Hedonic Damages

When it is used

Hedonic damages analyses are offered in jurisdictions that permit them. Counsel first settles what the forum allows, a figure, only an explanation of the concept, or neither: the governing law decides whether the loss can be recovered, and the forum's rules on expert testimony decide what an economist may say about it. The hedonic damages guide sets out how particular courts have answered both questions, each with its source.

Step-by-step

1. Take a value of life from published value-of-statistical-life estimates, keep only the part that is separate from earnings and state the dollar year of each estimate
2. Convert that value to a value per year over a statistically average person's remaining life expectancy
3. Multiply the annual value by the share of life's enjoyment the injury removed, as rated by a physician, psychologist or other qualified evaluator in the record
4. Project the annual loss over the injured person's own life expectancy, discount it to present value and total it apart from the other losses

Data sources

• Value-of-statistical-life estimates: a peer-reviewed review of labor market studies (Viscusi & Aldy, 2003) and EPA's mortality risk valuation guidance (U.S. Environmental Protection Agency, n.d.)
• The national life tables for the person's age and sex (Arias et al., 2026)
• The discount rate series the report uses for its other future losses (U.S. Department of the Treasury, n.d.)
• The loss rating of a physician, psychologist or other qualified evaluator in the record

How is a hedonic damages figure calculated?

In four steps, each shown in the report, and only where the forum allows a figure. First, the economist takes a value of life from published willingness-to-pay studies, such as studies of the extra pay workers accept for riskier jobs and of what people are willing to pay to reduce small risks of dying (Viscusi & Aldy, 2003; U.S. Environmental Protection Agency, n.d.), counting only the value of life apart from earnings (Loth v. Truck-A-Way Corp., 1998). Second, that lifetime value is converted to a value per year over the remaining life expectancy of a statistically average person. Third, the annual value is multiplied by the share of life's enjoyment the injury removed, a rating the economist takes from a physician, psychologist or other qualified evaluator in the record rather than setting it. Fourth, the annual loss is projected over the injured person's own life expectancy and reduced to present value, as any other future loss is.

The proposed testimony the Seventh Circuit reviewed in 1992 shows the arithmetic. The economist put the value of the enjoyment of life of a statistically average person, 31 years old with 45 more years to live, at $2.3 million in 1988 dollars, which the court said averages out to about $60,000 a year, multiplied that figure by a loss of 66 to 83 percent drawn from a clinical neuropsychologist's calculations, and adjusted the result for the young age of the injured boy, who was six when a taxi struck him. The trial court barred the testimony, and the Seventh Circuit held that ruling was not reversible error (Mercado v. Ahmed, 1992).

Where the forum admits only an explanation of the concept, the economist states no figure. In a federal case governed by New Mexico law, the trial court excluded the figure, and the economist described the loss as the value of a person's being, as opposed to the person's doing or economic productive capacity, and named four broad areas he would consider in valuing it: the enjoyment of one's chosen occupation, the activities of daily living, social and leisure activities, and internal well-being. He made no attempt to apply them to the facts of the case, leaving that to the jury (Smith v. Ingersoll-Rand Co., 2000). Attorneys confirm the governing rule for their case.

What data does a hedonic damages calculation use?

Four inputs: value-of-statistical-life estimates, the national life tables, a discount rate series and an evaluator's loss rating, the first three of them published. Value-of-statistical-life estimates are published in the economics literature and in agency guidance. In the literature, a peer-reviewed review brings together more than 60 studies of the wage premiums paid for fatal risk on the job, from ten countries (Viscusi & Aldy, 2003). In agency guidance, EPA's mortality risk valuation page, read on October 24, 2026, puts the agency's central estimate for its benefit analyses at $7.4 million in 2006 dollars, brought forward to the year of each analysis, and traces its guidance to a 1997 report to Congress that rested on 26 studies, 21 from the wage-risk literature and five of stated preference (U.S. Environmental Protection Agency, n.d.). Whichever estimate a report uses, it states the estimate's dollar year and how it was brought forward. The horizon comes from the national life tables for the person's age and sex, the 2024 tables (Arias et al., 2026), adjusted only where a physician has given a condition-specific opinion; the life expectancy calculator looks up the same tables. The discount rate comes from the same Treasury or other series the report uses for its other future losses (U.S. Department of the Treasury, n.d.). The fourth input, the loss rating, is not published: it comes from an evaluator in the record, and the report names its source.

Why is a hedonic figure kept apart from the other losses in the report?

So that a court can admit or exclude it without touching the rest of the report, and so that each input can be checked. The figure is presented in its own section, apart from lost earnings, lost household services and future care costs, and totaled separately. A court can then exclude the figure and keep the rest of the economist's testimony, as the trial court did in a federal case governed by New Mexico law: the hedonic figure was excluded, while the same economist's testimony on lost future earnings and his explanation of the concept went to the jury (Smith v. Ingersoll-Rand Co., 2000). The section sets out the value-of-statistical-life range, the annual conversion, the loss rating and its source, the horizon and the discount rate together, so an opposing expert can change any input and rework the result. Where the forum's position is unsettled, counsel decides whether to request a figure at all, and the economist testifies only to what the court admits.

Limitations

The value of a statistical life describes what a population would pay for small reductions in risk, not what one person's life is worth: EPA recommends one central estimate for all of its analyses of the benefits of reducing mortality risk, whatever the age, income or other characteristics of the people affected, and says it places no dollar value on individual lives (U.S. Environmental Protection Agency, n.d.). The Seventh Circuit had serious doubts that the studies capture how much people value life, noting that people take dangerous jobs for reasons besides the pay, as a police officer may out of civic duty, and that government safety spending answers to budgets, elections and lobbying as well as to the value of life (Mercado v. Ahmed, 1992). The loss rating is a clinical judgment the economist adopts rather than computes, so the figure is no sounder than the rating. The hedonic damages guide sets out the other doubts courts have raised, and the federal and state admissibility standards govern how a court weighs them.

Admissibility

Courts have treated the figure and the concept differently, each under its own forum's rules. In a case governed by Illinois law, the Seventh Circuit found no reversible error in a trial court's decision to bar an economist's figure for the lost pleasure of living, though it did not go so far as to say the approach lacked any merit (Mercado v. Ahmed, 1992). In a case governed by New Mexico law, the Tenth Circuit affirmed the judgment of a trial court that had excluded the figure but let the economist explain the concept, and it observed that under New Mexico law an economist may testify to an opinion of the loss's economic value (Smith v. Ingersoll-Rand Co., 2000). In New Mexico's own courts, the Court of Appeals upheld the admission of an economist's testimony that gave the jury the range of values in value-of-statistical-life studies and left the percentage of the loss for the jury to set (Couch v. Astec Industries, Inc., 2002). A California Court of Appeal held an economist's hedonic testimony inadmissible as a matter of law (Loth v. Truck-A-Way Corp., 1998). How forums treat a hedonic damages claim is the subject of its own guide. Attorneys confirm the governing rule for their case.