Establishing a Monetary Value for Lives Saved: Issues and Controversies

In Australia we spend about one-sixth of GDP to protect life and health in one way or another. This is a substantial diversion of resources away from other goods. Accordingly we would like to know whether this level of expenditure on health and safety is appropriate or whether it is too large or small. To assess such issues, quantitative measures of the value of life and health, and of safety, are needed. However most public agencies in Australia (as in most other countries) have only qualitative views about these values. This paper reviews the relevant key concepts and valuation principles based on what individuals are willing to pay for health and safety. It then describes the major methods of valuation and empirical results for values of life, health and safety. Finally it suggests possible values for saving life and increasing longevity for public policy purposes in Australia and discusses some applications. However there are some unresolved issues for which further analysis would be desirable.