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Notice2024-08300

Notice of Availability of Final Guidance for Estimating Value per Statistical Life

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Published

April 18, 2024

Issuing agencies

Consumer Product Safety Commission

Abstract

The Consumer Product Safety Commission (Commission or CPSC) is announcing the issuance of final guidance for CPSC's application of the Value per Statistical Life in the agency's analyses of benefits and costs and, in particular, for its regulatory analysis.

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<title>Federal Register, Volume 89 Issue 76 (Thursday, April 18, 2024)</title>
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[Federal Register Volume 89, Number 76 (Thursday, April 18, 2024)]
[Notices]
[Pages 27740-27751]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-08300]

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CONSUMER PRODUCT SAFETY COMMISSION

[Docket No. CPSC-2023-0013]

Notice of Availability of Final Guidance for Estimating Value per
Statistical Life

AGENCY: U.S. Consumer Product Safety Commission.

ACTION: Notice of availability.

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SUMMARY: The Consumer Product Safety Commission (Commission or CPSC) is
announcing the issuance of final guidance for CPSC's application of the
Value per Statistical Life in the agency's analyses of benefits and
costs and, in particular, for its regulatory analysis.

ADDRESSES: Docket: For access to the docket to read background
documents or comments received, go to <a href="http://www.regulations.gov">www.regulations.gov</a>, and insert
the docket number, CPSC-2023-0013, into the ``Search'' box, and follow
the prompts.

FOR FURTHER INFORMATION CONTACT: Alex Moscoso, Associate Executive
Director, Directorate for Economic Analysis, U.S. Consumer Product
Safety Commission, 4330 East-West Highway, Bethesda, MD 20814;
telephone: 301-504-7782; email: <a href="/cdn-cgi/l/email-protection#61000c0e12020e120e21021112024f060e17"><span class="__cf_email__" data-cfemail="5b3a363428383428341b382b2838753c342d">[email&#160;protected]</span></a>.

SUPPLEMENTARY INFORMATION:

I. Introduction

The Value per Statistical Life (VSL) is a widely used parameter in
benefit-cost analysis, including regulatory analysis, that represents
an individual's willingness to pay for reducing their risk of fatality.
VSL values a reduction of fatality risk in monetary terms for purposes
of benefit-cost analysis; it is not an attempt to place a value on any
individual life. In regulatory analysis, government economists
typically apply VSL as a standardized and transparent measure of the
welfare impact from policies that reduce or increase fatalities.
CPSC's Directorate for Economic Analysis (EC) is responsible for
conducting all economic analyses for the agency, which includes
regulatory analyses. A regulatory analysis may include an analysis of
benefits and costs of a proposed regulation. EC regularly uses VSL in
its regulatory analyses of CPSC regulations. While the U.S. Office of
Management and Budget (OMB) and other executive branch agencies and
departments have published guidelines on the application of VSL,\1\
CPSC, as an independent agency, is not subject to these guidelines.
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\1\ The U.S. Department of Transportation, U.S. Department of
Health and Human Services, and the U.S. Environmental Protection
Agency all recommend default VSL estimates in their official
guidelines. OMB provides general best practice guidance (OMB
Circular A-4) to Federal executive branch agencies on regulatory
analysis, including discussion of issues related to estimating and
using VSL in regulatory analyses.
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On March 24, 2023, CPSC published a Notice of Availability (NOA) in
the Federal Register that presented its Proposed Draft Guidance for
Estimating the Value per Statistical Life (88 FR 17826). The NOA
provided a 60-day comment period. CPSC received eight comments, and
based on these comments, CPSC made the following changes to its VSL
guidance:
<bullet> Removed the recommendation that high and low values should
be used for child VSL in sensitivity analyses. Instead, the Final VSL
Guidance recommends that the decision for what variables to test in a
sensitivity analysis be done on a case-by-case basis, as is currently
practiced in CPSC.
<bullet> Added further discussion on the normative frameworks used
for the rationale of recommending a separate VSL for children.
<bullet> Added further discussion on alternative methods for
estimating VSL and provided the reasons why CPSC did not recommend
them.
This document establishes and describes the final guidelines on the
application of VSL in CPSC's analysis of benefits and costs and
regulatory analysis. Specifically, this final guidance establishes a
standard method for estimating VSL as well as guidelines for adjusting
VSL for inflation, changes in real income (i.e., controlling for
inflation), and discounting.\2\
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\2\ On March 29, 2024, the Commission voted (3-2) to approve
publication of this notice. Commissioner Trumka issued a statement
in connection with his vote, available at <a href="https://cpsc.gov/About-CPSC/Commissioner/Richard-Trumka/Statement/New-CPSC-Guidance-Will-Double-the-Value-We-Place-on-Saving-Children%E2%80%99s-Lives-I-Expect-This-to-Lead-to-More-Protective-Rulemaking-Both-at-CPSC-and-Across-the-Rest-of-Government">https://cpsc.gov/About-CPSC/Commissioner/Richard-Trumka/Statement/New-CPSC-Guidance-Will-Double-the-Value-We-Place-on-Saving-Children%E2%80%99s-Lives-I-Expect-This-to-Lead-to-More-Protective-Rulemaking-Both-at-CPSC-and-Across-the-Rest-of-Government</a>. Commissioners Feldman and Dziak
issued a joint statement in connection with their vote, available at
<a href="https://cpsc.gov/About-CPSC/Commissioner/Peter-A-Feldman/Statement/Joint-Statement-of-Commissioners-Peter-A-Feldman-and-Douglas-Dziak-on-%E2%80%9CValue-of-Statistical-Life%E2%80%9D-Double-Counting">https://cpsc.gov/About-CPSC/Commissioner/Peter-A-Feldman/Statement/Joint-Statement-of-Commissioners-Peter-A-Feldman-and-Douglas-Dziak-on-%E2%80%9CValue-of-Statistical-Life%E2%80%9D-Double-Counting</a>.
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This final guidance prescribes a VSL estimate specifically for
children, which differs from other established VSL guidance. Other
government economists have applied a uniform VSL to all fatalities that
fall within the scope of the regulation being assessed.\3\ This
approach has the advantage of simplicity. However, it systematically
underestimates benefits for regulations that reduce fatality risks to
children.\4\
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\3\ However, recent OMB guidance indicates agencies should
consider valuing fatal risk reductions using estimates of the VSL
and the value per statistical life-years (VSLY) extended. The VSLY
approach emphasizes that the value of a statistical life is not a
single number relevant for all situations; instead, it varies with
the remaining life expectancy of the population affected. The
remaining life expectancy is usually higher for children than for
other populations, which implies a higher VSL for children. OMB also
recommends the use of health-related monetary values for children
that are at least as large as the values used for adults.
\4\ The extent to which these estimates should be adjusted for
older individuals (e.g., over age 65) is also an area of active
research but is not the focus of these Final Guidelines.
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New research shows a higher willingness to pay for risk reduction
in children's fatality risk than adults.\5\ CPSC recommends a specific
VSL for children based on this research. In addition to this research,
there are anecdotal observations that strongly suggest that society
prioritizes the safety of children over the adult population and
invests significantly in child safety. For example, the large
investments made on child safety in the baby proofing industry,\6\
safety caps on over-

[[Page 27741]]

the-counter medicines,\7\ and additional certifications and licensing
for child safety put upon daycares and schools. Congress has also given
CPSC special statutory mandates to protect children from the risk of
death or injury associated with the use of consumer products.\8\
Research on individuals' willingness to exchange money to reduce
fatality risks to children largely align with these societal
preferences. This final guidance recommends a higher VSL for children
to more accurately assess the benefits of regulations that protect
children from deadly outcomes.
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\5\ Studies are summarized in IEc (2018) and Robinson et al.
(2019).
\6\ The global baby safety devices market has been estimated to
be a $14.21 billion market in 2022. https://www.businesswire.com/
news/home/20220516005546/en/Baby-Safety-Devices-Market-Research-
Report-2022_-Global-Forecast-to-2027_-ResearchAndMarkets.com
\7\ Poison Prevention Packaging Act of 1970, Public Law 91-601
84 Stat. 1670.
\8\ See, for example, 15 U.S.C. 2056a.
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II. Discussion

The purpose of this final guidance is to: (1) provide background on
relevant work CPSC has done to understand the issue of child VSL; (2)
describe the current practice of using VSL in regulatory economics,
both at CPSC and in other government agencies; (3) explain CPSC's
reason for issuing VSL guidelines; and (4) publish CPSC guidelines for
VSL. Additional details were provided in the NOA that presented CPSC's
Proposed Draft Guidance for Estimating the Value per Statistical Life
(88 FR 17826) and the accompanying staff briefing package.\9\
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\9\ Briefing Package can be found here: <a href="https://www.cpsc.gov/s3fs-public/DraftFederalRegisterNoticeNoticeofAvailabilityProposedGuidanceforUsingValueofStatisticalLife.pdf?VersionId=QiWpCy7L9AvI17U.Mo3s.CyRkUdM2INf">https://www.cpsc.gov/s3fs-public/DraftFederalRegisterNoticeNoticeofAvailabilityProposedGuidanceforUsingValueofStatisticalLife.pdf?VersionId=QiWpCy7L9AvI17U.Mo3s.CyRkUdM2INf</a>.
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This final guidance does not discuss the valuation or averted costs
associated with reducing non-fatal injuries. Some Federal agencies and
departments estimate the values or averted costs associated with
reducing the risk of non-fatal injuries as a function of VSL. CPSC,
however, determines the averted costs associated with non-fatal
injuries through its Injury Cost Model, independent of VSL.\10\ This
guidance document does not change CPSC's injury cost estimation
approach for non-fatal outcomes.
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\10\ For information on how CPSC estimates the cost of injuries,
see: <a href="https://www.cpsc.gov/s3fs-public/ICM-2018-Documentation.pdf">https://www.cpsc.gov/s3fs-public/ICM-2018-Documentation.pdf</a>.
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A. Background

