xid-8714185_2

# xid-8714185_2 - Tuesday Nov 1 1 Value of statistical life...

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T uesday, Nov 1. 1. Value of statistical life Key is 'statistical' life - not any individual or specific life - used frequently (to estimate damages in court, for example). Value of statistical life (VSL) reflects value of reduction to risk exposure: reflects society’s willingness to pay for reduction in risk of mortality due to exposure to various substances or contaminants. People voluntarily take on risk every day. It's possible to use this information on choices and tradeoffs to estimate the risk people take., and therefore to estimate the value of that risk. Example: suppose new regulation is expected to result in reduction of risk of death due to exposure to a particular contaminant of .001 (ie, 1 in a thousand). For an affected population of 1,000,000, 1,000 lives would be expected to be saved (1,000/1,000,000 = .001). Suppose people in this population are willing to pay, on average, \$20 for this reduction in risk. Then, \$20 x 1,000,000 = \$2,000,000 = social willingness to pay to avoid the risk. EPA study (1996) estimated value of live saved through its environmental regulations at \$4.8 million per life (with confidence interval of +/- \$3.2 million). http://www.epa.gov/air/sect812/copy.html (full report) How? What is wage difference for risky occupations? Example: Police officers have a 1 in 10,000 higher risk of being killed - than general population - suppose that police earn \$1,000 more than others in comparable situations except for heightened risk of death - then, \$1,000 x 10,000 = \$10 million

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xid-8714185_2 - Tuesday Nov 1 1 Value of statistical life...

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