Edited by Ronaldo Seroa da Motta
Chapter 3: Valuing statistical lives
David Pearce INTRODUCTION: THE IMPORTANCE OF RISK VALUATION IN ENVIRONMENTAL COST–BENEFIT STUDIES Environmental cost–beneﬁt studies include as beneﬁts any reductions in the risks of premature mortality and morbidity. In turn, changes in the risks of health ‘end points’ are given economic valuations based on the willingness to pay (WTP) of those at risk to reduce the risks. Valuations may vary with the level of risk and certainly vary with the health state that is avoided, for example, people are more averse to cancer risks than risks of accident. One feature of these cost–beneﬁt studies is that health beneﬁts tend to dominate overall beneﬁt estimates. Accordingly, if the basis on which the health beneﬁts are estimated is incorrect, then the overall cost–beneﬁt result is very likely to be incorrect. It matters a great deal, therefore, if the underlying epidemiology is correct and if the economic valuation applied to the health effects is correct. This chapter provides an overview of the issues as they relate to premature mortality only. It is designed as a background paper on the debate about the appropriate way to treat life risks in the context of environmental change. It does not seek to produce any new results, being designed mainly for reference and as a guide to the issues. Table 3.1 shows the role that health beneﬁt valuation has played in some recent European cost–beneﬁt studies. It can be seen that the overall...
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