Valuing Morbidity in Environmental Benefit-Cost Analysis

Abstract

For benefit-cost analysis of policies with respect to environmental and natural resources, economic researchers often require monetized values of households' willingness to pay for reductions in risks to human life and health. I briefly recap some of the main issues in the related task of valuing reductions in the risk of death. These issues also account for our considerably smaller literature on valuing reductions in morbidity risks. An important distinction is the issue of valuation in the space of illnesses versus valuation in the space of illness attributes. I compare the requirements for environmental benefit-cost analysis with the limitations of the standard approaches taken in costeffectiveness analysis in health economics, and I highlight some areas that are ripe for further research.

Short-term impact of PM 2.5 on contemporaneous asthma medication use: Behavior and the value of pollution reductions

“…Researchers have also identified behavioral responses such as exposure avoidance (12), school absences (15), and defensive expenditures (16). The latter is of particular interest to economists, because responses to changes in environmental conditions provide one vehicle for understanding the external costs of pollution (17)(18)(19).…”

Benefit-Cost Analysis of Air Pollution, Energy, and Climate Regulations

“…Some environmental regulations reduce the risk of morbidity (e.g., bouts of bronchitis from inhalation of air pollutants) without changing mortality probabilities. Different values of statistical injury (VSI) are available for illnesses of different durations and severity (Cameron, 2014). For a nonfatal illness that is associated with an extended hospital stay and some posthospital recovery time, the average VSI may be as high as $300,000 to $500,000 per case, or about 3 percent to 5 percent of the average VSL value (Gentry and Viscusi, 2016).…”

Valuing non-marginal changes in mortality and morbidity risk

“…This marginal rate of substitution is commonly referred to as the value per statistical life (VSL) or the value per statistical case (VSC) of illness or injury. As these metrics enable the analyst to monetize mortality and morbidity risk reductions, they are crucial to regulatory impact analysis (Cropper et al, 2011;Cameron 2014).…”