The derivation and calibration of the life-quality index (LQI) from economic principles

The life-quality index (LQI) is a versatile tool to support the effective implementation of programs and practices for managing risk to life safety. The LQI allows a transparent and consistent basis for determination of the net benefit arising from projects, programs, standards and policies undertaken at some cost to improve safety or enhance the quality of life. The paper shows that the LQI model is in harmony with well-established principles of economics, utility theory and recent developments to quantify the progress of nations through indicators of human development. The initial calibration of the LQI was based on a simplifying assumption of a linear relation between the GDP and work time. In this paper, we modify the calibration using empirical data for GDP and work time and link the LQI model to well-established economic principles and theory of production. The proposed improvements to the model eliminate a systematic bias associated with estimation of societal willingness to pay for safety. In addition, it provides a rigorous basis for program evaluation to assist decision-makers in directing expenditures where they may most effective. (C) 2005 Elsevier Ltd. All rights reserved.