On the assessment of marginal life saving costs for risk acceptance criteria

Abstract

During the evaluation of societal risk acceptance based on the Life Quality Index (LQI), the marginal life saving costs have to be assessed and compared with the Societal Willingness to Pay for a marginal increase in life safety. With this procedure, decisions on investments into different risk reduction measures are based on efficiency considerations in order to achieve an optimal allocation of limited societal resources. Three basic assumptions can have a large effect on the efficiency of a risk reduction measure and the absolute level of risk to life deemed to be acceptable by the LQI criterion: The definition of the marginal life saving costs, the discount rate used for comparing costs and benefits that accrue at different points in time and the time horizon over which future consequences of the decision are taken into account. In the present paper these issues are discussed based on a clear differentiation between monetary optimization and the societal risk acceptance criterion, which enters the decision as a boundary condition. The aim is to provide clear guidelines on how the assessment of marginal life saving costs has to be performed in the context of regulating different risks to life based on the LQI criterion.