Is the Value of a Statistical Life lower for older adults?

Last week, I was at the Society for Benefit-Cost Analysis’s annual conference in Washington, D.C., where I had the opportunity to learn from some of the leading experts in economic analysis about the newest developments in the field.

One topic that has been a major talking point for decades is how analysts monetize changes in the risk of death, which we commonly refer to as the value of statistical life (VSL). We’ve written in detail about VSL in the past, but as a reminder, VSL is not based on how valuable human life is, it is based on how much people are willing to pay for small reductions in the probability of death. 

One of the most debated questions in the VSL literature is whether or not its value should be the same for everyone. My colleague Rob Moore has written about this problem and some of the main questions that surround this topic. However, at this year’s conference, one presenter was focused specifically about how we should think about VSL for elderly adults. 

This presentation was somewhat responding to a talk that was given at the 2023 annual conference, talking about the VSL for young children, which concluded that the child VSL should be higher than the adult VSL. In that presentation, the key insight the researchers had was that children do not have resources to trade for risk of death reduction, because their resources are managed by their parents. As a result, we should look at how much parents are willing to pay for risk of death reduction on behalf of their children, which is indeed higher than what they would pay for reducing their own risk. 

The presentation I attended at the conference last week took some issue with this approach. The main problem the presenters had was the fact that assuming child VSL is higher than adult VSL is a dramatic departure from the labor market approach that the original estimate of VSL is derived from. 

Although this is not the main argument last year’s researchers made, it is a logical extension that if we depart from the labor market method to arrive at a higher VSL for children, we could follow the same rationale to arrive at a lower VSL for elderly adults. 

Researchers have shown that ageism is an extremely costly type of prejudice that exists in our society. While the technical minutia that informs cost-benefit analysis might not appear to have significant equity concerns, if we understand their full implications we can see how these decisions could inform policy that disadvantage certain groups. If we assume that VSL is lower for elderly adults, then things like high quality elder care become much less valuable from an economic perspective. 

The point I took away from this discussion is not that there is a particular right way to calculate VSL, but rather that we need to be fully aware of the implications our calculations come with. If we decide a variable VSL is appropriate because it allows for a more efficient allocation of risk reduction, then we need to make sure we are not reinforcing negative biases with our decisions.