Sensitivity to scope in estimating the social benefits of prolonging lives for regulatory decisions using national stated preference tradeoffs

Branden B. Johnson () and Adam M. Finkel ()
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Branden B. Johnson: Decision Research
Adam M. Finkel: University of Michigan

Environment Systems and Decisions, 2023, vol. 43, issue 3, 509-528

Abstract: Abstract Regulatory decisions on environmental issues often entail comparing a proposed regulation’s benefits to its costs, usually presuming that the rule should be adopted only if benefits justify costs. Conventional benefits estimation usually defines benefits of a human-mortality-reducing regulation as the product of the number of lives expected to be prolonged and the “value of a statistical life,” usually estimated by averaging citizens’ responses when asked their willingness to pay for a specified small reduction in the probability of their own death. A novel approach to estimating life-prolonging benefits elicits stated preference tradeoffs between national benefits and national costs, a method more compatible with actual regulatory decisions (Finkel and Johnson Environ Law 48:453–476, 2018). All national-tradeoff studies to date presented subjects with only one magnitude, thus not testing within-person scope sensitivity. A U.S. experiment (n = 600) presented ascending or descending sequences of national regulatory benefits (a hypothetical regulation prolongs 10, 100, or 1000 lives) or national regulatory costs ($100 million, $1 billion, or $10 billion). The former yielded decreasing, the latter increasing, values per life when magnitudes increased, without within-frame order effects. Willingness to trade off benefits and costs generally rose or fell less than tenfold overall with a tenfold benefit/cost change, although strict proportionality and super-proportionality also occurred in various sub-groups. Averaged across frames, the implicit value per life prolonged increased with regulatory initiative size, contradicting the premise of invariant life value. Trimmed results mostly matched values of a statistical life used by U.S. federal regulatory agencies. This novel method could expand regulators’ benefit-valuing repertoire.

Keywords: Cost–benefit analysis; Macro-risk; National tradeoffs; Proportionality; Scope sensitivity; Stated preference; Value of a statistical life (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10669-023-09899-x

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