There is no standard concept for the value of a specific human life in economics. However, when looking at risk/reward trade-offs that people make with regard to their health, economists often consider the value of a statistical life . The VSL is the value that an individual places on a marginal change in their likelihood of death. Note that the VSL is very different from the value of an actual life. It is the value placed on changes in the likelihood of death, not the price someone would pay to avoid certain death.
Economists often estimate the VSL by looking at the risks that people are voluntarily willing to take and how much they must be paid for taking them.These types of studies, which look at a person’s actual choices, are known as revealed preference studies. A common source of such choices is the labor market, where jobs with greater risk of death are seen to correlate with higher wages. but has shown to be non linear.
Much of this research uses a wage hedonic approach, which looks at how wages change with changes in job characteristics. Basically, these studies regress wages on job characteristics like risk of death, occupation, industry, risk of injury, location, etc. By controlling for as many job characteristics as possible, researchers hope to tease out the portion of the wage that is compensating for the risk of death on the job. A recent summary of this literature is the 2003 paper by Viscusi and Aldy.
Another method economists can use to estimate the VSL is by simply asking people how much they would be willing to pay for a reduction in the likelihood of dying, perhaps by purchasing safety improvements. These types of studies are referred to as stated preference studies. A well known problem with this method is the so-called “hypothetical bias”, whereby people tend to overstate their valuation of goods and services.