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Page Title: Guideline 8.1-- Units of Value
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b. An RBP system may be employed in a graded manner so that monetization of
certain costs and benefits can be deferred until later stages of the analysis and
conducted in a more targeted fashion for a more limited subset of the decision
If the decision is made not to monetize, the basis and justification for such action
should be fully documented. The justification should address how the absence of
direct expression of the cost effectiveness of any activity does not impact the
supportableness, usefulness, or relative ranking of the prioritization results.
Monetizing should be performed in accordance with the guidance provided by the
OMB, reference (k). This guidance states that presentation of monetized benefits and
costs is preferred where acceptable estimates are possible, but recognizes that this is
often difficult. Where monetization is not possible for certain elements of the benefits
or costs that are essential to consider, other quantitative and qualitative
characterizations of these elements should be provided. The principle of " illingness-
to-pay"captures the notion of opportunity cost by providing an aggregate measure of
what individuals are willing to forgo to enjoy a particular benefit, and OMB considers
this valuation methodology to be the conceptually superior approach. In the area of
health and safety, OMB suggests that for nonfatal effects, the use of either the
willingness-to-pay approach or valuations based on the expected direct costs avoided
by changing such risks is appropriate. Changes in fatality risks as a result of
Government action are best monetized according to the willingness-to-pay approach.
It should be made clear that in this context, the terms " alue of statistical life"or " alue
of life,"if used at all, refer to the willingness-to-pay for reductions in risks of premature
deaths. Valuation of certain environmental and cultural amenities may be difficult to
accomplish using a willingness-to-pay approach. Where this is a problem, OMB
suggests that for many such goods, particularly goods providing " on-use"values,
contingent-valuation methods may provide the only analytical approaches currently
available for estimating values. A schedule of monetized benefits should be included
that would show the type of benefit and when it would accrue, expressed in constant
undiscounted dollars (discounting is addressed in Guideline 8.2). Any benefits that
cannot be monetized (some examples might be an increase in the rate of introducing
a more productive new technology or an increase in the risk of extinction of
endangered species) should be presented and explained. Even if not monetized,
these benefits should still be quantified (if at all possible) or fully characterized
It is often much easier to defend a range of values for statistical deaths or injuries
averted than it is to defend a particular value, e.g., it is worth spending precisely $X
million to avert a premature fatality. One can more easily defend the notion that it
would be irresponsible to forgo safety improvements if lives could be saved for as little
as $Y a piece, but it would also be an unsound use of resources to spend more than
$Z per life saved, so the value that should be accorded to averting fatalities should fall
between $Y and $Z. Since many factors in RBP are uncertain, adding a few
additional uncertainties in the monetization of adverse effects averted usually does not

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