The value of life revisited: with special reference to Australia
Author: Peter Abelson
In 2008, the Commonwealth Office of Best Practice Regulation (OBPR) adopted a national value of statistical life (VSL) of $3.5m, citing the value recommended in the report by this writer (Abelson 2008) that it had commissioned. After allowing for annual per capita changes in income, in 2023 the Office of Impact Assessment (the OBPR renamed) recommended a value of $5.4m for the VSL and relatedly $235,000 for the value of a statistical life year (VSLY). This paper discusses the several major issues associated with the VSL, whether the Australian national value should be reviewed, and if so how. This paper starts by describing the meaning of VSL, the main values currently used in Australia and other countries, and the main methods for deriving these values. The paper then discusses some major issues associated with estimating and setting the VSL. These include issues with the methods for developing VSLs, the significant differences between willingness to pay and willingness to accept valuations, the treatment of tax, allowing for related morbidity effects, whether to include third party (social) values in the VSL, and whether VSL should vary with responsibility for deaths, including related ethical issues. And, topically, whether and how to review and update the current national Australian VSL. The paper then discusses the VSLY, how it is generally estimated and whether this should differ from the value of a quality adjusted life year (VQALY). Finally, the paper addresses the important practical issue of when in public policy decision making to apply the VSL or the VSLY.
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