VSL is usually derived from willingness to pay studies. These
studies either use surveys to investigate individuals' willingness to
exchange their own income for a change in their own mortality risk, or
they examine real world behavior that reflects this trade-off, such as
the change in income associated with a change in job-related risk. The
framework of such studies requires participants to assess their own, or
a situation's, risk of fatality and then place a monetary value on a
change to that risk. Individual willingness to pay estimates from these
studies are then converted to a VSL estimate by dividing by the risk
change. For example, if a group of 10,000 individuals were willing to
pay $900 each to reduce their risk of death by 0.01 percent in a given
year, then in the aggregate that group of individuals would be willing
to spend $9 million \11\ to reduce the risk of one additional fatality
in that year.
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\11\ $900 / 0.01% = $900 / 0.0001 = $9 million per expected
death averted. In practice, WTP varies across individuals. In this
example, $900 could also represent the average WTP across the
population.
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These studies usually estimate the value that adults place on
reducing their own risk of fatality. Inherently, individuals'
willingness to pay is a function of their real income, wealth, and
other personal factors, as well as the characteristics of the risk. A
majority of the studies other agencies have used to estimate VSL are
wage-risk studies examining labor market data for working age adults.
This approach is not transferable to children, who are not part of the
labor market, do not control financial resources, and may not
understand or be able to express their willingness to pay for such
reductions. As such, the revealed preference literature is limited to a
few, lower-quality averting behavior studies for valuation of mortality
risks to children.\12\ The stated preference literature is more
prevalent for children VSL, and stated preference studies have been
employed in many instances by Federal agencies in mortality
valuation.\13\ As articulated in Pricing Lives: A Guidepost for a Safer
Society,\14\ ``[d]espite the challenges of undertaking credible stated-
preference studies, it may nevertheless be the case that this approach
yields more reliable estimates of VSL in situations in which either the
fatality rate data or the employment data are deficient, making it
infeasible to obtain stable VSL estimates using market data.'' The
scenario described by Viscusi very much describes the current dilemma
for child VSL.
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\12\ We also highlight that averting behavior studies for
children's mortality risks are limited by a drawback comparable to
stated preference literature in this area of study: these studies
examine parents' expenditures for products or actions that reduce
risks to their children (i.e., rather than children's WTP for their
own reductions in risk).
\13\ The review studies cited by CPSC in crafting its
recommendations--IEc (2018) and Robinson et al. (2019)--take care to
address potential limitations of the stated preference literature.
\14\ Viscusi, W. Kip. 2018. ``Pricing Lives: Guideposts for
Safer Society''. Princeton University Press.
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Assigning the same VSL for adults and children ignores evidence
that society values the safety of children more than adults. Failing to
acknowledge the importance of child safety within society, and the
research on individuals' willingness to exchange money to reduce
fatality risks to children that aligns with these societal
preferences,\15\ runs the risk of undervaluing the perceived benefits
of regulations that protect children. Therefore, applying a uniform VSL
likely disadvantages regulations meant to protect the lives of those
whose safety society values most.
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\15\ Industrial Economics, Inc. ``Valuing Reductions in Fatal
Risks to Children'', January 3, 2018, <a href="https://www.cpsc.gov/content/Valuing-Reductions-in-Fatal-Risks-to-Children">https://www.cpsc.gov/content/Valuing-Reductions-in-Fatal-Risks-to-Children</a>.
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Inasmuch as CPSC is tasked with protecting consumers from
unreasonable risk of death and injuries from consumer products, many of
the benefits of the agency's regulations are the reduction of risk from
death among children.\16\ Furthermore, CPSC's statutory authorities
(such as sections 104 and 106 of Consumer Product Safety Improvement
Act of 2008, 15 U.S.C. 2056a and 2056b) and policy statements (see,
e.g., 16 CFR 1009.8) direct the Commission to place a higher priority
on preventing product related injury to vulnerable populations, which
includes children. Therefore, CPSC has a statutorily based interest in
estimating the VSL for children to ensure a more precise and
comprehensive assessment of the benefits from regulation.
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\16\ Safety Standards for Magnets (87 FR 57756), Safety
Standards for Operating Cords on Custom Window Coverings (87 FR
73144), and Safety Standards for Clothing Storage Units (87 FR
72598).
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In 2018, Industrial Economics Inc. (IEc) conducted a criteria-
driven literature review of studies estimating a VSL for children and
drafted a report for CPSC that described its findings. IEc found that
``[t]he number of studies that explore the value of reducing children's
risks has increased substantially in recent years. The results of these
studies are diverse, but generally suggest that the value individuals
place on reducing risks to children is greater than the value of
reducing risks to adults.'' In 2019, a group of co-authors that
included a subset of the authors of the IEc report published an update
of this criteria-driven literature review in a peer-reviewed journal
with some modifications from the 2018 report.\17\

[[Page 27742]]

For convenience, we refer to these two documents as the ``literature
reviews.''
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\17\ Robinson, L., Raich, W., Hammitt, J., & O'Keeffe, L.
(2019). Valuing Children's Fatality Risk Reductions. Journal of
Benefit-Cost Analysis, 10(2), 156-177. doi:10.1017/bca.2019.10.
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The literature reviews applied two sets of criteria.\18\ First, the
authors developed selection criteria to identify studies for detailed
review. These selection criteria were straightforward, intended to
ensure that the studies measure a reasonably consistent outcome and are
potentially suitable for application in analyses of U.S. policies.
Second, the authors developed evaluation criteria to assess the quality
and applicability of studies. These criteria required detailed review
of each study, and some involved substantial professional judgment. The
authors used these evaluation criteria to investigate the relative
strengths of each study and the implications of including or omitting
them.
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\18\ The starting point for developing these criteria was review
of those previously used to evaluate adult VSL studies for
application in U.S. regulatory analyses, which in turn were based on
advice provided by previous expert panels. The authors adapted these
criteria to focus on valuing risks to children aged 0-17.
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The selection criteria \19\ are:
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\19\ Robinson et al., 2019, tables 1 and 2.
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1. Written in English;
2. Publicly available;
3. Data collected within the past 30 years;
4. Data collected in a high-income country;
5. Values a change in risk (not a change in life expectancy); and
6. Estimates willingness to pay (not willingness to accept
compensation).
The evaluation criteria \20\ are:
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\20\ Id.
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1. Data collected more recently;
2. Data collected in the United States;
3. Based on a national sample;
4. Based on a probabilistic sample (not a convenience sample); and
5. Provides evidence of validity.
The literature reviews found five publications that satisfied many
of the evaluation criteria. These studies suggest the VSL for children
exceeds the VSL for adults by a factor of 1.2 to 2.9, with a midpoint
of roughly 2. The five studies and their estimates of children's VSL as
a ratio to adult VSL are listed in table 1.

Table 1--Ratio of Child to Adult VSL From Selected Studies
------------------------------------------------------------------------
Study Ratio
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Alberini and Scasny (2011) 21 22........................ 1.2
Dickie and Gerking (2006) \23\.......................... 2.3
Gerking, Dickie, and Vernosi (2014) \24\................ 1.6, 2.9
Hammitt and Haninger (2010) \25\........................ 2
Hammitt and Herrera (2017) \26\......................... 2.8
------------------------------------------------------------------------

