|Full Paper.pdf||219 KB|
Date Published:Jan 2010
Regulations designed to increase homeland security often require balancing large costs against highly uncertain benefits. An important component of these benefits is the reduced risk of fatalities from terrorist attacks. While the risk to an individual appears small, the benefits may be large when aggregated over the population. U.S. regulatory agencies have well-established approaches for valuing mortality risks, but address risks that differ in significant respects from those associated with terrorism. The best available estimates of the value of small risk reductions, expressed as the value per statistical life (VSL), average about $6.5 million. However, terrorism-related risks may be perceived as more dreaded and ambiguous, and less controllable and voluntary, than the workplace risks underlying many VSL estimates. These factors may increase the VSL appropriate for terrorism risks, possibly doubling the value.