VALUE OF HUMAN LIFE - REVIEW OF THE MODELS

This paper reviews four consumer maximization models where the probability of premature death enters as a variable that is both known to the consumer and under his control. These models generate a number of interesting results with respect to a person's willingness to pay for an increased chance of living. The most useful to the cost‐benefit analyst is the derived relationship between this willingness‐to‐pay value and a person's lifetime earnings, and thus the relationship between the theoretically correct willingness‐to‐pay approach to the valuation of life‐saving programs and the widely‐used human‐capital approach. However, the conclusions of the reviewed models are in this regard conflicting. Two of the models establish a theoretical basis for investigating the correlation of these two measures; however, this basis is shown to follow from an unrealistic assumption concerning the person's lifetime utility function. The remaining two models, although based upon more realistic assumptions, do not claim to provide theoretical grounds for making such investigations. The conclusion of this review is that in the absence of available data on personal demand for increased survival probability it is impossible to determine the relationship between the willingness‐to‐pay and the human‐capital approaches to placing a value on human life. Copyright © 1979, Wiley Blackwell. All rights reserved