Lives in the hands of economists: a critical review of the main methodologies used to derive the value of a statistical life

This paper aims at describing the notion of the value of a statistical life and its use for conducting cost-benefit analyses relevant to policies that affect health and safety. The distinction between statistical and identified lives is discussed, and the common methodologies for valuing a statistical life are critically presented. It is argued that, moral issues aside, there is also a series of technical and conceptual problems that relate to the valuation of a statistical life. The implication of this assertion is that, although cost-benefit analyses may generate insightful results, their policy suggestions should by no means be conclusive – especially when safety is at stake, and that various exogenous considerations should also be taken into account.