Since the completion of these studies, CPSC has published three
regulations in the Federal Register aimed at children's safety that
include benefit-cost analysis: Safety Standards for Magnets (87 FR
57756),\27\ Safety Standards for Operating Cords on Custom Window
Coverings (87 FR 73144),\28\ and Safety Standards for Clothing Storage
Units (87 FR 72598).<SUP>29 30</SUP> All three of the regulatory
analyses estimated benefits that came primarily from preventing death
and injury to individuals under 18 years old, but consistent with
general Federal practice CPSC used a uniform VSL. However, in the
benefit-cost analyses of custom window coverings and clothing storage
units, CPSC also used child-to-adult VSL ratios from the above studies
in the sensitivity analyses to evaluate the impact of an elevated VSL
for children.
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\21\ Results summarized from Alberini and Scasny (2011)
represent their estimates from a survey conducted in Milan, Italy,
which indicated the VSL for children was not statistically different
from the VSL for adults (i.e., from a ratio of 1.0). The authors
present additional estimates from a survey in the Czech Republic,
which--despite producing statistically significant evidence of a
modest premium for the children's VSL--was not considered in the
literature review because Czech Republic did not qualify as a high-
income country at the time of the review.
\22\ Alberini, A, Scasny, Milan. (2011). Context and the VSL:
Evidence from a Stated Preference Study in Italy and the Czech
Republic. Environmental and Resource Economics, 49(4), 511-538.
<a href="https://doi.org/10.1007/s10640-010-9444-8">https://doi.org/10.1007/s10640-010-9444-8</a>.
\23\ Dickie, M., & Gerking, S.D. (2006). Valuing children's
health: Parental perspectives. In P. Scapecchi (Ed.), Economic
valuation of environmental health risks to children (pp. 121-158).
Organisation for Economic Co-operation and Development (OECD).
\24\ Gerking, S., Dickie, M., and Veronesi, M. (2014). Valuation
of Human Health: An Integrated Model of Willingness to Pay for
Mortality and Morbidity Risk Reductions. Journal of Environmental
Economics and Management, 68(1): 20-45.
\25\ Hammitt, J.K., & Haninger, K. (2010). Valuing fatal risks
to children and adults: Effects of disease, latency, and risk
aversion. Journal of Risk and Uncertainty, 40, 57-83. DOI: 10.1007/
S11166-009-9086-9.
\26\ Hammitt, J.K., & Herrera-Araujo, D. (2017). Peeling back
the onion. DOI: 10.1016/j.jeem.2017.06.006.
\27\ <a href="https://www.federalregister.gov/documents/2022/09/21/2022-20200/safety-standard-for-magnets">https://www.federalregister.gov/documents/2022/09/21/2022-20200/safety-standard-for-magnets</a>.
\28\ <a href="https://www.federalregister.gov/documents/2022/11/28/2022-25041/safety-standard-for-operating-cords-on-custom-window-coverings">https://www.federalregister.gov/documents/2022/11/28/2022-25041/safety-standard-for-operating-cords-on-custom-window-coverings</a>.
\29\ <a href="https://www.federalregister.gov/documents/2022/11/25/2022-24587/safety-standard-for-clothing-storage-units">https://www.federalregister.gov/documents/2022/11/25/2022-24587/safety-standard-for-clothing-storage-units</a>.
\30\ CPSC also issues regulations for children's products under
other statutes, including for durable infant and toddler products
under section 104 of the Consumer Product Safety Improvement Act of
2008 (CPSIA). These regulations, however, do not require a full
regulatory analysis.
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B. Current Federal Agency Practice

The U.S. Environmental Protection Agency (EPA), U.S. Department of
Transportation (DOT), and U.S. Department of Health and Human Services
(HHS) each have formal guidelines for the use of VSL within their
agency. EPA derives its estimates from 26 studies, of which 21 are
wage-risk studies.\31\ DOT primarily addresses injury-related risks; it
derives its VSL estimate exclusively from wage-risk studies, which also
address injury-related risks.\32\ HHS bases its VSL estimates on six
wage-risk studies and one meta-analysis of these studies, as well as
three stated preference studies.\33\ Table 2 displays the values of all
three agencies' VSL, adjusted to 2022 dollars and income levels for
comparison.
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\31\ U.S. EPA. 2010. ``Guidelines for Preparing Economic
Analyses.'' <a href="https://www.epa.gov/environmental-economics/guidelines-preparing-economic-analyses">https://www.epa.gov/environmental-economics/guidelines-preparing-economic-analyses</a>.
\32\ U.S. Department of Transportation (DOT). 2021. ``Treatment
of the Value of Preventing Fatalities and Injuries in Preparing
Economic Analyses''. <a href="https://www.transportation.gov/sites/dot.gov/files/2021-03/DOT%20VSL%20Guidance%20-%202021%20Update.pdf">https://www.transportation.gov/sites/dot.gov/files/2021-03/DOT%20VSL%20Guidance%20-%202021%20Update.pdf</a>.
\33\ U.S. Department of Health and Human Services (HHS). 2016.
``Guidelines for Regulatory Impact Analysis''. <a href="https://aspe.hhs.gov/reports/guidelines-regulatory-impact-analysis">https://aspe.hhs.gov/reports/guidelines-regulatory-impact-analysis</a>.

Table 2--U.S. Federal Departments' VSLs
[2022 dollars]
------------------------------------------------------------------------
EPA DOT HHS
------------------------------------------------------------------------
$11.0 million $12.5 million $12.3 million
------------------------------------------------------------------------

These estimates are similar, even though the three agencies each
reviewed the literature at different times using different criteria,
and hence included different studies in developing their estimates.
These estimates are also very

[[Page 27743]]

similar to the publication of a bias-adjusted estimate \34\ recommended
by Viscusi when adjusted to the same year.
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\34\ Viscusi, W. Kip. 2018. ``Best Estimate Selection Bias in
the Value of a Statistical Life.'' Journal of Benefit-Cost Analysis,
9(2): 205-246.
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III. Summary of the Final VSL Guidelines

CPSC's VSL guidelines (stated in section VI) state that:
1. CPSC will use HHS's VSL estimates for adults.
2. CPSC will double the adult VSL to establish the child VSL.
3. CPSC will account for both the change in the general price index
(inflation) and in real income using the method in HHS's Guidelines for
Regulatory Impact Analysis.
4. When estimating VSL for future years, CPSC will increase the VSL
by the expected growth in real earnings and discount the resulting
benefit values to reflect the time value of money, consistent with its
approach for all cost and benefits estimates.
These guidelines and their sources are summarized in table 3.

Table 3--Summary of CPSC VSL Guidelines
------------------------------------------------------------------------
Variable Guideline
------------------------------------------------------------------------
Adult VSL.................... $13.0 million in 2023 dollars and 2023
real income level as of March 1, 2024.
Based on HHS's VSL Guidance.
Child VSL.................... $26.0 million in 2023 dollars and 2023
real income level as of March 1, 2024.
Double the adult VSL. Doubling the VSL
is based on findings from IEc's
``Valuing Reductions in Fatal Risks to
Children'' and Robinson et al. (2019).
Inflation.................... Inflate to year where full annual data is
available for changes in prices
(inflation). Use data and formula in HHS
VSL guidance.
Discount..................... Apply discount rate to all monetized
values that accrue in future years.
Real Income.................. Use Current Population Survey (CPS)
Median Weekly Earnings for initial
adjustment to year of analysis. For
future years, use real earnings per
worker growth rate from the
Congressional Budget Office's Long-Term
Budget Outlook.
Income elasticity............ Using value from HHS VSL Guidance.
------------------------------------------------------------------------

IV. Reasons for Establishing VSL Guidelines

CPSC staff developed these VSL guidelines, including the
recommendation of a separate VSL for children, along two normative
frameworks. The Commission then published the draft VSL guidelines for
public comment. Staff analyzed these comments to develop the
Commission's final VSL guidelines as presented here.
The first normative framework applied by staff is CPSC's
established approach to valuing premature deaths: CPSC employs
estimates of individuals' willingness to pay for their own reductions
in mortality risk (i.e., the VSL). While willingness to pay estimates
for children are derived from a parental perspective (i.e., reflecting
how parents value children's mortality risk reductions higher than
their own), the research and data of IEc (2018) and Robinson et al.
(2019) provide persuasive evidence that values are higher for
children's risks. Regulatory analysis frequently demands judgment calls
in areas of limited data and research. CPSC assesses that its current
approach to VSL--valuing mortality risk changes equally for adults and
children--significantly underestimates benefits accruing to children
through lower mortality risks associated with consumer products.
Although it may be difficult to precisely measure child VSL, CPSC's
final VSL guidance is supported by the literature and available
evidence and is more accurate than equating child and adult VSLs.
Adopting a child VSL that doubles adults' VSL aligns CPSC's regulatory
analyses more closely with societal preferences in the U.S.
The second framework applied by staff is CPSC's mission to protect
the public against the unreasonable risks of injuries and deaths
associated with consumer products. Rulemaking is one tool CPSC uses to
carry out its mission. The rulemaking process entails CPSC staff
assembling a technical briefing package for the Commission's
consideration, which may encompass a regulatory analysis. The
Commission makes it determinations based on its governing statutes,
such as section 9 of the CPSA which requires that ``the benefits
expected from the rule bear a reasonable relationship to its costs.''
15 U.S.C. 2058(f)(3)(E). In adopting this Final Guidance to guide staff
and CPSC's future regulatory analyses, the Commission facilitates
efficient rulemaking to further its safety mission and specific
statutory responsibilities.
CPSC developed this Final Guidance for VSL considering both of
these frameworks and comments received on the Draft Guidance for VSL.
CPSC also publishes this Final Guidance as a form of standardizing best
practices for components of its regulatory analysis.
By developing and publishing guidelines for using VSL in regulatory
analysis, CPSC provides for regulatory analyses that appropriately and
consistently measure the benefits from reduced fatality risk, including
when children's mortality is considered and ensures transparency by
sharing these guidelines with the public. CPSC establishes these
guidelines with the objective of streamlining the estimation process
and making its application consistent and clear across regulations and
time periods.
These guidelines thus establish the source, base value, and method
of CPSC's application of VSL in regulatory analyses. The guidelines
also establish a ratio of child VSL to adult VSL for CPSC to use in
valuing reduced children's fatality risk in formal regulatory analysis,
as opposed to limiting its use to sections of the sensitivity analysis
as the Commission has done in the past. These guidelines will ensure
there is no ambiguity on which value to use in regulatory analysis, nor
in how to adjust for inflation and changes in real income, or whether
to discount VSL-related benefits.

