Traffic engineers often carry out cost-benefit analyses as part of studies on whether to build a proposed new transport facility. For example, a new bypass road may reduce delays to car drivers and train passengers. Perhaps the scheme will even lead to a reduction in the number of fatal road traffic accidents.
In these cases, if the engineer is to carry out a cost-benefit analysis present methodology says he will need to know the value of time saved by drivers and passengers, and the economic value of a fatality – of a human life.
Table 1 shows some estimates from different countries on the economic value of a fatality in a road traffic accident. The data might suggest that there is some agreement, at around Euros 2.1 million.
If there is agreement on the economic value of a fatality, then maybe the same value could be used in other studies, and perhaps referrred to as the “common value of life”. As Ezra Hauer says (ref. 978):
“There is also merit in declaring a common “value of life” (based on peoples’ willingness to pay) provided that the budgets of all agencies are adjusted so that the marginal cost of saving a life is the same in each agency and does not exceed the declared common value. f the above conditions are not met, there is no evident merit to declaring a common value of life to be used by all” (own emphasis).
Common value of life
What would be the implications of a common value of life? Suppose there are plans to reduce the number of district hospitals in an area and require patients to use the more thinly spread , regional hospitals (discussions on these lines can certainly be found in the UK and in Germany).
Fewer hospitals will likely mean an increase in fatalites, since it would take longer for injured persons to reach regional hospital accident and emergency units (and of course there would also be longer travel times for patients and visitors). With a common value of life, the additional fatalities should be added as a cost element in the cost/benefit study of the plan for hospital reductions.
Other examples could include:
- Many leading politicians in a country have constant security protection, aimed at saving them from (e.g.) attempts at assassination. If there is a common value of life, then once the cost of this protection reaches the Euros 2.1 million value (see above) then the protection should be cancelled, as it is no longer economically sensible.
- If a person dies in a traffic accident, the insurance company or the government should pay the victim’s relatives Euros 2.1 million, as this is the common value of life.
- To add an international element, suppose that in England there is a budget of €2 million available for road safety measures; and suppose also that there are two traffic accident reduction schemes , both costing € 2 million, one of which (located in London) would save 1 life, the other (located in Vietnam) 2 lives. With a common value of life then it would make better economic sense for the UK funds to be spent in Vietnam.
There is no common value of life
The problem with the above is that there is no “common value of life”. For example a person who commits suicide places zero value on his life; whilst at least one regent put the value of his life at the whole value of his kingdom (Richard III, according to Shakespeare).
Further, we could extend table 1 above by a row which gives the value of an accident fatality in Vietnam at just under € 7000 (from ref. 1448). In this case, to return to the Vietnam example above, if we save two lives in Vietnam this is only equal to € 14,000. The road safety measure for London would save one life which is valued at € 2.1 million. Since both schemes cost the same, in economic terms the Vietnamese government would be better investing its accident reduction funds in the UK.
Ezra Hauer’s 1994 paper (quoted above) refers to an earlier study and says “In a state-of-the-art review, Lawson (1989, p.43) concludes that the results of all studies deriving the value of life from people’s preferences :
“fail to reveal either a single most reasonable value or a schedule of values for different types or magnitudes of risk changes. The overwhelming characteristic of the combined evidence is its extraordinary diversity: the imputed value per death avoided (in 1989 Canadian dollars) varies from only about $200,000 up to as much as $50 millions”.
A 2003 paper by the UK’s TRL (ref. 1530) quotes a 1994, COST 1313 study which gives figures from several European countries on the total fatal casualty cost for a crash. The figures range from ECU 0.18 million (Spain) to ECU 2.16 million (Switzerland).
In other words, changing the methodology can significantly change the cost of accidents.
Elsewhere, a 2012 paper by the Netherlands organisation SWOV referred to a:
“European value of 1.5 million euro per fatality (which) is based on a report of the European Conference of Ministers of Transport (ECMT, 1998). This stated (….) that the best scientifically based VOSL estimate was € 2.4 ± € 1 million (price level 1990). However, for policy purposes, a more conservative approach was followed, and a lower limit of € 1.5 million (price level 1998) was recommended, as this would be more readily accepted as a minimum estimate (own emphasis).
So it appears that the cost of fatal traffic accidents depend on political decision, an element of judgement, the methodology used to estimate the cost, and on policy purposes.
As I understand it, Mr. Hauer argues that the whole approach to estimating the value of a life is wrong, and that the general public should be involved in deciding it, case by case. This would be more democratic than leaving the value of life to be estimated by a global, abstract formula or by a panel of academics and politicians making decisions on the value of life for policy purposes.
In its impact on traffic studies, Mr. Hauer also says that:
Because we are unsure what the right value (of life) is, the chance that the chosen value is tolerably accurate is small. Under such circumstances, it is probable that the consistently used process of technical risk evaluation recommends public decisions that are consistently at odds with what the public wants to have. (own emphasis).
In the study of alternative transport solutions, the increasing use of multi-criteria analysis is a good idea. It could include a criteria on the number of lives saved (left as a number) rather than hiding the criteria in an aggregated cost benefit figure. Some more direct democracy, on the lines of Switzerland’s referendum opportunities, might also be a good idea. If the value of life has to be decided for policy purposes, let the public decide it.
978 – USA, Ezra Hauer, “Can one estimate the value of life or is it better to be dead than stuck in traffic?” Transpn. Res.-A. Vol. 28A, No.2, pp.109-118; 1994
1427 – UK, CAPT (Internet), “The cost of road accidents”; 2012
1448 – Vietnam, Trinh Thuy Anh et al, “The cost of road traffic accidents in Vietnam”, Eastern Asia Society for Transportation Studies; 2005
1525 – Australia, “Cost of road crashes”; NMRA (New South Wales; 2012
1528 – Netherlands, SWOV fact sheet, “the valuation of human lossses of road deaths”, SWOV 2012
1530 – UK, TRL “TRL R-7780: Guidelines for estimating the cost of road crashes in developing countries”, DFID 2003