Interpersonal factors in the valuation of statistical lives By

This paper discusses various interpersonal factors with implications for valuation of statistical lives (VSL). We argue that such factors are important and that a valuation principle whereby risk changes are elicited on a purely individualistic basis may seriously bias VSL valuation. Risk-focussed altruism and purely selfish motivations for the survival of others, in particular close family members, are likely to be important sources of such bias. Financial and allocation effects associated with the death of a spouse will also change VSL valuation, typically in a positive direction. Externalities related to taxation and the financing of pension schemes tend to bias individual-based VSL valuation, but only for particular groups and not on the average. We also discuss individuals’ VSL valuation “on behalf of themselves” and “on behalf of their households”, and argue that individuals are likely to represent their households correctly on the average, even when interpersonal valuation factors such as altruism are unimportant. We conclude that little precise quantitative information exists about such factors, and that more research is warranted.