Value of Statistical Life

The value of a statistical life (VSL) is the marginal rate of substitution between income and the probability of death — how much a population is collectively willing to pay for a small reduction in mortality risk, expressed per expected life saved. It is not the value of any identified person's life but the aggregate willingness to trade money for tiny risk changes: if 100,000 people each pay $100 to reduce their annual fatality risk by one in 100,000, society spends $10 million to prevent one statistical death, implying a VSL of $10 million. VSL is the central input to benefit-cost analysis of health, safety, and environmental regulations, and is estimated from labor-market wage-risk data (revealed preference) or from surveys (stated preference).