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Value of Life Suppose there is a road improvement which will save 1 life per year,...

Value of Life

Suppose there is a road improvement which will save 1 life per year, reducing the number of fatalities from 2 to 1 per year (out of 1000 people using the road). Assume all travelers are identical. What value of life should be used in the analysis?

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Answer #1

The value of life, an econmic term is used to quantify the cost benefit of reducing one fatality or accident, generally this cost benefit analysis helps to estimate the marginal cost of preventing one more life from death. In statistical terminologies, it can be defined as the cost of reducing the average no. of the deaths by one unit. Though there are critics of this theory, which says that the human life cannot be given an economic value and it is priceless but due to finite resources this has found large application in the fields of economics, worker safety, improvement, globalization, health care adoption and measurement to reduce pollution.

In the current example, we can estimate the value of life in the following manner:

Value of life = (Cost of improving the road)/ (no of current accidents- no of reduced accidents after improvement)

Assumptions are the all the travellers are of same value of life and its is not differentiating between rich or poor, caste basis or income basis.

Value of life = (Cost of improving the road)/ (2-1)

thus , Value of life = (Cost of improving the road)

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