V. Response to Public Comments

Following publication in the Federal Register on March 24, 2023,
CPSC received eight public comments on the Draft Guidance. This section
summarizes those comments and provides the Commission's responses.
Overall, five commenters support approaches that value fatal risk
reductions for children differently from adults, and three commenters
do not

[[Page 27744]]

support such approaches. Of those who support a different VSL for
children and adults, three approve of CPSC's specific proposal to
adjust the VSL by approximately a factor of two. The two commenters
supporting a different VSL for children do not specify a recommended
multiplier. The remaining three commenters, who oppose applying a
different VSL for children, prefer the application of a uniform VSL for
individuals of all ages. The remainder of this section addresses the
specific issues raised by the commenters.

A. Comments Supporting a Higher VSL for Children

Comments: As noted above, three commenters voiced support for
CPSC's recommended approach of employing a multiplier of two for VSL
when assessing risks to children. Dr. Glenn Blomquist of the University
of Kentucky (emeritus) noted that this adjustment is consistent with
his assessments of a premium for children's risk valuation. An
anonymous commenter provided support for the proposed multiplier but
recommended relying solely on the Hammitt and Haninger (2010) study,
which is one of the mortality valuation studies informing CPSC's
understanding of children's risk valuation. The commenter states that
this approach would be simpler because it is the most applicable study
for U.S. regulatory analysis. The preferred estimate from this study is
identical to the multiplier (2.0) recommended by CPSC. A third group of
commenters who submitted joint comments (Consumer Federation of
America, Consumer Reports, Kids in Danger, U.S. Public Interest
Research Group) provide additional support for the multiplier of 2.0,
highlighting that this finding is aligned with broader societal
priorities for the protection of children.
Two commenters voiced support for alternative adjustments to
mortality valuation estimates for children. First, Dr. Adam Finkel of
the University of Michigan lauded CPSC's efforts to offer a separate
mortality valuation estimate for children. The commenter asserted that
improvements could be made to the methods employed to estimate
willingness to pay for mortality risk reductions; however, he did not
recommend a specific alternate estimate of mortality risk values for
children. Second, Lisa Robinson of the Harvard T.H. Chan School of
Public Health provided comments supporting mortality risk valuation
that specifically addresses how values may vary for children but noted
such estimates should be conducted (1) ``at least in sensitivity
analysis'' (i.e., in sensitivity analysis and, if supported by
sufficient evidence, in CPSC's primary estimates) and (2) following
investigation of other approaches. These alternatives, as presented by
the commenter, include a value per statistical life year (VSLY), value
per quality-adjusted life year (vQALY), or an inverse ``U'' function
highlighting the link between age and mortality risk values. These
approaches result in age-specific values for changes in mortality risk,
including a more gradual transition in values from younger children to
older children and adults.
Response: We thank these commenters for their input. CPSC's Final
Guidance maintains the recommendation for doubling the VSL for children
in the primary estimate of benefits. With regard to the alternative
formulations of age-specific valuations for mortality risk, CPSC has
evaluated these other options and concludes that applying a multiplier
has the advantage of relying entirely on willingness to pay (WTP)
values. Both the base VSL estimate and the adjustment factor for
children rely on primary research studies intended to estimate WTP for
small risk reductions. This consistency between methods and elicited
values is a significant strength.
CPSC acknowledges two limitations of its chosen approach. The first
relates to the framework for valuing mortality risks to children. The
studies used to derive the multiplier evaluate parents' WTP to reduce
risk for their own children. This framing differs from the standard
welfare economic framing, where individuals are assumed to be the best
judge of their own well-being. As discussed in Robinson et al. (2019),
eliciting a child's WTP for their own risk reduction is
problematic.\35\ Thus, a parental perspective offers the next best
solution. The second limitation is the small number of available, high-
quality studies estimating multipliers.
---------------------------------------------------------------------------

\35\ Robinson, L.A., W.J. Raich, J.K. Hammitt, and L. O'Keefe.
2019. ``Valuing Children's Fatality Risk Reductions.'' Journal of
Benefit-Cost Analysis. 10(2):156-177.
---------------------------------------------------------------------------

Like the use of WTP, the alternatives for valuing avoided child
fatalities suggested by Ms. Robinson also have strengths and
limitations. Standard derivation of VSLY (or vQALY) divides an estimate
of VSL by the discounted number of remaining life years (or QALYs),
accounting for age-specific survival probabilities, for the mean age of
sampled individuals in the stated and revealed preference studies
informing an agency's preferred VSL estimate. Analysts then multiply
estimates of the VSLY or vQALY by the life years or QALYs lost from
premature fatality. More life years are lost due to a child fatality
than an adult fatality, resulting in different values for avoiding each
type of death. While computationally straightforward to apply, this
approach requires several strong assumptions.
First, in the case of vQALYs, the construction of QALYs ``assumes
that how individuals value health states (measured as changes in
health-related quality of life, or HRQL) is independent of the duration
of the state, the age at which they are experienced, and the
individual's remaining life expectancy'' (Robinson and Hammitt
2013).\36\ In practice, these assumptions are unlikely to hold in all
cases.
---------------------------------------------------------------------------

\36\ Robinson, L.A., and J.K. Hammitt. 2013. ``Skills of the
Trade: Valuing Health Risk Reductions in Benefit-Cost Analysis.''
Journal of Benefit-Cost Analysis. 4(1): 107-130.
---------------------------------------------------------------------------

Second, this approach assumes that the VSLY (or vQALY) is constant
through time (i.e., no matter one's age, the value the individual
places on living an additional year does not change). According to
Robinson and Hammitt (2013), ``the assumption of a constant value per
QALY implies that VSL is proportional to future QALYs, which is not
consistent with empirical estimates of how VSL varies with age.'' The
inverse ``U'' function is typically discussed in the context of
mortality risk valuation for working age adults. Aldy and Viscusi
(2008),\37\ for example, provide evidence from labor market data that
VSL peaks at age 39, with diminished values at younger and older ages.
These results, however, are not available for children or for adults
over 62 years of age. It is unclear whether the inverse ``U'' pattern
would extend to other ages.
---------------------------------------------------------------------------

\37\ Aldy, J. E., & Viscusi, W. K. 2008. ``Adjusting the value
of a statistical life for age and cohort effects''. Review of
Economics and Statistics, 90(3), 573-581
---------------------------------------------------------------------------

We note that application of a VSLY or vQALY could result in results
comparable to the simpler doubling of values for children, depending
largely on the age of the affected population, the selected approach
(i.e., VSLY or vQALY), and the discount rate. United States life tables
illustrate that (undiscounted) life expectancy for infants is around
78.7 years.\38\ In contrast, life expectancy for a 48-year-old (the
mean age of a U.S. adult) is 33.5

[[Page 27745]]

years.\39\ In discounted terms, the gap is narrowed: at a 2 percent
discount rate, the present value of remaining life years is
approximately 39.7 for infants and 24.2 for the average U.S. resident.
In applying a VSLY to monetize avoided premature deaths at these ages,
the value of preventing one infant death would be 1.6 times greater
than the value of preventing one death of an average age adult. This
ratio is higher when using remaining expected QALYs (instead of
remaining life years) due to diminishing health-related quality of life
at older ages.\40\ Practically, this approach results in a premium that
declines as children approach adulthood. In contrast, CPSC's VSL
guidance results in a sharply delineated difference in mortality risk
reductions for older children and adults.
---------------------------------------------------------------------------

\38\ Life expectancy estimates are derived from Centers for
Disease Control (CDC) estimates included in the Excel workbook
accompanying HHS's Guidelines for Regulatory Impact Analysis
Appendix D: Updating Value per Statistical Life (VSL) Estimates for
Inflation and Changes in Real Income. See <a href="https://aspe.hhs.gov/reports/updating-vsl-estimates">https://aspe.hhs.gov/reports/updating-vsl-estimates</a>, as viewed on November 10, 2023.
\39\ Mean age of U.S. adults (ages 18+) derived from 2020
Decennial Census table PCT12 (``Sex by single-year age''). <a href="https://data.census.gov/table/DECENNIALDHC2020.PCT12?q=PCT12:+SEX+BY+SINGLE-YEAR+AGE">https://data.census.gov/table/DECENNIALDHC2020.PCT12?q=PCT12:+SEX+BY+SINGLE-YEAR+AGE</a>
\40\ Estimation of expected lifetime QALYs is challenging for
children--particularly younger children--due to the difficulties in
eliciting health status from children and valuing those health
states to construct measures of health-related quality of life (see
Section 7.10.3 and Online Appendix 7.7 of Cost-Effectiveness in
Health and Medicine, Second Edition, 2017).
---------------------------------------------------------------------------

We are not aware of any regulatory agency currently using VSLYs or
vQALYs in primary estimates of benefits or costs. One department, U.S.
Department of Health and Human Services (HHS), uses the VSLY to
estimate the value of mortality risk reductions in sensitivity
analysis. But like other agencies, HHS uses a uniform VSL in its
primary estimate. See, e.g., HHS (2022) Tobacco Product Standard for
Characterizing Flavors in Cigars, available at <a href="https://www.regulations.gov/document/FDA-2021-N-1309-0001">https://www.regulations.gov/document/FDA-2021-N-1309-0001</a>.
Finally, while measurements like VSLY or inverse ``U'' make it
possible to generate estimates for each age of childhood, CPSC would
then need to project the number of deaths at each age for the
prospective study period. While CPSC staff is confident this could be
done for two subpopulations--adults and children--staff are less
confident that there will be enough data to consistently forecast
incidents for every individual age of childhood. Accordingly, if these
alternate approaches were used, the Commission might have to base some
of its rules on projections supported by only a handful of historical
death records.
Weighing the strengths and limitations of the available options for
differentiating the value of risk reductions for children and adults,
CPSC concludes that the application of a multiplier derived from
available WTP literature is preferable to valuing lost life years for
affected individuals using a VSLY or vQALY. The advantages of relying
solely on WTP studies, despite the small number of high-quality
studies, and the resulting sharply delineated difference in the value
of mortality risk reductions for adults and children, outweighs the
advantages of an approach that results in more gradual declines in
value as children age but requires several strong assumptions to
construct a VSLY or vQALY and potentially unavailable data on the age
distribution of children affected by proposed regulations.

