Kip Viscusi, W.: Pricing lives—guideposts for a safer society
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It might seem disturbing to try to put a price tag on lives. It is quite easy to find examples (Thai football team trapped in caves, Russian sub Kursk, and so on) where we are willing to spend virtually unlimited resources to save lives.
These are the good news. When identified or known lives are at stake, they seemingly have an infinite value.
The sad news is that we cannot spend an infinite amount of money to prevent fatalities. Look at a road crossing where a fatal accident is expected to occur each year. How much should society invest to try to avoid the fatality, i.e., what is the value of a statistical (or anonymous) life, VSL? The more we spend the less likely is the fatality. But we cannot spend the entire GDP on this single crossing. Given limited resources, there must be a trade-off between spending to reduce the risk and spending the resources on other valued goods and services.
Similar trade-offs are made by firms when accepting a small risk that their products cause...