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Public policy toward life saving: Should consumer preferences rule?

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  • Richard Thaler
  • William Gould

Abstract

Needless to say, people who face risks that entail a high probability of death are willing to pay extraordinarily large sums to reduce the probability. Those that face low risks are typically unwilling to pay anything at all to reduce those risks. Accordingly, a public policy that would allocate funds to maximize the number of lives saved conflicts sharply with the willingness-to-pay criterion. Information about their survival probabilities always increases willingness of individuals to pay for life saving. Risk-aversè individuals may reject insurance for the treatment of fatal diseases that is fairly priced, even if they plan to pay for the treatment if they get sick; this result has implications regarding the choice of treatment or prevention. If the objective of public policy is to save the largest number of lives, then the allocation of funds must be made before individuals are affected by life-threatening risks.

Suggested Citation

  • Richard Thaler & William Gould, 1982. "Public policy toward life saving: Should consumer preferences rule?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 1(2), pages 223-242.
    • Handle: RePEc:wly:jpamgt:v:1:y:1982:i:2:p:223-242
    DOI: 10.2307/3324705
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    Cited by:

    1. Dale Whittington & Duncan Macrae, 1990. "Comment: Judgments about who has standing in cost-benefit analysis," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 9(4), pages 536-547.
    2. Timothy L. McDaniels, 1988. "Comparing Expressed and Revealed Preferences for Risk Reduction: Different Hazards and Question Frames," Risk Analysis, John Wiley & Sons, vol. 8(4), pages 593-604, December.
    3. Richard O. Zerbe, 1991. "Comment: Does benefit cost analysis stand alone? rights and standing," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 10(1), pages 96-105.
    4. Hosseini, Hamid, 2003. "The arrival of behavioral economics: from Michigan, or the Carnegie School in the 1950s and the early 1960s?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(4), pages 391-409, September.

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