulatory policies recognize the preferences of both current and future generations without shortchanging either group.