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The health of nations: the value of a statistical life

29 Jul 2008

Australians born today live more than 20 years longer than their counterparts a century ago. This gain in our longevity has been achieved through a variety of incremental improvements in health and aged care expenditure, occupational safety, environmental interventions (in particular in relation to water and sanitation), and technological advances driven by research and innovation, together with concern for public welfare and social justice. Such investments reflect the value we place on life, health and wellbeing.

The Office of the ASCC commissioned Access Economics on 30 May 2007 to conduct a comprehensive review of the available Australian and international literature, presenting the microeconomic framework and different methodologies for valuing life, with a view to deriving low, base and high values for the value of a statistical life (VSL) and the value of a statistical life year (VSLY) for use as inputs in cost effectiveness analysis (CEA) and cost benefit analysis (CBA). VSL is understood broadly as the marginal dollar value of a human life while VSLY is understood broadly as the marginal dollar value of a year of healthy human life. The latter is particularly important in practical applications, since most interventions and regulation are aimed at averting injuries and disease and most of these are not immediately fatal. In occupational health and safety (OHS), only around 0.2% of compensated injuries are fatal, and permanently disabling incidents are more substantially more costly than fatalities (NOHSC, 2004). The brief included a consultation process with stakeholders in other Australian Government portfolio areas that may have an interest in the calculation and use of the VSLY in public decision making processes.


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