Valuing lives and life years: anomalies, implications, and an alternative

Many government interventions seek to reduce the risk of death. The value of preventing a fatality (VPF) is the monetary amount associated with each statistical death that an intervention can be expected to prevent. The VPF has been estimated using a preference-based approach, either by observing market behaviour (revealed preferences) or by asking hypothetical questions that seek to replicate the market (stated preferences). The VPF has been shown to differ across and within these methods. In theory, the VPF should vary according to factors such as baseline and background risk, but, in practice, the estimates vary more by theoretically irrelevant factors, such as the starting point in stated preference studies. This variation makes it difficult to choose one unique VPF. The theoretically irrelevant factors also affect the estimates of the monetary value of a statistical life year and the value of a quality-adjusted life year. In light of such problems, it may be fruitful to focus more research efforts on generating the VPF using an approach based on the subjective well-being associated with different states of the world.