B. Comments Opposing a Higher VSL for Children

Comment: Three commenters oppose CPSC's proposed multiplier of two
for children's mortality risks. The Toy Association characterized
children as an ``arbitrary section of the population'' for the purposes
of mortality risk valuation. It asserts that the VSL should be applied
uniformly across the entire population and labels the multiplier as an
``exaggeration'' of the VSL. Dr. W. Kip Viscusi of Vanderbilt
University Law School and Dr. Thomas Kneisner of Claremont Graduate
University also voiced opposition to the adjustment. Dr. Viscusi
asserted that the evidence provided by CPSC does not warrant a
different VSL for children. Dr. Kneisner voiced support for equality in
children's and adults' VSLs in CPSC regulatory analyses.
Response: The Proposed Draft and Final Guidance defines the age
threshold for the guidance as individuals younger than 18 years old.
CPSC does not view individuals younger than 18 as an ``arbitrary
section of the population'' given that age 18 is a common cutoff
employed in studies of adult and children's VSL. Eighteen years old
also aligns with society's commonly accepted threshold for adulthood
which are supported by the governmental obligations and rights afforded
to an individual the moment they turn 18, such as military service and
the right to vote. As explained below, this application of a higher VSL
for children also falls within current guidance from the OMB's Circular
A-4 \41\ that such values should be at least as high as comparable
values for adults.
---------------------------------------------------------------------------

\41\ Pg. 51, <a href="https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4.pdf">https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4.pdf</a>.
---------------------------------------------------------------------------

C. OMB Guidance on VSL Adjustments

Comments: Four commenters discuss CPSC's proposed VSL adjustments
in the context of Federal guidance for benefit-cost analysis.
Specifically, these commenters reference OMB Circular A-4 and its
discussion on the topic of age adjustments for VSL. Three commenters--
The Toy Association, Dr. Viscusi, and Dr. Kneisner--all state that OMB
cautions against the use of age adjustment factors and notes that other
agencies follow this approach. One commenter, Dr. Finkel, addresses
these comments preemptively by noting that the 2003 version of the OMB
guidance is 20 years old and was crafted in a context in which OMB was
admonished for the use of lower VSL estimates for elderly populations.
Dr. Finkel comments that an upwards adjustment on the children's VSL is
distinct from the ``much-derided `senior-death-discount.''' Finally,
The Toy Association claims that CPSC has not provided evidence that new
research that is materially different or additional to the research
considered in Circular A-4. The Toy Association characterizes as
``disingenuous'' assertions that the Circular is 20 years old, and that
new research is available.
Response: As an independent Federal agency, CPSC is not subject to
OMB review as part of its rulemaking process. While CPSC regulatory
analyses follow many of the recommended practices in Circular A-4, CPSC
can consider newer evidence and best practices not reflected in the
2003 document.
Furthermore, since the filing of comments on the Draft Guidance,
OMB has updated its guidance for benefit-cost analysis.\42\ The revised
OMB guidance now states:
---------------------------------------------------------------------------

\42\ U.S. Office of Management and Budget. 2023. Circular No. A-
4. Available at <a href="https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4.pdf">https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4.pdf</a>.

The valuation of health outcomes for children and infants poses
special challenges. It is rarely feasible to measure a child's
willingness to pay for health improvement, and adults' concern for
their own health is not necessarily relevant to valuation of child
health. For example, the wage premiums demanded by workers to accept
hazardous jobs are not necessarily appropriate to use for
regulations that accomplish health gains for children. Some studies
suggest that parents may value children's health more strongly than
their own health. Although this parental perspective has been a
promising research strategy, it may need to be expanded to include a
societal interest in child health and safety.
Where the primary objective of a regulation is to reduce the
risk of injury, disease or mortality among children, [agencies] may
develop a benefit-cost analysis to the extent that valid monetary
values can be assigned to the primary expected health outcomes. For

[[Page 27746]]

regulations where health gains are expected among both children and
adults and [the agency] decide[s] to perform a benefit-cost
analysis, the monetary values for children should be at least as
large as the values for adults (for the same probabilities and
outcomes) unless there is specific and compelling evidence to
suggest otherwise.

CPSC's new guidelines are consistent with OMB's current
recommendation that monetary values for children deserve ``special''
attention and should be no lower than that of adults.

D. Framework for CPSC's Policy Decision

Comment: Lisa Robinson called for CPSC to clarify whether it is
applying the conventional benefit-cost analysis framework in which
individuals' preferences (i.e., willingness to exchange money for
effects they themselves experience) are the basis for valuing outcomes,
the framework for government policy decisions in which CPSC must
interpret and act upon societal influences, including significant
investments in child safety and Congressional mandates, or another
framework. Ms. Robinson notes that policymakers may decide to pursue
policies that differ from the results of benefit-cost analysis;
however, she notes that most guidance documents are clear that benefit-
cost analysis is intended as a tool to inform, but not determine, the
decision.
Related to Ms. Robinson's comment, one anonymous commenter
recommended that CPSC justify its statement ``that society prioritizes
the safety of children over the adult population and invests
significantly in child safety'' by citing IEc (2018) or Robinson et al.
(2019). The commenter believes these sources provide greater support
than the market size of the child safety industry.
Response: We thank Ms. Robinson for clearly distinguishing between
the two frameworks that may serve as rationales for a higher VSL for
children. The Final Guidance now includes an explanation of the two
normative frameworks guiding the incorporation of child VSL into CPSC's
regulatory analysis.
The first normative framework presented by Ms. Robinson describes
CPSC's typical approach to valuing premature deaths: CPSC employs
estimates of individuals' willingness to pay for their own reductions
in morality risk (i.e., the VSL). While willingness to pay estimates
for children are derived from a parental perspective (i.e., reflecting
how parents value children's mortality risk reductions higher than
their own), CPSC concludes that the research and data of IEc (2018) and
Robinson et al. (2019) represent sufficient evidence that values are
higher for children's risks. Regulatory analysis frequently demands
judgment calls in areas of limited data and research. CPSC assesses
that valuing mortality risk changes equally for adults and children
underestimates the benefits accruing to children through lower
mortality risks associated with consumer products. Although the
conventional framework of relying on individuals to value risks to
themselves is often infeasible in the context of children valuing their
own risk reductions such that novel methodologies are required,
adopting a child VSL double that of adults, as a policy decision, best
aligns CPSC's regulatory analyses with societal preferences in the U.S.
The second framework presented by Ms. Robinson is relevant in this
context as well. CPSC is guided by its mission ``to protect the public
against unreasonable risks of injury associated with consumer
products.'' 15 U.S.C. 2051(b)(1). Rulemaking is one tool CPSC uses to
carry out its mission. Neither agency mandates nor statutory
obligations compel the Commission to endorse or reject proposed rules
solely on benefit-cost analysis outcomes. At very most, CPSA is
required to find in some rulemakings that ``the benefits expected from
the rule bear a reasonable relationship to its costs,'' where
``benefits or costs that cannot be quantified in monetary terms'' are
considered. 15 U.S.C. 2058(c)(1), (f)(3)(E). Therefore, policymakers
also may consider effects not captured in economic analysis.

E. Availability of Studies Estimating a Multiplier

Comment: Three commenters suggest that available literature is too
limited to support an adjustment of the VSL (or, more specifically, an
adjustment of 2.0). First, Drs. Kneisner and Viscusi note that there is
limited literature on VSL for children versus adults. In particular,
they state that this literature is sparse relative to the large
literature on VSL more generally. These commenters also assert that the
evidence is particularly slim to serve as the empirical foundation for
a ``major shift in benefit assessment practice.'' Finally, two
commenters (The Toy Association and Dr. Kneisner) claim that the
literature does not support the conclusion that VSL for children is
roughly double that of adults. Dr. Kneisner asserts, without any
supporting citation, that more accurate revealed preference estimates
suggest the two VSLs are close.
Response: The literature studying mortality valuation for children
is indeed more limited than the literature on broader mortality
valuation topics. This is expected because children do not participate
broadly in the labor market and are not included in wage-risk studies.
Similarly, children are not typically sampled for stated preference
research estimating willingness to pay for mortality risk reductions.
Regulatory analysts frequently operate in data-limited environments
and must assess the quality and applicability of a limited number of
studies or data sources. Given the importance of accurately
characterizing mortality valuation for children, CPSC explored the
available literature for children's VSL to assess the weight of
evidence on this topic. CPSC concludes that the existing literature,
including the literature cited in the NOA seeking comment on the Draft
Guidance as well as in this Notice, provides sufficient evidence for an
adjustment to the VSL for children that is consistent with societal
preferences for protection of children's health.

