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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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These might include the critical significance of ‘perspective’, the sources of bias in signals about values and what can be done about them, the range of possible consequences, external effects, publicness of goods and bads, the insights to be had from sensitivity analyses, the distinction between (and therefore searching testing of) elements claimed to be ‘fixed’ rather than ‘variable’, the idea of opportunity cost and its meaning in the presence and absence of market signals, the idea that speed of implementation is a determinant of cost, and so on. This agenda-setting feature appears in both columns. Since the right-hand column is the more inclusive column, it must imply that some of the elements in a choice that may be thrown up in an initial brainstorming session using an economic ‘checklist’ would be deemed ‘beyond’ the scope of an economic analysis that was to be conducted according to the rules of the left-hand column.

j. Distributional concerns or interpersonal comparisons of welfare (utility) cannot be addressed with Paretianism or / versus Distributional concerns or interpersonal comparisons of subjective states may be an important part of the analysis, though there is precious little guidance as to how they are to be addressed and how combined with efficiency criteria Step (j) is not really a step in the Paretian scheme at all, since interpersonal


comparisons of subjective experiences, such as ‘welfare’ or ‘utility’, are either excluded by design or surreptitiously sneaked in by less careful analysts. Some have explicitly urged the use of unitary weights (e.g. Harberger’s third postulate in Harberger (1971)). Alan Williams himself urged the use of a system of weighting that discriminated against older people (Williams, 1997, 1998b).

The approach adopted to date by others on the right is scarcely more advanced however. Harberger (1978) explicitly analysed the qualitative effects of differential weights in the use of consumers’ and producers’ surplus in cost–benefit analysis, though – unlike Williams – without analysis of the source and moral authority of such weights. Advice from, for example, the National Institute for Health and Clinical Excellence (NICE) includes: treating unitary weights as provisional, conducting sensitivity analyses to test the impact of alternative weights on the application of a decision rule, taking account of the views of advisory bodies on specific distributional questions, conducting research into the distributional values that are held by the public, and embodying these concerns in the deliberative processes that translate economic and other evidence into practical advice for policy and professional practice, rather than embodying them in the economic evidence itself (NICE, 2004).

k. Public decisions can be modelled or ‘made’ through algorithmic processes like CEA (which may embody other algorithms, like QALYs) or / versus Public decisions can be informed by algorithmic processes, but often need to be supplemented by deliberative processes that are context dependent to assist the process of conflict resolution over values, to weigh up the significance of other contributors to the social good and to carry conviction with ‘the public’ Step (k) contains a more striking contrast between the two columns and develops the point just made about process. I may have overdrawn the distinction, but I think it is a real one which accords to the left-hand column a more ‘deterministic’ form of analysis than in the right-hand column. Both employ algorithms and models, but the right-hand column emphasises that at least parts of the agenda may be best addressed through a deliberative process. This is not quite the same as a consultative process. Through consultative processes one can gain information, even scientific information (if the consulting is done in a scientific way, for example by commissioning economists to discover people’s willingnesses to pay for additional QALYs), but the final decision is bound to be determined by the combining of what Lomas and colleagues (2005) call context-free scientific evidence, context-sensitive scientific evidence and colloquial evidence. The difference between the first two of these is well illustrated by the difference between explanatory and pragmatic trials, the former being rather good (one hopes) at establishing internal validity, and the latter (again, one hopes) at establishing external validity. Colloquial evidence is not scientific evidence at all, though frequently it is the only form of evidence


available to a decision maker. It typically consists of ‘case studies’, guesses about what the political and other constraints on the scope of a decision may be, ‘expert opinion’ (which may be scientifically collected but which is still a species of gossip – systematically collected gossip). Weighing all these matters up is, I conjecture, better done through a deliberative process involving the relevant ‘stakeholders’. I also conjecture that considering matters of equity is also most fruitfully done in a deliberative fashion, especially if controversial.

To the extent that this is true, economists become much more intimately involved in – and responsible for – public policy resource allocation decisions.

The phenomenon is well illustrated by the way in which NICE’s appraisal committees work.


One way of interpreting the distinction between the left and the right columns is through an idea of ‘authority’. On the left the moral authority underlying ‘ought’ statements of public policy comes to us a priori, as in ethics – in this case preference utilitarianism. On the right, the ethical authority underlying ‘ought’ statements is ad hoc; it is externally provided, typically for most practical purposes, by a senior accountable politician having formal responsibility for a sphere of policy. This comes close to Alan Williams’ claim that CEA and related techniques were ‘value-free presupposing no ethical principles at all’ (Sugden and Williams, 1978, p. 235). The main case against the left-hand column view is that it excludes too many considerations that may be relevant in decision contexts in the sphere of social policy. The main case against the right-hand view is that it might be used to exclude the appropriate use of the left, for it would be foolish to deny the possibility that Paretianism, perhaps with a well-judged dash of adjusted ‘Harbergerism’ in the matter of weights, may on occasion be all that is required. However, the ‘adjustment’ I have in mind is one that generates non-arbitrary interpersonal weights, which might be, but is unlikely to be, unitary. Unfortunately, the source for such weights plainly cannot be the economist qua economist and must surely be the ‘authority’.


