Willingness to Pay and the Distribution of Risk and Wealth

Posted: 2 May 2000

See all articles by Richard J. Zeckhauser

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Abstract

Willingness to pay (WTP), most economists believe, is an appropriate benefits metric for government expenditure and regulatory policies that reduce risks to human life. It depends, however, on the distribution of risk and wealth. Currently, society's expenditures overemphasize concentrated risks, say after-the-fact treatment as opposed to prevention. A "dead-anyway" effect complements excess attention to intense interests in explaining this. Our normative criterion for spending on risk reduction is what a rational, albeit uninsured, individual confronting lotteries on future risks to life and wealth would choose for himself. This requires correcting WTP to eliminate the dead-anyway effect but continues to reflect that wealth enhances the utility of living.

JEL Classification: I18, H51, D81

Suggested Citation

Zeckhauser, Richard J., Willingness to Pay and the Distribution of Risk and Wealth. Available at SSRN: https://ssrn.com/abstract=4956

Richard J. Zeckhauser (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-384-9340 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-496-3783 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
809
PlumX Metrics