F. Application of Existing Literature to CPSC's Regulations

Comment: Four commenters address the types of risks and the
geographic coverage of the studies considered by CPSC. One anonymous
commenter requests that CPSC better describe the context of the risks
managed by CPSC in order to support transfer of these estimates. Three
commenters (The Toy Association, Dr. Kneisner, and Dr. Viscusi) state
that the types of risks considered in these studies are different from
those regulated by CPSC, thus limiting the applicability of these
studies for use in CPSC regulatory analysis. These three commenters
further expressed concern about the study populations informing CPSC's
proposed adjustment. The Toy Association notes that the studies rely on
samples from Milan, Italy; parents in Orlando, Florida; and a non-
representative sample of parents across the United States. Drs.
Kneisner and Viscusi note that assessments of VSL vary greatly by
country, limiting the applicability of non-U.S. studies for use by
CPSC.
Response: As a U.S. regulatory agency, CPSC aims to rely on
nationally representative U.S. studies if available data allow. Given
the smaller set of studies on this topic (relative to broader VSL
research), tradeoffs may be necessary, including consideration of
studies conducted in other high-income countries or using spatially
constrained and/or non-representative samples

[[Page 27747]]

within the United States. Both IEc (2018) and Robinson et al. (2019)
found such studies met enough of the remaining evaluation criteria to
include in their estimate for child to adult VSL ratio.
Importantly, while VSL estimates may differ across countries, there
is not strong evidence that the relationship between children and adult
VSLs similarly differ. The literature reviews by IEc and Robinson et
al. focused on high income countries to minimize economic factors that
would strongly influence the valuation of mortality risks. We note that
if the two studies conducted abroad (in France and Italy) were excluded
from the reviews, the result would be a range of ratios from 1.6 to 2.9
and a higher midpoint (2.25) than recommended by CPSC. And reliance on
the lone study conducted across the entire United States (Hammitt and
Haninger 2010) would result in the same ratio (2.0) as the broader set
informing CPSC's approach. Accordingly, relying on a larger set of
studies that includes the foreign studies is both more defensible and
more conservative (i.e., resulting in a lower or the same VSL for
children than what each of the commenters proposed).
Finally, risks managed by CPSC include both acute and chronic
injury-based values that can lead to a fatality. CPSC does manage risk
for traumatic injuries and death, such as strangulation from window
covering cords and tip overs from clothing storage units. But CPSC has
a broad mandate to prevent death and injuries from all types of hazard
scenarios associated with consumer products. For instance, the
Commission has a rule (codified at 16 CFR part 1307) that prohibits the
use in children's toys of certain types of phthalates that can cause
adverse effects on male reproductive development. CPSC likewise sets
regulations on the amount of lead in children's toys to address long-
term and recurring health complications from lead poisoning. We
encourage researchers to conduct U.S.-based studies estimating
willingness to pay for risk reductions in the context of all types of
injuries resulting from consumer products.

G. Concerns with Stated Preference Literature

Comment: Drs. Kneisner and Viscusi express concerns with the use of
stated preference literature as the basis for CPSC's proposed VSL
adjustment. These commenters suggest that responses to hypothetical
survey questions are not a useful guide for policy because they are
subject to ``rampant potential biases.''
Response: Wage-risk studies, a type of revealed preference research
underlying many VSL estimates employed by Federal agencies, rely on
labor market data for working age adults and therefore do not address
risks to children. As such, the revealed preference literature is
limited to averting behavior studies for valuation of mortality risks
to children. As articulated in Pricing Lives: A Guidepost for a Safer
Society,\43\ ``[d]espite the challenges of undertaking credible stated-
preference studies, it may nevertheless be the case that this approach
yields more reliable estimates of VSL in situations in which either the
fatality rate data or the employment data are deficient, making it
infeasible to obtain stable VSL estimates using market data.''
Viscusi's assessment very much describes the current circumstances for
child VSL.
---------------------------------------------------------------------------

\43\ Viscusi, W. Kip. 2018. ``Pricing Lives: Guideposts for
Safer Society''. Princeton University Press.
---------------------------------------------------------------------------

The stated preference literature is more prevalent in this study
area and stated preference studies have been employed in many instances
by Federal agencies in mortality valuation. The review studies cited by
CPSC in crafting its recommendations--IEc (2018) and Robinson et al.
(2019)--take care to address potential limitations of the stated
preference literature. IEc (2018) highlighted the scope tests performed
in each study examining WTP sensitivity to magnitude changes in risk,
specifically, whether results were consistent with WTP increasing with
larger risk reductions and if the increase was proportional. For
example, if a study found a group of individuals willing to pay $900 to
reduce their risk of death by 0.01 percent, then a proportional
response would be the same group willing to paying $1,800 to reduce
their risk of death by 0.02 percent. Two of the five available studies
passed its scope test. The other three studies exhibited sensitivity
but either lacked proportionality or did not report a ratio. However,
the other relative strengths of these three studies (explained in full
detail in Section 4.1.2. in IEc (2018)) merits their inclusion. We note
that insensitivity to scope would not necessarily result in biased
estimates of the ratio between VSL for children and adults. Overall,
the literature provides evidence of elevated willingness to pay for
risk reductions to children.

H. Statistical Significance

Comment: Two commenters call for additional information on the
statistical significance of the ratios (children's VSL to adult VSL)
presented by CPSC. The Toy Association highlights that the IEc (2018)
authors noted some ratios are not statistically significant and asserts
that the value of VSL for children is not statistically different from
the VSL for adults. An anonymous commenter recommended CPSC include the
statistical significance of these ratios in its documentation.
Response: We have expanded table 1 of the Final Guidance to address
these comments. The comment from The Toy Association, however, lacks
context. While IEc (2018) notes that multiple studies present results
that are not statistically different than the adult VSL (a ratio of
1.0), this finding includes studies on fatal and nonfatal risks. Only
one ratio of mortality risk values (1.2, Alberini and
[Scaron][ccaron]asn[yacute] 2011) was not statistically different than
the adult VSL (a ratio of 1.0)--the remaining three studies presented
values that were statistically different from 1.

I. Consideration of Use in Primary Estimates or Sensitivity Analysis

Comment: Three commenters consider the use of alternative VSL
estimates in primary CPSC estimates or in sensitivity results. All
three suggest that CPSC should present a range of values (i.e., using
both the standard VSL and adjusted VSL for children) in its analyses.
Lisa Robinson calls for CPSC to clarify why it believes the literature
justifies an adjustment in its main estimates, rather than only in
sensitivity analysis. Ms. Robinson notes that IEc (2018) and Robinson
et al. (2019) both highlight uncertainty in the relationship between
the VSL for adults and children. She quotes recommendations in the
latter paper that agencies adjust the VSL in sensitivity analyses until
more research is published supporting an adjustment (Robinson et al.
2019, p. 173).
Two other commenters, Drs. Blomquist and Finkel, also support the
use of sensitivity analyses reflecting both sets of VSL estimates;
however, these commenters do not comment on whether the primary
estimates should reflect the conventional VSL or the adjusted VSL for
children.
Response: CPSC's primary estimates of benefits and costs reflect
the agency's best characterization of the anticipated effects of a
rule. CPSC's primary assessments are modeled using the agency's best
estimates of any uncertain inputs. Given available evidence on the
valuation of children's risk changes--as summarized in IEc (2018) and
Robinson et al. (2019)--CPSC concludes that doubling the adult VSL for
children is

[[Page 27748]]

more accurate than equating child and adult VSLs. Further, as the
midpoint of the range of values for this multiplier, doubling would be
the appropriate single point estimate for all non-symmetric
distributions.

J. Age Threshold for Children

Comments: Three commenters discuss the pattern of VSL by age that
results from two VSL estimates: one for adults, and one for children.
The resulting pattern, characterized as a ``cliff'' by Lisa Robinson,
has a uniform, elevated VSL for ages 0 to 17 that drops to a uniform,
standard VSL for ages 18 and up. Ms. Robinson notes that it seems
unrealistic for values to drop suddenly, rather than changing as a
child progresses to adulthood. Similarly, Dr. Glenn Blomquist comments
that limited evidence suggests VSL is greatest for young children and
is closer to that of adults for older teens. The Toy Association states
that the CPSC proposal ignores the inconsistency of applying a single
adjustment to all adolescent age groups (infant, toddler, pre-teen, or
teenager). The Toy Association states that CPSC does not define the age
differentiating children from adults.
Response: Contrary to the Toy Association's comment, the Draft
Guidance defined the age threshold, stating ``CPSC staff should apply
this child VSL to mortality risk reductions likely to accrue to any
individual younger than 18 years old . . . .''
CPSC acknowledges that a stepwise adjustment to the child VSL
results in a pattern in which risks for 17 and 18 year olds are valued
using estimates that differ considerably. While the strength of
available research supports an adjustment for children, there is a
weaker literature base to support adjustments for more refined age bins
(or single-year ages). In Section 4.2.2 of IEc (2018), the authors
discuss variation in values by age of the child. Most studies on
children's risks considered broad age ranges approximating those
recommended by CPSC for adjustments (i.e., newborns to 17 year olds).
IEc (2018) note at page 33:

[Only] some of these studies provide evidence that WTP may vary
by the age of the child. For fatal risk reductions, two surveys
suggest that estimated WTP declines with the age of the child
(Gerking, Dickie, and Veronesi 2014, skin cancer survey; Hammitt and
Haninger 2010); but two surveys find no significant impact (Alberini
and [Scaron][ccaron]asn[yacute] 2011; Gerking, Dickie, and Veronesi
2014, leukemia survey). Hammitt and Herrera (2017) do not report
whether WTP differs by children's age.

