This case is a good example of utilizing the monetary value of increasing safety by using willingness to pay (WTP) to minimize the mortality risk. Ideally, this is the value of life case where economists consider it to be the value of minimizing the risks of mortality. Usually, this phrase not only denotes a precise and clear meaning but also solicits a lot of controversies. For instance, it may seem controversial to many because of the fact that it implies the possibility of valuing human lives in monetary terms yet most people consider the life of a human being to be priceless. Back to the phrase, the value of life is the short form of Value of a Statistical Life (VSL). This phrase indicates the monetary value of reducing the mortality risk that could stop one statistical death (Mackie, Worsley & Eliasson, 2014) . It should not, therefore, be comprehended as the amount of money that people are willing to pay in order to save a particular determined life.
In our practical case, the road improvement project is supposed to save one life in a year hence minimizing the number of causalities from two to one in every a thousand people using the road. To understand this scenario, I assume that each road user is willing to pay (WTP) some amount of money to benefit from the project’s reduction of mortality risk. For instance, if each road user is willing to pay 140 U.S dollars, then the resultant Value of a Statistical Life (VSL) will be given by $1300 x 1,000/1. The result is 1.3 million U.S dollars. Therefore, .3 million U.S dollars will collected from 1000 road users to save one statistical life and hence the value of this statistical life can be established a .3 million U.S dollars. This case solution also indicates the reason why the approximations about a person’s value of a statistical life can be significant. This case example can also involve a situation where an individual can ignore the road users’ willingness to pay but can have some data about the risk trade-offs or money observed from the studies that the choices of these road users when it comes to other risks associated with mortality. In such a situation, it can then be important to tabulate an average implicit value of a statistical life of the road users based on the acquired data of choices, and utilize the VSL to approximate the importance of this particular safety and risk-reduction project under evaluation.
Delegate your assignment to our experts and they will do the rest.
As seen from the case, there should be little or no controversy in using the willing to pay concept to value reductions in the likelihood of death if people consider longevity, or changes in the risk of mortality like other normal consumptions goods and services. The existence of controversies will prevail if there is evidence that people misperceive the risks of mortality and, therefore, provide inconsistent willing to pay values. Besides, while general preferences consider self-interested actions, people can care for the risks that threaten the lives of others. For instance, the identified victims may be relatives or close friends (Mackie, Worsley & Eliasson, 2014) . Unselfish concerns can, therefore, matter when it comes to the willingness to pay in reduction of mortality risks.
Another classical factor, in this case, is associated with the distributional nature of the willing to pay strategy that can, for example, provide unbalanced weight to the richer people in the society. Ideally, the heterogeneity nature of the population is a vital theme. This theme challenges the policymakers when determining if or how the value of a statistical life should be varied to cater for the differences in a person’s character and risk types (Milligan, Kopp, Dahdah, & Montufar, 2014). Thus, such sample cases on reduction of mortality risk on road some of the above factors that arise from the use of the willing to pay strategy in studying mortality risks. The value of a statistical risk model in this case, therefore, neither indicates what a road user intends to pay to evade death with certainty nor if that individual is willing to face death with certainty. Instead, the model indicates the value of the willingness to pay for an infinitely small change in mortality risk. Thus, VSL can be arrived at by considering the limit of willingness to pay when the variation in the risk is small and infinite. That is, the marginal rate of substitution between the survival probability and wealth constitutes the VSL.
To sum up, this case is a good illustration of utilizing the monetary value of increasing safety by using willingness to pay (WTP) to minimize the mortality risk. For instance, if each road user is willing to pay 140 U.S dollars, then the resultant Value of a Statistical Life (VSL) will be given by $1300 x 1,000/1. As seen from the case, there should be little or no controversy in using the willing to pay concept to value reductions in the likelihood of death if people consider longevity, or changes in the risk of mortality like other normal consumptions goods and services.
References
Milligan, C., Kopp, A., Dahdah, S., & Montufar, J. (2014). Value of a statistical life in road safety: a benefit-transfer function with risk-analysis guidance based on developing country data. Accident Analysis & Prevention , 71 , 236-247.
Mackie, P., Worsley, T., & Eliasson, J. (2014). Transport appraisal revisited. Research in Transportation Economics , 47 , 3-18.
