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The EPA does not place a dollar value on individual lives. Rather, when conducting a cost-benefit analysis of new environmental policies, the Agency uses estimates of how much people are willing to pay for small reductions in their risks of dying from adverse health conditions that may be caused by environmental pollution.
These estimates of willingness to pay for small reductions in mortality risks are often referred to as the value of a statistical life VSL. Note that the VSL is very different from the value of an actual life.
It is the value placed on changes in the likelihood of death, not the price someone would pay to avoid certain death. This is best explained by way of an example. From the EPA 's website: Suppose each person in a sample ofpeople were asked how much he or she would be willing to pay for a reduction in their individual risk of dying of 1 in , or 0.
Since this reduction in risk would mean that we would expect one fewer death among the sample ofpeople over the next year on average, this is sometimes described as "one statistical life saved.
This is what is meant by the "value of a statistical life. A common source of such choices is the labor market, where jobs with greater risk of death are seen to correlate with higher wages.
Such studies regress wages on job characteristics like risk of death, occupation, industry, risk of injury, location, etc. A recent summary of this literature is the paper by Viscusi and Aldy.
These types of studies are referred to as stated preference studies. A well known problem with this method is the so-called " hypothetical bias ", whereby people tend to overstate their valuation of goods and services. This estimate was derived from the range of values estimated in three meta-analyses of VSL conducted after EPA's Guidelines were published in Mrozek and TaylorViscusi and Aldyand later, Kochi, et al.
However, the Agency neither changed its official guidance on the use of VSL in rule-makings nor subjected the interim estimate to a scientific peer-review process through the Science Advisory Board SAB or other peer-review group.
Both sets of data are collected on behalf of the Bureau of Labor Statistics. The direct benefits of the Clean Air Act from to include reduced incidence of a number of adverse human health effects, improvements in visibility, and avoided damage to agricultural crops. These estimates do not include a number of other potentially important benefits which could not be readily quantified, such as ecosystem changes and air toxics-related human health effects.
The estimates are based on the assumption that correlations between increased air pollution exposures and adverse health outcomes found by epidemiological studies indicate causal relationships between the pollutant exposures and the adverse health effects.
A table of specific values used for the various improvements in health can be found in the report's executive summary. Please help improve this section by adding citations to reliable sources.
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The value of life is an economic value used to quantify the benefit of avoiding a fatality. It is also referred to as the cost of life, value of preventing a fatality (VPF) and implied cost of averting a fatality (ICAF). In social and political sciences, it is the marginal cost of death prevention in a certain class of circumstances.
In many studies the value also includes the quality of life.