As researchers publish on this topic in future years, CPSC will
consider whether available research supports more granular adjustments
by the age of the child. Current research supports an adjustment for a
broad definition of children, consistent with the recommendations in
CPSC's Final Guidance.

K. Use of HHS Guidance for Base VSL

Comment: Two commenters provided input on CPSC's proposal to rely
on the HHS VSL as the base VSL (i.e., for adults) in regulatory
analysis. While one anonymous commenter requested that CPSC provide
additional justification for using the HHS estimate, Lisa Robinson
commented that the proposal seems reasonable given that many of the
studies underlying the HHS estimates address injury-related deaths.
Response: CPSC has added to the Final Guidance a more comprehensive
rationale for adopting HHS's VSL estimate and methodology. This
rationale reemphasizes HHS's inclusion of more recent studies in the
development of its VSL estimate. Contemporary studies are preferable
because revealed preference literature has progressed significantly
\44\ in recent years and newer studies better reflect current societal
preferences. Moreover, the studies considered by HHS encompass
fatalities stemming from both traumatic injuries and illnesses,
aligning with the spectrum of potential death causes from consumer
products that CPSC is responsible for mitigating.
---------------------------------------------------------------------------

\44\ Cropper, Joiner, and Krupnick, ``Revisiting the
Environmental Protection Agency's Value of Statistical Life'',
Resources for the Future, pg.15; Section 2.3.6., July 2023, <a href="https://media.rff.org/documents/WP_23-30.pdf">https://media.rff.org/documents/WP_23-30.pdf</a>.
---------------------------------------------------------------------------

L. Equity Concerns

Comment: Dr. Kneisner commented that, ``equity grounds are also the
basis for an equal VSL, as has been the case in other applications that
come under mandatory OIRA review where age adjustments have been
prohibited in VSL.''
Response: As noted above, CPSC is not subject to OMB review of its
regulatory analyses. Further, age adjustments are no longer prohibited
for the VSL under OMB's final revised Circular A-4. OMB notes that
values for children should be at least as high as those for adults.

M. Legal Analogies

Comment: Dr. Kneisner contends that an equal VSL for children and
adults mirrors how possible demographic differences are treated legally
in other situations. He notes that unequal annual pension payments by
gender are no longer legal because no individual woman is necessarily
going to live longer than a man. Similarly, no individual child is
necessarily going to live longer than an adult.
Response: CPSC's application of the VSL is not used to value any
individual life. Rather, the concept of a ``statistical life''
represents the aggregation of many individuals benefiting from small
reductions in their risk of death. In this context, the population
average life expectancy for children is longer than the analogous life
expectancy for adults. While this may be part of the higher valuation
of risk reductions to children, we do not know the list of factors--or
their relative importance--being considered by respondents of stated
preference questionnaires.
Further, values frequently differ across ages in benefit-cost
analysis. For example, cost of illness estimates may reflect higher
treatment expenditures for children than adults for a particular
illness or injury. These averages represent our best assessment of the
value of these outcomes, even if expenditures for one child may be
lower than expenditures for one adult.

N. Discount Rate

Comment: Dr. Adam Finkel recommended that CPSC include language
about the discount rate. Dr. Finkel encouraged CPSC to follow recent
OMB guidance (i.e., the draft revisions to Circular A-4) of adopting a
discount rate of 1.7 percent.
Response: CPSC staff is reviewing the recently published final
revisions to Circular A-4 and considering an update with respect to the
revised discount rate cited by Dr. Finkel; however, this rate was
updated from 1.7 percent to 2 percent in the final revisions. This
issue, however, is outside the scope of this guidance on valuing
premature deaths.

VI. VSL Guidelines

In this section we state CPSC's final VSL guidelines, as determined
by the Commission following consideration of the public comments
described above. CPSC made the following changes to its VSL guidance
from its Draft Guidance published in March 2023:
<bullet> Removed the recommendation that high and low values should
be used for child VSL in sensitivity analyses. Instead, the Final VSL
Guidance recommends the decision for what variables to test in a
sensitivity analysis to be done on a case-by-case basis, as is
currently practiced in CPSC.
<bullet> Added further discussion on the normative frameworks used
for the

[[Page 27749]]

rationale of recommending a separate VSL for children. And,
<bullet> Added further discussion on alternative methods for
estimating VSL and provided the reasons why CPSC did not recommend
them.
Aside from these changes, the guidelines did not substantively
change from the Draft Guidance.
First, the Final VSL Guidance specifies how to determine the VSL
for both adults and children. Next, it describes how to determine when
adjustments to the VSL are needed and how to make them. Finally, this
guidance provides an example scenario that illustrates how to apply the
guidelines.

A. Adult VSL

CPSC should use the most recent VSL from HHS to value expected
fatality risk reductions for individuals that are 18 years or older. As
of this document, HHS recommends a central VSL estimate of $13.0
million in 2023 dollars at 2023 income levels. As explained in greater
detail further into these guidelines, CPSC should update that value as
needed, following the HHS guidance.
CPSC recommends HHS's estimate because its value is based on a more
recent review of the literature that applies extensive selection and
evaluation criteria that reflects the evolution of best practices. It
includes newer studies that better reflect current societal
preferences, as revealed preference literature has progressed
significantly in recent years. Moreover, the studies considered by HHS
encompass fatalities stemming from both traumatic injuries and
illnesses, aligning with the spectrum of potential death causes from
consumer products that CPSC is responsible for mitigating. For these
reasons, CPSC aligns its VSL estimate with HHS. If the HHS estimate or
methodology significantly changes in the future, CPSC will evaluate
changes to the estimate and the basis for any changes.

B. Child VSL

These guidelines recommend doubling the value CPSC uses for adult
VSL to represent child VSL. CPSC should apply this child VSL to
mortality risk reductions likely to accrue to any individual younger
than 18 years old uniformly and not modify this value for any other
characteristics. This valuation aligns with the findings from recent
reviews, that child VSL has been valued between 1.2 to 2.9 times more
than adult VSL (table 1) in peer-reviewed literature. The approximate
midpoint of this range is the source for doubling the adult VSL to
represent child VSL.
There are other estimations of VSL that could potentially be used
to derive a child VSL, such as value per statistical life year (VSLY)
estimates or an ``inverse U'' that peaks in middle age such as that
reported in Aldy and Viscusi (2008). These alternatives for valuing
avoided child fatalities have strengths and limitations.
Standard derivation of VSLY (or vQALY) divides an estimate of VSL
by the discounted number of remaining life years (or QALYs), accounting
for age-specific survival probabilities, for the mean age of sampled
individuals in the stated and revealed preference studies informing an
agency's preferred VSL estimate. Analysts then multiply estimates of
the VSLY or vQALY by the life years or QALYs lost from premature
fatality. More life years are lost due to a child fatality than an
adult fatality, resulting in different values for avoiding each type of
death. While computationally straightforward to apply, this approach
requires several strong assumptions.
First, in the case of vQALYs, the construction of QALYs ``assumes
that how individuals value health states (measured as changes in
health-related quality of life, or HRQL) is independent of the duration
of the state, the age at which they are experienced, and the
individual's remaining life expectancy'' (Robinson and Hammitt 2013).
In practice, these assumptions are unlikely to hold in all cases.
Second, this approach assumes that the VSLY (or vQALY) is constant
through time (i.e., no matter one's age, the value the individual
places on living an additional year does not change). According to
Robinson and Hammitt (2013), ``the assumption of a constant value per
QALY implies that VSL is proportional to future QALYs, which is not
consistent with empirical estimates of how VSL varies with age.'' The
inverse ``U'' function is typically discussed in the context of
mortality risk valuation for working age adults. Aldy and Viscusi
(2008), for example, provide evidence from labor market data that VSL
peaks at age 39, with diminished values at younger and older ages.
These results, however, are not available for children or for adults
over 62 years of age. It is unclear whether the inverse ``U'' pattern
would extend to other ages.
We note that application of a VSLY or vQALY could result in
comparable results as a doubling of values for children, depending
largely on the age of the affected population, the selected approach
(i.e., VSLY or vQALY), and the discount rate. United States life tables
illustrate that (undiscounted) life expectancy for infants is around
78.7 years. In contrast, remaining life expectancy for a 48-year-old
(the mean age of a U.S. adult) is 33.5 years. In discounted terms, the
gap is narrowed: at a 2 percent discount rate, the present value of
remaining life years is approximately 39.7 for infants and 24.2 for the
average U.S. resident. In applying a VSLY to monetize avoided premature
deaths at these ages, the value of preventing one infant death would be
1.6 times greater than the value of preventing one death of an average
age adult. This ratio is higher when using remaining expected QALYs
(instead of remaining life years) due to diminishing health-related
quality of life at older ages. Practically, this approach results in a
premium that declines as children approach adulthood. In contrast, this
VSL guidance results in a sharply delineated difference in mortality
risk reductions for older children and adults.
We are not aware of any regulatory agency currently using VSLYs or
vQALYs in primary estimates of benefits or costs. HHS uses the VSLY to
estimate the value of mortality risk reductions in sensitivity
analysis. A uniform VSL is used in its primary estimate. See, for
example, HHS (2022) Tobacco Product Standard for Characterizing Flavors
in Cigars, available at <a href="https://www.regulations.gov/document/FDA-2021-N-1309-0001">https://www.regulations.gov/document/FDA-2021-N-1309-0001</a>.
Finally, while measurements like VSLY or inverse ``U'' make it
possible to generate estimates for each age of childhood, CPSC would
then need to project the number of deaths at each age for the
prospective study period. While CPSC is confident it can do this for
two subpopulations--adults and children--we are less confident that
there will be enough data to consistently forecast incidents for every
individual age of childhood. Some CPSC safety rules may rely on
projections derived from only a handful of historical death records.
Weighing the strengths and limitations of the available options for
differentiating the value of risk reductions for children and adults,
CPSC concludes that the application of a multiplier derived from
available WTP literature is preferable to valuing lost life years for
affected individuals based using a VSLY or vQALY. The advantages of
relying solely on WTP studies, despite the small number of high-quality
studies, and the resulting sharply delineated difference in the value
of mortality risk reductions for adults and children, outweighs the
advantages of an approach that results

