The economics of risks to life.

This paper examines the economic welfare implications of mortality change within a framework that both recognizes general equilibrium effects and incorporates full age-specific accounting. Two formal results are derived. Under a life-cycle welfare criterion, changes in the agepattern of mortality, caused say by a medical breakthrough, should be assessed on the utility of additional life-years, production, and reproduction, less expected additional social costs of support. Loss of life at a specific age should be assessed on the opportunity costs of expected lost years of living and lost production and reproduction, less expected social support costs. From these results it is seen that current methods, in general, leave out an important social transfer term, that the valuation of life-risks is highly agedependent, and that the degree of diminishing returns to consumption plays an important part in calculations of the economic cost of risks.