Interpretations of utility and their implications for the valuation of health.

Title: Interpretations of utility and their implications for the valuation of health.
Authors: Dolan, Paul and Kahneman, Daniel
Publisher: Economic journal, 118 (525). pp. 215-234
ISSN: 1468-0297
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Abstract: The term utility can be interpreted in terms of the hedonic experience of an outcome (experienced utility) or in terms of the preference or desire for that outcome (decision utility). It is this second interpretation that lies at the heart of the methods that economists have developed to value non-market goods, such as health. In this article, we argue that decision utility is unlikely to generate meaningful data on the utility associated with different experiences, and instead economists should look towards developing measures that focus more directly on experienced utility.

Do we really know what makes us happy? A review of the economic literature on the factors associated with subjective well-being

Title: Do we really know what makes us happy? A review of the economic literature on the factors associated with subjective well-being
Authors: Dolan, Paul and Peasgood, Tessa and White, Mathew
Publisher: Journal of economic psychology, 29 (1). pp. 94-122
ISSN: 0167-4870
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Abstract: There is increasing interest in the “economics of happiness”, reflected by the number of articles that are appearing in mainstream economics journals that consider subjective well-being (SWB) and its determinants. This paper provides a detailed review of this literature. It focuses on papers that have been published in economics journals since 1990, as well as some key reviews in psychology and important unpublished working papers. The evidence suggests that poor health, separation, unemployment and lack of social contact are all strongly negatively associated with SWB. However, the review highlights a range of problems in drawing firm conclusions about the causes of SWB; these include some contradictory evidence, concerns over the impact on the findings of potentially unobserved variables and the lack of certainty on the direction of causality. We should be able to address some of these problems as more panel data become available.

Valuing lives and life years: anomalies, implications, and an alternative

Title: Valuing lives and life years: anomalies, implications, and an alternative
Authors: Dolan, Paul and Metcalfe, Robert and Munro, Vicki and Christensen, Michael C.
Publisher: Health economics, policy and law, 3 (03). pp. 277-300
ISSN: 1744-1331
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Abstract: Many government interventions seek to reduce the risk of death. The value of preventing a fatality (VPF) is the monetary amount associated with each statistical death that an intervention can be expected to prevent. The VPF has been estimated using a preference-based approach, either by observingmarket behaviour (revealed preferences) or by asking hypothetical questions that seek to replicate the market (stated preferences). The VPF has been shown to differ across and within these methods. In theory, the VPF should vary according to factors such as baseline and background risk, but, in practice, the estimates vary more by theoretically irrelevant factors, such as the starting point in stated preference studies. This variation makes it difficult to choose one unique VPF. The theoretically irrelevant factors also affect the estimates of the monetary value of a statistical life year and the value of a quality-adjusted life year. In light of such problems, it may be fruitful to focus more research efforts on generating the VPF using an approach based on the subjective well-being associated with different states of the world.

Measuring wellbeing for public policy: preferences or experiences?

Title: Measuring wellbeing for public policy: preferences or experiences?
Authors: Dolan, Paul and Peasgood, Tessa
Publisher: The Journal of legal studies, 37 (S2)
ISSN: 0047-2530
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Abstract: Policy makers seeking to enhance well-being are faced with a choice of possible measures that may offer contrasting views about how well an individual’s life is going. We suggest that choice of well-being measure should be based on three general criteria: (1) the measure must be conceptually appropriate (that is, are we measuring the right sort of concept for public policy?), (2) it must be valid (that is, is it a good measure of that concept?), and (3) it must be empirically useful (that is, does it provide information in a format that can be readily used by policy makers?). Preference-based measures (as represented by income) are compared to experience-based measures (as represented by subjective evaluations of life) according to these criteria. Neither set of measures meets ideal standards, but experiences do fare at least as well as preferences, and subjective evaluations perform much better than income alone as a measure of well-being.

Developing methods that really do value the ‘Q’ in the QALY

Title: Developing methods that really do value the ‘Q’ in the QALY
Author: Dolan, Paul
Publisher: Health economics, policy and law, 3 (01). pp. 69-77
ISSN: 1744-1331
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Abstract: Most health economists recommend that improvements in health be valued by asking members of the general public to imagine themselves in different states of health and then to think about how many years of life they would give up or what risk of death they would be willing to accept in order to be in full health. In this paper, I argue that preferences are not a very good guide to future experiences and a more suitable way to value health is to ask people in different states of health how they think and feel about their lives. Valuing health in this way may result in greater priority being given to mental health services. Whatever the precise implications, it is my contention that it is much better to ration health care according to real experiences rather than according to hypothetical preferences.