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«Edited by ANNE MASON Research Fellow, Centre for Health Economics University of York and ADRIAN TOWSE Director, Office of Health Economics Radcliffe ...»

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The Ideas and Influence of Alan Williams

The Ideas and Influence of Alan Williams


Edited by


Research Fellow, Centre for Health Economics

University of York



Director, Office of Health Economics

Radcliffe Publishing

Oxford • New York

Radcliffe Publishing Ltd

18 Marcham Road Abingdon Oxon OX14 1AA United Kingdom www.radcliffe-oxford.com Electronic catalogue and worldwide online ordering facility.

© 2008 Anne Mason and Adrian Towse All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior permission of the copyright owner.

Anne Mason and Adrian Towse have asserted their rights under the Copyright, Designs and Patents Act, 1998, to be identified as Editors of this Work.

Neither the publisher nor the authors accept liability for any injury or damage arising from this publication.

British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library.

ISBN-13: 978 184619 231 9 Typeset by Pindar New Zealand (Egan Reid), Auckland, New Zealand Printed and bound by TJI Digital, Padstow, Cornwall, UK Contents Preface vii List of contributors ix 1 A tribute to our friend and colleague, Alan Williams 1 Richard and Peggy Musgrave 2 Citizens, consumers and clients: Alan Williams and the political economy of cost–benefit analysis 5 Robert Sugden 3 Alan Williams and cost–benefit analysis in health care:

comments on the paper by Robert Sugden 19 Bengt Jönsson 4 The public–private challenge in health care 27 Alan Maynard 5 Discussion of Alan Maynard’s paper: ‘The public–private challenge in health care’ 47 Dominique Polton 6 Resource allocation in health care: Alan Williams’ decision maker, the authority and Pareto 57 Anthony J Culyer 7 Discussion of Anthony Culyer’s paper: ‘Resource allocation in health care: Alan Williams’ decision maker, the authority and Pareto’ 75 Adrian Towse 8 Being reasonable about equity and fairness: looking back and extending the Williams way 85 Aki Tsuchiya and Paul Dolan 9 Equity and fairness in health and health care: looking up and extending ‘My way’ – a comment on Aki Tsuchiya and Paul Dolan’s paper

–  –  –

The sign on Alan Williams’ desk revealed his sense of humour, a man who invited and relished debate, but always recognising that intellectual pursuits were a means to a practical end.

Alan was a man of principles: as Bob Sudgen notes, Alan was not interested in ‘cookbook’ economics, but in developing guiding principles that embraced and encouraged active intellectual engagement and development. Many of the authors of the papers contained within this book testify to their encounters with Alan – their intellectual journeys: Bob Sugden recalls his student days and attributes his chosen career path to Alan’s influence; Ben van Hout reminisces about the impact Alan had upon Dutch efforts to develop quality of life measures; Bengt Jönsson echoes these sentiments, remembering how Alan’s courageous intellectual battles within Europe paved the way for younger academics; and Alan Maynard reminds us of the debate that raged (and perhaps rages still) between egalitarians and libertarians, both parties guilty, Williams observed, of comparing the ideal characteristics of their own ideology with the actual characteristics of the opposing ideology. As intellectual journeys criss-crossed, new ideas were born and principles were refined or revised; for Alan, principles were never meant to be followed slavishly or unthinkingly.

However, Alan was also a practical man: intellectual debates were not an end in themselves, but were for the purpose of tackling real-world issues. He wanted to help decision makers engage with the issues facing them; the role of the health economist, as he saw it, was to provide a clear framework through which important factors informing the decision-making process were made accessible and transparent. Thus Alan continued, well into his retirement, to propound applications for his work: always an egalitarian, he argued that there were equity grounds for discriminating against older people who had had their ‘fair innings’ and that these grounds had important implications for the way in which scare resources were allocated within tightly squeezed healthcare budgets. In recent years, Alan worked with Aki Tsuchiya on broader issues of

viiviii PREFACE

equity and fairness, exploring the implications of discriminating on the basis of gender or of socio-economic status.

Alan will perhaps best be remembered for his work within cost–benefit analysis. The quality-adjusted life year (QALY), born of his desire to find a generic outcome measure that would enable an assessment of the opportunity

costs of healthcare interventions, synthesised the principled and the practical:

life years added by a health intervention, adjusted for the quality of that life – not an end in itself but a means to achieving equitable health outcomes for all in the real world of limited resources. The role of the QALY as a tool for decision makers, enabling them to break out of the artificial constraints of ‘welfarist’ or ‘Paretian’ approaches, is discussed by Tony Culyer who sets out the key dividing points between Paretian and decision-making approaches to the application of economics in the allocation of resources in health care.

Within the healthcare sector, debates over the derivation and application of the QALY continue. Paul Kind reminds us that the quality element (‘Q’) of the QALY is critical: whose values should be used, how should values be combined and who should decide these issues? Kind argues that scope remains for methodological development, and that failure to address this has serious practical implications. Bob Sugden echoes these sentiments, questioning whether decision makers should decide, on behalf of the community, what the collective objective should be. Alan Maynard focuses on failure of healthcare systems to measure treatment effects, and advocates a system-wide application of patient-related outcomes measures (PROMs) as a way forward.

Alan’s work on the QALYs also inspired methodological work on outcome measurement in other fields. Paul Dolan and Aki Tsuchiya’s work on quality of life measurement in crime is in its early stages of development, with the SALY (safety-adjusted life year) proposed as a tool for measuring public safety.

