Value of Life

Definition

Health Economics

  • Reduced mortality and increased life expectancy are common benefits of health programmes whose appraisal will sometimes require a value to be placed on 'life' seen as 'length of life'. There are broadly three approaches to this valuation. The human capital approach, which assesses the value as the present value of expected future earnings. This has been widely discredited partly for its partial nature (effectively treating people as though they were cart-horses) and partly because of the discrimination it implies against the very young, the old, females, chronic sick, etc. The second, the social decisions approach, infers values from decisions made in the public sector. The third approach enquires experimentally and via surveys about the value placed by individuals on reductions in the size of the risk of death they confront with respect to any particular hazard. Related to this are approaches that seek to explain longevity and the risk of death through the making of rational economic choices. These latter approaches are based on people's preferences and are most consistent with the concept of Pareto efficiency. They also directly approach the matter in a context of uncertainty, which is the characteristic practical context for most decisions.
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