The Value of Statistical Life (VSL) is a Willingness to pay value representing what individuals or society are prepared to pay for a marginal change in the probability of death. This metric serves as a crucial tool in cost-benefit analysis and Life Cycle Assessment when quantifying the monetary value of mortality risks and health impacts.
VSL does not represent the value of an identified individual's life, but rather reflects society's aggregate willingness to pay for small reductions in mortality risk across a population. For example, if 10,000 people are each willing to pay £500 to reduce their annual mortality risk by 1 in 10,000, this implies a VSL of £5 million (10,000 × £500 = £5,000,000 for one statistical life saved).
The concept is widely used in environmental impact assessment, public health policy, and regulatory decision-making to place monetary values on the benefits of interventions that reduce mortality risks. These values allow decision-makers to compare life-saving interventions against their costs and against other societal priorities on a common monetary scale.
VSL estimates vary considerably across countries and contexts, reflecting differences in income levels, cultural attitudes towards risk, and methodological approaches to valuation. Studies typically derive VSL values through revealed preference methods (such as wage-risk studies) or stated preference methods (such as contingent valuation surveys).
In a simple approach without Discounting, VSL can be converted to the value of a life year by dividing by the number of life years expected to be lived without the premature death. This conversion provides the Value of a Life Year (VOLY), which can be useful when impacts vary in terms of life years lost rather than fatalities. However, more sophisticated approaches may apply discounting to reflect time preferences and the timing of benefits.
