The Economics of Risks to Life

Arthur, W.B. (1978). The Economics of Risks to Life. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-78-049

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This study asks two questions: (1) What is the net value to the representative individual over his life-time of activities that alter age-specific mortality risks? (2) What is the cost to the representative individual of activities that take a life at random at a given age?

Results, derived from an economic-demographic model with full age-specific accounting have a strong actuarial flavor: alterations in the mortality schedule, caused say by a medical breakthrough, should be assessed on the utility of expected additional life-years, production, and reproduction, less expected social costs of support. Loss of life at a specific age, due to an accident say, should be assessed on the opportunity costs of expected lost years of living, lost production and reproduction, less expected social support costs.

The results show that current methods, in general, leave out an important social transfer term, that "value of a life lost" is highly age-dependent, and that the degree of diminishing returns to consumption is crucial in calculations of the economic cost of risks.

Item Type: Monograph (IIASA Working Paper)
Research Programs: System and Decision Sciences - Core (SDS)
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 01:44
Last Modified: 27 Aug 2021 17:08

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