[Federal Register Volume 89, Number 76 (Thursday, April 18, 2024)]
[Notices]
[Pages 27740-27751]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[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 www.regulations.gov, 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: [email protected].

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:
     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.
     Added further discussion on the normative frameworks used 
for the rationale of recommending a separate VSL for children.
     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 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. Commissioners Feldman and Dziak 
issued a joint statement in connection with their vote, available at 
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.
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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: https://www.cpsc.gov/s3fs-public/DraftFederalRegisterNoticeNoticeofAvailabilityProposedGuidanceforUsingValueofStatisticalLife.pdf?VersionId=QiWpCy7L9AvI17U.Mo3s.CyRkUdM2INf.
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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: https://www.cpsc.gov/s3fs-public/ICM-2018-Documentation.pdf.
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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, https://www.cpsc.gov/content/Valuing-Reductions-in-Fatal-Risks-to-Children.
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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
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                          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
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    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).29 30 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. 
https://doi.org/10.1007/s10640-010-9444-8.
    \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\ https://www.federalregister.gov/documents/2022/09/21/2022-20200/safety-standard-for-magnets.
    \28\ https://www.federalregister.gov/documents/2022/11/28/2022-25041/safety-standard-for-operating-cords-on-custom-window-coverings.
    \29\ https://www.federalregister.gov/documents/2022/11/25/2022-24587/safety-standard-for-clothing-storage-units.
    \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.'' https://www.epa.gov/environmental-economics/guidelines-preparing-economic-analyses.
    \32\ U.S. Department of Transportation (DOT). 2021. ``Treatment 
of the Value of Preventing Fatalities and Injuries in Preparing 
Economic Analyses''. https://www.transportation.gov/sites/dot.gov/files/2021-03/DOT%20VSL%20Guidance%20-%202021%20Update.pdf.
    \33\ U.S. Department of Health and Human Services (HHS). 2016. 
``Guidelines for Regulatory Impact Analysis''. https://aspe.hhs.gov/reports/guidelines-regulatory-impact-analysis.

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

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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
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           Variable                            Guideline
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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 https://aspe.hhs.gov/reports/updating-vsl-estimates, 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''). https://data.census.gov/table/DECENNIALDHC2020.PCT12?q=PCT12:+SEX+BY+SINGLE-YEAR+AGE
    \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 https://www.regulations.gov/document/FDA-2021-N-1309-0001.
    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, https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4.pdf.
---------------------------------------------------------------------------

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 https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4.pdf.

    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, https://media.rff.org/documents/WP_23-30.pdf.
---------------------------------------------------------------------------

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:
     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.
     Added further discussion on the normative frameworks used 
for the

[[Page 27749]]

rationale of recommending a separate VSL for children. And,
     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 https://www.regulations.gov/document/FDA-2021-N-1309-0001.
    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