Chapter 30: Valuing Health and Longevity in Regulatory Analysis: Current Issues and Challenges
Lisa A. Robinson and James K. Hammitt Economic valuation of health risks plays a major role in informing decisions about environmental and health and safety regulations, especially as governments around the world increasingly require assessment of regulatory impacts. Regulatory analysis in some form has been mandated in the United States for over 30 years (OMB 1997) and is gradually being implemented in the OECD member countries (OECD 2009). For regulations designed to reduce the risk of illness, injury, or premature mortality, counting the number of cases averted is an important initial step in understanding the impacts of alternative policies. Such counts do not convey the relative severity of each outcome, however, nor can they be meaningfully aggregated across different types of effects. Taking the next step of valuing health outcomes in monetary terms provides additional useful insights. Valuation is particularly informative when it addresses trade-offs that are similar to those involved in regulatory decisions. Such decisions require choosing whether to devote resources to achieving health risk reductions or whether to allow individuals, firms, or government agencies to use these resources to provide other desirable goods and services. When based on the affected individuals’ willingness to pay (WTP) for risk reductions, monetary valuation indicates their preferences for trading income (or wealth) for health improvements. These values can be used to determine whether the benefits of alternative regulatory actions are likely to be commensurate with their costs, and also to identify which action, if any, is most likely to maximize the net...
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