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- Publisher
- Oxford University Press
- Copyright
- The Author 2011. Published by Oxford University Press on behalf of the American Law and Economics Association. All rights reserved. For permissions, please e-mail: journals.permissions@oup.com.
- ISSN
- 1465-7252
- eISSN
- 1465-7260
- DOI
- 10.1093/aler/ahq028
- Publisher site
- See Article on Publisher Site
Abstract
When people face risk of death, they overinvest in risk reduction: first, they discount their risk-reduction costs by the probability of death; second, they consider the consumption of their wealth as a benefit from risk reduction. From a social perspective, people's wealth remains after their death. Therefore, discounting costs by the probability of death and taking into account the benefit of wealth consumption are socially inefficient. Moreover, even for the individual under risk of death, the investment in risk reduction is excessive. We discuss market mechanisms that could correct the inefficiencies; we argue that willingness to pay as a criterion for valuing life should radically change; and we show how the results of the economic analysis of tort law should be modified.
Journal
American Law and Economics Review – Oxford University Press
Published: Apr 7, 2011
Keywords: JEL D60 D80 I10 K13 K32