Their discussant, Martin Buxton, discusses the potential for a ‘super-QALY’ to embrace outcome measurement across different parts of the public sector, or even across multiple sectors.

Alan vigorously contested charges that cost–benefit analysis was a ‘pseudoscience’. However, modern economic evaluation is not immune to the same allegations. Peggy and Richard Musgrave, who open this book with a tribute to Alan, reflect on his concern with the philosophical and ethical issues that underpin decision making, issues that must still be faced. To recognise and appreciate Alan’s legacy, the task falls to the health economics community to ensure that we do not shirk our responsibilities: the need to be intellectually rigorous without being rigid; to keep in sight the practical implications of our work; to acknowledge the shortcomings within our discipline; and to move forward in the spirit of the Williams’ way.

–  –  –

Richard A Musgrave HH Burbank Professor of Economics, Emeritus Harvard University Richard Abel Musgrave died on 15 January 2007 in Santa Cruz, California at the age of 96. A leading fiscal economist, he played a central role in shaping the modern field of public finance.

Peggy B Musgrave Professor of Economics, Emerita University of California, Santa Cruz Robert Sugden Professor of Economics University of East Anglia, UK Bengt Jönsson Professor of Health Economics Stockholm School of Economics, Sweden Alan Maynard Professor of Health Economics University of York, UK Dominique Polton Directrice de la Stratégie des Études et des Statistiques Caisse Nationale de l’Assurance Maladie, France

–  –  –

Anthony J Culyer Professor of Economics, University of York, UK Senior Scientist, Institute for Work & Health, Canada Adrian Towse Professor of Economics and Director Office of Health Economics, London, UK Aki Tsuchiya Reader in Economics and Health Economics University of Sheffield, UK Paul Dolan Professor of Economics Imperial College London, UK Jan Abel Olsen Professor of Health Economics University of Tromsø and University of Oslo, Norway Paul Kind Professor of Health Economics University of York, UK Ben van Hout Professor of Medical Technology Assessment, University of Utrecht The Netherlands and Scientific Director, Pharmerit Martin Buxton Professor of Health Economics and Director of the Health Economics Research Group Brunel University, UK CHAPTER 1 A tribute to our friend and colleague, Alan Williams... Richard and Peggy Musgrave We take the occasion of Alan’s Memorial Conference to add our own words of esteem. Over the decades we travelled similar paths, both as colleagues and as friends. As colleagues, we shared fascination with the mysteries of ‘public finance’ and its powers to improve the world around us. As friends, we shared many visits, conferences and associations, crossing the Atlantic from east and west, from Vermont in the US to York in the UK. Hiking along the Pacific and in Vermont’s green hills, we recall Alan’s buoyant spirit, his gentle sense of humour spiced with sharp wit, a view of the world where not all was for the best, but neither was it beyond repair. Alan, striding firmly ahead, followed by June, slightly amused and with a twinkle of her own.

Alan’s earlier work, as did ours, focused on the basics of fiscal theory, the nature of public goods, the intractable issues of equity and the ways of implanting fiscal functions into the various forms of governmental organisation, central and local, unitary and federal. Later on, focus shifted to policy issues and it is here that Alan’s choice of health economics would lead him to his outstanding contributions, containing thoughts and directions which now enrich the papers of this conference.

Alan’s turn to health economics was indeed a brilliant move, guided by his knack for combining analytical insights with a sense for practical application;

to clear the ground first, before proceeding to more complex aspects. The purpose of health policy and research, as he saw it, is to improve the state of health of particular individuals, of groups and of nations, an essential ingredient of human well-being. Evaluation and comparison require measurement, a key issue to which Alan made one of his major contributions. The state of health as a policy concern has to be measured over time, traditionally done with reference to life expectation. Beginning with life expectancy as the point of departure, Alan then refined the concept, adding a human touch by allowing


for the quality of life that was experienced. Building on this framework, the quantitative analysis and assessment of policy outcomes could be advanced.

Through all this, just what is the nature of health and how does it compare with other benefits to be gained by economic activity? To begin with, is health improvement to be viewed as a private good, best left to the market, or is it a public good, calling for public intervention to overcome market failure?

The answer depends on the particulars of the case and on how the problem is viewed. The individual patient, waiting for his pain pill to arrive, rightly views it as a private good, excludable and rival in consumption. Hence efficiency can be obtained in the market, and although government may enter to assure availability of medication as a matter of equity in distribution, it is not needed on efficiency grounds. The answer differs, however, when considering medication given to prevent the spread of communicable disease.

With consumption now non-rival, the market fails in its provision and public financing is required.

Non-rival consumption may or may not be combined with excludability, and the role of the public hand differs accordingly. The advance of medical science, of medical ‘knowing’ of how to prevent and heal disease, is non-rival in use. Benefits to the consumer will be the larger, the more widely the given stock of knowledge is available, calling for its provision free of charge by the originator. This, however, would leave no compensation for those engaged in the advance of knowledge, and government must step in. Patent law might be used to preserve that incentive, limiting patent length so as to balance that gain against the immediate loss of not fully utilising the available stock of knowledge. Concern with the nature of public, private, and mixed goods thus provides an inseparable bond between health economics and public finance.

A further link between the two fields is provided by a shared concern with equity in distribution. In designing its budgets, the NHS applies two standards, choosing projects which are most effective in fighting particular diseases, and providing them in the most cost-efficient way. Alan agreed, but asserted that effectiveness and efficiency are not everything for ‘behind them, there lurks equity’. Who should pay and who should benefit? How can health be measured, so that comparisons can be made and an equitable system be defined?

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