Academic journal article Environmental Law

The Limits of Self-Interest: Results from a Novel Stated-Preference Survey to Estimate the Social Benefits of Life-Prolonging Regulations

Academic journal article Environmental Law

The Limits of Self-Interest: Results from a Novel Stated-Preference Survey to Estimate the Social Benefits of Life-Prolonging Regulations

Article excerpt

  I.  INTRODUCTION                                            454  II.  GROPING TOWARDS SOCIAL BENEFITS VALUATION, FROM TWO       DIFFERENT STARTING POINTS                               459 III.  IMPUTED VALUATION AS THE MIDPOINT OF TWO MORE ROBUST       RESPONSES                                               465  IV.  RESULTS: MEANS AND DISTRIBUTIONS OF IMPUTED VALUATIONS  469   V.  THE IMPORTANCE OF WHAT CITIZENS TRADE FOR WHAT          471  VI.  "EXPLAINING" VALUATIONS DERIVED FROM MACRO-SCALE       ELICITATION                                             473 VII.  DISCUSSION AND CONCLUSIONS                              474 

I. INTRODUCTION

We may fervently believe that human life is "priceless," (3) but society routinely trades off lives for dollars, both by inaction and by regulatory (and "soft law") action. (4) For supporters of stringent environmental, health, and safety regulation, and for believers in the principle that governmental intervention is only justified when the benefits of the intervention exceed its costs, it is crucial that methods of analysis neither misestimate risks nor incorrectly value the benefits of risk reduction.

This Article reports on a new way to estimate the value that citizens place on life-prolonging regulatory benefits, one that challenges both the conventional goal of estimating the "value of a statistical life" (VSL) and the specific way economists currently estimate it. (5) VSL estimates are the primary way regulatory agencies now translate information about risk reduction into monetary benefits that can be compared with costs and used to guide decisions about whether and how stringently to regulate. (6) But there is an odd mismatch between the scenarios economists use to estimate VSL and the arenas in which lives are prolonged via regulatory intervention (or not prolonged because of decisions to eschew regulation). Simply put, estimates of VSL impute (or elicit) tradeoffs between a small probability of death to an individual and the individual's willingness to pay (WTP) to avoid it (in "stated-preference" (SP) studies), or her demands for higher wages to accept it (in the typical "revealed-preference" (RP) study). (7) The decision of whether and how stringently society should regulate, in contrast, is not a personal choice but a policy choice: should we collectively incur large financial costs to prolong many lives?

This question operates at a far different scale from the personal, and also quintessentially involves what we might term "shared purpose," (8) an enterprise that triggers citizens' desires to help improve the public welfare (including benefits to those close to them but not themselves), as well as any aversions they might have to paying for an intervention that will benefit people other than themselves (perhaps benefiting only unknown people). (9) Herein we describe a complementary approach to standard means of VSL estimation to raise broader questions about how society develops such crucial information. We raise the possibility that because traditional methods actually estimate the individual marginal rate of substitution (MRS) between wealth and mortality risk, they are not necessarily estimating the VSL, or that in any event the VSL may not be the best unit estimator of the benefits of large-scale life-saving. But we hasten to add that because our method never directly probes the MRS itself, it too may miss the target.

Regulatory decisions affect society as a whole, and significant regulations often involve expenditures of about $[10.sup.7] to $[10.sup.9] per regulation to reduce statistical fatalities on the order of about 10 to 10,000. (10) But the studies from which VSL estimates are either inferred or elicited do not involve observations or questions anywhere near this scale. (11) Instead, they typically involve fractions of one life "saved," and hypothetical WTP on the order of fifty dollars. (12) For example, someone willing to pay fifty dollars to eliminate a fatality risk to herself of one chance in 100,000 would be indicating a VSL of $5 million ($50 divided by 0. …

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