Willingness to pay, death, wealth, and damages

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 theirdeath.Therefore, discountingcostsbythe probabilityofdeathand 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; weargue that "willingness topay" 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.