CHDS faculty James K. Hammitt is quoted in several recent articles on the value of reducing deaths from the COVID pandemic, including the Wall Street Journal, fivethirtyeight.com, and Forbes. The value of reducing mortality risk is based on individuals’ willingness to exchange their own income for small changes in their own risk, such as a 1 in 10,000 decrease in their chance of dying in the next year. It is usually summarized as the value per statistical life, or VSL. Estimates of VSL are used in benefit-cost analysis when comparing the positive and negative consequences of a policy.
Hammitt’s work with CHDS’s Lisa A. Robinson is the basis of the VSL estimates recommended by the U.S. Department of Health and Human Services (HHS), of which the Centers for Disease Control and Prevention are a component. The HHS guidance suggests that the average VSL for the U.S. population is about $10 million (updated to the present). This means that the average individual is willing to pay about $1,000 to increase his or her chance of surviving the year by 1 in 10,000. If the risk of dying of COVID-19 were reduced by 1 in 10,000 for each of the 100 million Americans aged 60 and above, the economic value would be $100 billion ($1,000 x 100 million) and 10,000 fewer people would die this year (1/10,000 x 100 million).
The COVID pandemic raises multiple challenges. First, researchers and media accounts are not always clear about the comparisons they are making. For example, are they estimating the total damages of COVID in the absence of intervention, in comparison to conditions without the virus? Evaluating the incremental impact of a policy, in comparison to expected conditions given the interventions that are already in place? These comparisons determine the size of the risk change and the number of deaths averted, which affects the economic value.
Second, estimates of VSL are often derived from the higher wages paid to workers facing larger occupational risk. However, work by Hammitt, Robinson, and others suggests that values are higher for averting risks that are perceived as more dreaded or ambiguous, and less controllable or voluntary. A study of the value of reducing risk of death from SARS conducted in Taiwan during the 2003 outbreak found the value of reducing SARS risk to be substantially larger than implied by existing estimates of VSL.
Third, the rate at which people will trade income for risk reduction diminishes as the risk change increases. While individuals report they are willing to pay $1,000 for a 1 in 10,000 risk change, it would be difficult for most to pay $10,000 for a 1 in 1,000 risk change.
Fourth, VSL may vary with age. Values for children may be larger, and values for the elderly smaller, than for middle-aged adults. But the sizes of these differences are uncertain and the ethics of applying them are contested.
Despite their limitations, estimates of VSL provide valuable perspective on what costs are worth bearing to control the coronavirus pandemic.
Learn more: Premature Deaths, Statistical Lives, and Years of Life Lost: Identification, Quantification, and Valuation of Mortality Risks
Learn more: Valuing Mortality Risk Reductions in Global Benefit-Cost Analysis
View our Resource Pack: Valuing Health and Longevity in Benefit-Cost Analysis