Background: The economic benefits of reduced mortality risk for a society of purely self-interested individuals equals the value of statistical life, measured as the population mean marginal rate of substitution of one's own wealth for one's own safety. Government agencies in the U.S., Canada, the EU, UK and elsewhere routinely use the value of a statistical life to evaluate policies and regulations affecting public health and safety. For rules affecting transportation and the environment, the value of reduced mortality risk is often the dominant component of measured benefits (e.g., frequently accounting for over 85% of benefits of air pollution regulations).
The assumption that society consists of purely self-interested individuals may be questioned based on empirical evidence from surveys and experiments in which substantial fractions of subjects indicate that they are willing to pay to improve the health or safety of others. The apparent presence of altruism has prompted research on how altruism affects measurement of economic benefits of reduced mortality risk. Two results are now widely accepted. First, if altruism is non-paternalistic (respecting the preferences of others), then any willingness to pay for others’ safety should be ignored in social benefit-cost analysis. Second, if altruism is paternalistic and “safety-focused” (concerned only with the mortality risks of others), then the willingness to pay for others’ safety should be added to the willingness to pay for one’s own safety in benefit-cost analysis.
Existing results on altruism and benefits of reduced mortality risk ignore the possibility of self-protection, that individuals may take actions that affect the risk of death they face, despite substantial empirical evidence supporting the presence of self-protection.
Data/Methods: The theoretical paper adopts a utilitarian perspective. Empirical evidence is cited but no statistical analysis of data is conducted.
Results/Expected Results: The present paper examines how self-protection affects economic benefits of reduced mortality risk under altruism. A key result is that under safety-focused altruism, the benefit of reduced mortality risk depends on the Hicks-compensated rate of substitution between government-provided safety improvements and individual self-protection. For example, willingness to pay for others’ safety should be included under perfect complementarity but excluded under perfect substitution, with intermediate cases lying between these extremes. Empirical evidence on self-protection favors imperfect substitution.
Policy Implications: Results provide government agencies with additional guidance for conducting benefit cost analyses of programs affecting health and safety.