Hedonic Damages

Hedonic Damages - 


 * The term “hedonic damages” usually refers to a measurement of an estimate of the dollar value of the loss of or a reduction in an individual’s “ability to enjoy life.” A calculation of hedonic damages usually begins with assuming a specific “whole value of life” from the “value of life” literature. That literature is based on a “willingness-to-pay” methodology that estimates the value of a “statistically anonymous human life” from the amount individual consumers pay to reduce safety risks just enough to prevent the loss of one human life.  (Such values can also be derived from “wage-risk” studies based on the wage premiums workers are paid for taking more than the average risk of death in their employments.) After a specific value of life is assumed for a “whole life,” a subtraction is made for the  lifetime earnings of an “average” person.  The difference between the value of a “whole life” and the value of lifetime earnings of an average person is treated as the value of the average person’s ability to enjoy life.  Finally, the annual value of life is used to create a present value of the loss for the life expectancy of the injured person or decedent.  Some economists believe that such calculations are inappropriate, while others find them useful “benchmarks” for the losses of specific individuals. Expert testimony about such calculations are allowed in courts in some states, but not others.


 * From: http://www.umsl.edu/divisions/artscience/economics/ForensicEconomics/definitions.html