The value of safety: reducing risks to human life
How do we estimate the monetary value of risk to human life? How much would we be willing to pay to protect life and reduce the risk of mortality? Or would we prefer to spend our money on other things?
11 February 2022
How do we estimate the monetary value of risk to human life? How much would we be willing to pay to protect life and reduce the risk of mortality? Or would we prefer to spend our money on other things?
These key questions have been explored in pioneering research conducted by academics at Newcastle University Business School, as well as the University of Birmingham and Glasgow Caledonian, who have developed methods to find out the monetary value of risk reductions from safety improvements and, therefore, the fundamental issue of valuing risks to human life.
About the research
The studies build on the sterling work done by the late Professor Emeritus Michael Jones-Lee, an esteemed pioneer and international expert on the economics of safety policy and risk. Because of his work, Newcastle University is considered to be one of the world leaders in this field.
The Newcastle team was instrumental in establishing the ‘preference-based values’ (PBV) method to calculate the value of preventing death and injury. PBVs put a monetary value on the risk to human life by looking at how much people would be willing to pay (WTP) to prevent casualties occurring in different situations.
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Since 2000, the team has conducted research to estimate values for premature fatalities for a range of causes of premature death, in comparison to those for road accidents. These causes include:
- rail-related deaths
- fatalities caused by domestic fires and fires in public places
- murders
- drowning
- accidents in the home.
The research also calculates the values of the health benefits of reducing air pollution – a topical issue given the need to cut carbon emissions to tackle climate change – as well as the values related to preventing death from cancer.
National impact
All of this work has had far-reaching implications and has helped to shape UK government policy on health and safety. The values of preventing premature fatalities (VPF), and the values of life years lost (VOLY) have been used to monetise the safety benefits arising from government-funded, public sector projects, in line with HM Treasury guidance on cost-benefit analysis (CBA) and DEFRA guidelines on estimating the damage costs of air pollution.
The research was also central in the decision to change HM Treasury guidance in relation to workplace cancers and has led the UK government to commit to commissioning a new primary study to provide direct empirical evidence to update its values for life expectancy gains.
Informing polices
One of the researchers at Newcastle University Business School, Sue Chilton, says: “Our research has had a significant impact on government understanding and implementation of policy in this area. Our robust, transparent and evidence-based values are used to inform policies across a wide range of UK government departments and agencies, giving ministers a clear method of assessing risk and public attitudes in relation to key health issues.”
It’s a fundamental duty of governments to implement policies that improve social welfare and health outcomes.
Future-proofing against future health pandemics
Another academic involved in the research, Dr Jytte Seested Nielsen, adds: “Our research has become even more important in light of the Covid pandemic, which has led to millions of deaths and caused widespread disruption to families and businesses across the world. Ministers have had to balance the need to prevent Covid-related deaths with the need to open up the economy, protect people’s mental health and prevent deaths from non-Covid-related diseases, such as cancer. This is not an easy judgement to make but I’d like to think that our research in the future can be used to affect policy in this area, too.
For example, what are the added benefits of having more ventilators, more nurses, more ICU beds – and more school teachers and local services – if it means we are better prepared? How much would we be willing to pay for all of this to build a strong defence against a future health pandemic? Which actions should we prioritise?”
Dr Chilton adds: “Our studies will encourage policymakers to systematically consider how to deal with and plan for similar scenarios in the future. Covid-19 and future health pandemics should be seen through the lens of society, or social wellbeing, and treated as a broader public health issue. To future-proof against further outbreaks of Covid-19 or a new pandemic, we need to move away from the narrow perspective of the virus as primarily a ‘medical problem’, the resolution of which appears dominated by a reliance on mathematical models and behavioural science.
Policymakers should take a broader perspective, which might include a critical reassessment of the policies it (or its designated organisations) enacts on our behalf.”
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About the authors
Professor Susan Chilton is Professor of Economics at Newcastle University Business School. The academic core of Susan's research is applied welfare economics, centering on the use of surveys and experimental situations to understand how individuals make decisions affecting their economic welfare. The work is based in environmental economics, safety economics and health economics.
Dr Jytte Seested Nielsen is Reader in Economics at Newcastle University Business School. Jytte's main research area is economics of safety policy and risk and thus the fundamental issue of valuing (risks to) human life. In addition, her research focuses on methodological issues in stated preference techniques and how the use of economic experiments can contribute to the development of more robust methods for policy evaluation.