Value of a Prevented Fatality - Accounting for Everything

Saving lives costs money. If you're designing or specifying something (anything) that might have a risk of killing or injuring someone, you'll want to incorporate safety features to minimise the risk. If you're commissioning a project that conceivably could at some point prevent a death (a safety campaign or an anti-pollution law), you'll want to know up-front how worthwhile it'll be. Nowadays we tend to reduce everything to cold, hard dollar values, and human lives at risk are no exception.

A set of decisions will have to be made, since safety features will tend to increase the cost of a system, and perhaps increase the cost of operating it too. No system can ever be 100% safe, so even the most caring of designers will have to draw the line somewhere. The UK Treasury (who hold the purse strings for all government spending in that country) recommends that safety aspects of an asset are evaluated by comparison with the Value of a Prevented Fatality.

Assigning a monetary value to a human life opens up all the economic tools to aid the designer; cost/benefit analysis, value engineering, etc. In our risk adverse, yet penny-pinching world, this at least gives us some basis for making impossible decisions, justifying the outcome, and getting insured afterwards.

How Much?

Having drawn up our spreadsheet, we now need a value to put into the VPF cell. How do we go about it?

The UK Treasury issues a Green Book1 which describes how to evaluate proposed government spending. It offers several approaches to determining the VPF for particular circumstances:

  • Willingness to Pay: Every individual makes decisions every day about how much risk they are willing to accept, and how much they are willing to pay to reduce the risk. Will you buy a smoke detector for your one-bed singleton flat? The £5 you spend will greatly increase your chance of escape if there is a fire. Will you buy one if you have a family to look after? The Green Book offers advice on both circumstances. So the designer can go out and survey people to discover their views on paying hard cash to reduce risk- this is a Stated Preference methodology. Somewhat more robust might be a Revealed Preference methodology. Here, our intrepid designer would look for statistics that express something about the public's appetite for risk. Perhaps the difference in wages for similar jobs with different levels of risk will give a clue.
  • Financial Consequences: If you're killed in a car accident, there is a knock-on financial effect; your employers' output is reduced for a time; the health and emergency services will probably have expended something trying to save you, etc. These costs can be added up to give an overall cost of your death, and ongoing cost of not having you around. Cold, eh?

The UK Department of Transport combines the two approaches to come up with a VPF figure of £1,145,000 at 2000 prices, for the average road traffic accident. They also looked at the value of a prevented injury, which they computed as £128,000 for a serious injury, and £10,000 for a minor injury. They went on (in 2003) to value all deaths and injuries in Great Britain at just over £18bn.

In Northern Ireland, a survey of farmers was used to calculate a Value of Farming Fatality Prevented. Farm workers were asked to ascribe a value to the "pain, grief and suffering" due to a non-fatal farm injury. They were then asked to choose between two treatments, with differing risks of death, long-term injury or full success; and to weigh up which types of death were worse (gored by a bull verses falling over verses drowning in slurry). These factors were chained and weighted to give a final figure between £1.5m and £2.5m.

The UK Health and Safety Executive's number-crunchers also reckon that not all deaths are equal. They double their VPF figure when evaluating asbestos removal projects, since exposure to asbestos will increase the risk of a drawn out death from cancer. There is a study underway at the moment to discover whether this is a sensible approach to "dreaded" risks.

In the USA, the Environmental Protection Agency uses a somewhat higher figure of US$4.8m to asses the value of fatalities due to poor air quality.

Whither Morality?

You might think that the best way to handle risk of death is to remove it completely. Sadly, this is generally not possible, and so trade-offs between the costs of safety measures, their effectiveness, and the value of that effect will always be required.

Whatever the practicalities of making a justifiable decision may be, there is still an ick factor associated with VPF calculations. Ascribing a figure to a living, breathing human being, even in the abstract and in aggregate feels wrong.


  1. The IRA training and induction manual is also called The Green Book, as is the political philosophy of Muammar Qaddafi. Make of that what you will.

Sources:

  • Treasury Green Book, Annex 2, http://greenbook.treasury.gov.uk/annex02.htm#Prevented
  • Valuation of benefits of health and safety control: Follow-up study,
  • Contribution of improved longevity to living standards, http://www.findarticles.com/p/articles/mi_m0254/is_1_64/ai_n13803511/pg_6
  • Highways Economics Note No. 1 2003, http://www.dft.gov.uk/stellent/groups/dft_rdsafety/documents/page/dft_rdsafety_033570.pdf

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