[[Page 27750]]

in more gradual declines in value as children age, but requires several
strong assumptions and potentially unavailable data on the age
distribution of children affected by proposed regulations.
Therefore, CPSC aligns its child estimates with those ratios in the
IEc study and Robinson et al. (2019).

C. Adjustments

When applying VSL in regulatory analysis, the values must be
adjusted for inflation, changes in real income, and the time value of
money (discounting). This subsection describes the approach CPSC should
take for each. This subsection also provides an example to illustrate
these methods.
1. Adjusting for Inflation and Changes in Real Income
VSL should be adjusted to the most recent calendar year that has
full inflation and real income data available, using the approach
described in HHS (2021) and the accompanying Excel workbook. This
method accounts for both the change in prices and real income and is
summarized below.
VSL(year y) = VSL(year x) x (P(year y) / P(year x)) x (I(year y) /
I(year x))\e\

where
year y = specified dollar year of the analysis (year to which
VSL is being inflated)
year x = year that is the basis for the initial VSL
P = price index for year x or y using the Consumer Price Index
I = real income in year x or y using BLS Weekly Earnings
e = income elasticity of VSL, assumed to be 1.0

When using this formula, CPSC uses the `annual average' of the most
recently completed year for the Consumer Price Index and the Weekly
Earnings (P and I).
CPSC updates VSL estimates using the most recent `annual average'
of reported indices--and not inflate to a partial year--for both prices
and real incomes. For example, as of the drafting of this guidance
document in March 2024, 2023 is the most recent year that has all 12
months' CPI indices reported.
CPSC regularly performs prospective regulatory analyses that
project a proposed or final regulation's impact into the future.
Throughout the study period of a prospective regulatory analysis, VSL
estimates should be adjusted to account for expected changes in real
income. Regarding inflation, best practice throughout the Federal
Government is to calculate future costs and benefits in constant real
dollars for a specific dollar year, and not project inflation in future
years. CPSC will follow the HHS Guidance from HHS for this adjustment.
This method is summarized below.
VSL(year z) = VSL(year y) x (1 + g)\E\ x (year z--year y)

where
year z = a specific year in the period of analysis
year y = specified dollar year of the analysis
g = real income growth rate using the Congressional Budget Office's
long-term growth forecast
E = income elasticity of VSL, which currently uses the value of 1.0

For real income growth rate, HHS relies on the estimate that the
Congressional Budget Office (CBO) uses in its most recent Long-Term
Budget Outlook. As of the time of this draft guidance document, the
most recent published outlook is from 2023, and it reports an annual
growth in real earnings per worker of 1.0 percent from 2023 to 2053.
CPSC should use this estimate as its real income growth (g) in its
prospective regulatory analyses until CBO updates the value in a future
Long-Term Budget Outlook. At that time, CPSC would use the updated real
income growth rate estimate. If CPSC has a prospective regulatory
analysis that goes beyond the projection window from CBO (e.g., 2053
for the 2023 Long-Term Budget Outlook), CPSC should still use the real
income growth rate from CBO for those years beyond CBO's projection
window.
2. Sensitivity Analysis
Many regulatory analyses include a sensitivity analysis as a
supplement to the primary benefit-cost analysis. Often, these
sensitivity analyses will alter the value of one or more of the
variables in the primary analysis and describe the impact that change
has in the estimated total benefits or total costs. CPSC should
continue its practice of including a sensitivity analysis that adjusts
input variable estimates that have a significant impact on the outputs
of the analysis or have a great deal of uncertainty associated with
them, on a case-by-case basis for each regulatory analysis. The
sensitivity analysis could include adjusting adult and child VSL.
3. Discounting
CPSC regularly performs prospective regulatory analyses that
project a proposed or final regulation's impact into the future. In its
prospective analyses, CPSC considers the time value of money by
applying an annual discount rate to all monetized costs and benefits.
An argument can be made that discounting prevented deaths may be
inappropriate because unlike money, a life saved today does not have an
opportunity cost to be invested for more lives saved in the future,
therefore a life saved today should be worth as much as a life saved 10
years into the future. However, the same resources that would have been
used to save those lives could have been invested to earn a higher
payoff in future lives saved from an alternative policy. In addition,
there is a professional consensus that future health effects, including
both benefits and costs, should be discounted at the same rate.
For these reasons, CPSC should apply discount factors to monetized
benefits using VSL in its prospective regulatory analyses.
4. Example
This section provides an example to illustrate the guideline's
application of child VSL, adjustments for inflation and changes in real
income, and discounting. This example adjusts HHS's 2013 VSL value into
2023 dollars, doubles the adjusted VSL to get the child VSL, and then
accounts for changes in real income for a prospective 10 years.
First, the 2013 VSL value of $9.0 million must be inflated to 2023
dollars. The average annual consumer price index for the base year of
2013 is 232.957, and for the target year of 2023 is 304.702. The
average annual real income index for the base year of 2013 is 333, and
for the target year of 2023 is 367. Last, the income elasticity of VSL
according to HHS is 1.0. These data points are used below to show the
calculation to adjust VSL from 2013 dollars to 2023 dollars.
$13.0 million = $9.0 million x (304.702 / 232.957) x (367 / 333)\1.0\
The adjusted VSL is $13.0 million. This is the value that would be
used in a regulatory analysis based in the year 2023 and in 2023
dollars. If the analysis is measuring prevented deaths among children,
the analysis would use double this value, $26.0 million in 2023
dollars, to estimate benefits from a reduction in fatality risk for
children.
For a prospective analysis, the VSL should increase throughout the
years at the rate of real annual growth of earnings per worker. CBO
estimates this real annual growth rate to be 1.0 percent from 2023 to
2053. Table 3 shows the adjusted VSL for adults over a 10-year
prospective analysis.

Table 4--Adult VSL Estimates From 2023-2032
------------------------------------------------------------------------
Adult VSL
Year of analysis estimate
------------------------------------------------------------------------
2023.................................................... $13.0 million

[[Page 27751]]

2024.................................................... 13.1 million
2025.................................................... 13.2 million
2026.................................................... 13.4 million
2027.................................................... 13.5 million
2028.................................................... 13.6 million
2029.................................................... 13.8 million
2030.................................................... 13.9 million
2031.................................................... 14.0 million
2032.................................................... 14.2 million
------------------------------------------------------------------------

Table 5 shows the adjusted VSL for children over a 10-year
prospective analysis.

Table 5--Child VSL Estimates From 2023-2032
------------------------------------------------------------------------
Child VSL
Year of analysis estimate
------------------------------------------------------------------------
2023.................................................... $26.0 million
2024.................................................... 26.2 million
2025.................................................... 26.4 million
2026.................................................... 26.8 million
2027.................................................... 27.0 million
2028.................................................... 27.2 million
2029.................................................... 27.6 million
2030.................................................... 27.8 million
2031.................................................... 28.0 million
2032.................................................... 28.4 million
------------------------------------------------------------------------

These VSL values would be multiplied by the estimated number of
reduced deaths due to the rule to generate monetized estimates from a
reduction in fatality risk. The monetized estimates would then have a
discount rate applied to them for each year to account for the time
value of money.

Alberta E. Mills,
Secretary, Consumer Product Safety Commission.
[FR Doc. 2024-08300 Filed 4-17-24; 8:45 am]
BILLING CODE 6355-01-P

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