I have suggested that a deliberative process may be the natural decision-making process to accompany a right-handed view of the use of economic evaluation in resource allocation decisions. Whether that is so will plainly depend in part on the range and character of the elements of analysis that transcend standard welfarism. It will also depend on the context of the decision (for example, whether it is one to be made on behalf of whole populations or major subgroups of populations as distinct from made in a one-to-one situation between the professional and patient). Finally, the value of using deliberative


processes will also depend on much broader social and political considerations – concepts of respect for the individual, agency, paternalism and the like.

It seems axiomatic that no method of making choices can long survive – nor ought it – if it is divorced from the values of the people it is there to serve. This is as true of methods that serve the interests of dominant elites as it is of those that serve the interests of entire populations. A challenge arises from the need to encompass different cultures and values – and even preferences. Another comes from the need for the processes to be seen to be encompassing different cultures and so on. Constrained outcomes, no matter how satisfactory, are never going to be believed to have been truly the best that could have been achieved if they are generated by processes that are secret. Yet another comes from the fact (conjecture?) that people are much more likely to believe in the authenticity of a decision if they, or those whom they trust, have participated in the making of it. Indeed, this is one of the attractions of the perfect market model – no transaction takes place without the active consent of any affected parties (assuming of course that there are exchangeable and enforceable private property rights in everything), so no values are crowded out (not even the famous transactions of Sen’s sadist and masochist), the outcome is as visible as the participants wish it to be, and everyone who needs to be involved is involved.


Let me end by proposing some further questions without attempting to answer them.

● Is it possible to make general statements about the character of decisions that determine the balance of algorithmic and deliberative resolution of value questions?

● Is it desirable, supposing it to be possible, to retain any element of preference-based welfarism in cost-effectiveness and related techniques of analysis as applied in health care?

● Where it is decided to go beyond, or simply to circumnavigate, preferences (one might say ‘extra-preferentially’), what kinds of ethical authority ought we to seek?

● How are controversies over interpersonal weights to be resolved and any such resolution embodied in economic analyses?

● Without a foundation of ‘preferences’ what roles are there for ‘utility’?

● What kind of accountability to the general public is required?

● Supposing that we also want (or are instructed by ‘the authority’) to keep public policy in line with common values in society, how best do we do this (invite comments, use consultation, citizens’ juries, markets or pseudo-markets...?) ‘What is the question?’ – THAT is the answer!


REFERENCES Culyer AJ (1971) Merit goods and the welfare economics of coercion. Public Finance 26: 546–72.

Culyer AJ (1984) The quest for efficiency in the public sector: economists versus Dr Pangloss (or why conservative economists are not nearly conservative enough).

In: Hanusch H (ed.) Public Finance and the Quest for Efficiency. Proceedings of the 38th Congress of the UPF, Copenhagen, Detroit: Wayne State University Press, pp. 39–48.

Department of Health (1996) Priorities and Planning Guidance for the NHS 1997/98.

London: Department of Health.

Dolan P and Olsen JA (2002) Distributing Health Care: economic and ethical issues.

Oxford: Oxford University Press.

Harberger AC (1971) Three basic postulates for applied welfare economics: an interpretive essay. Journal of Economic Literature 9: 785–97.

Harberger AC (1978) On the use of distributional weights in social cost-benefit analysis, Journal of Political Economy 86: S87–S120.

Harsanyi J (1955) Cardinal welfare, individualistic ethics and interpersonal comparisons of utility. Journal of Political Economy 63: 309–21.

Hogarth R and Reder M (eds) (1987) Rational Choice: the contrast between economics and psychology. Chicago: University of Chicago Press.

Kahneman D, Diener E and Schwarz N (eds) (1999) Well-Being: the foundations of hedonic psychology. New York: Russell Sage Foundation.

Kahneman D and Tversky A (eds) (2000) Choice, Values and Frames. Cambridge:

Cambridge University Press.

Kaplow L and Shavell S (2001) Any non-welfarist method of policy assessment violates the Pareto principle. Journal of Political Economy 109: 281–6.

Kelman M (2005) Hedonic psychology and the ambiguities of ‘welfare’. Philosophy and Public Affairs 33: 391–412.

Keynes JM (1931) Essays in Persuasion. London: Macmillan.

Lomas J, Culyer AJ, McCutcheon C, McAuley L and Law S (2005) Conceptualizing and Combining Evidence for Health System Guidance. Ottawa: Canadian Health Services Research Foundation.

Musgrave RA (1959) The Economics of Public Finance. New York: McGraw Hill.

National Institute for Clinical Excellence (2004) Guide to the Methods of Technology Appraisal (ref. N0515). Available at: www.nice.org.uk/page.aspx?o=201973 Rawls J (1971) A Theory of Justice. Cambridge MA: Harvard University Press.

Reinhardt U (1998) Abstracting from distributional effects, this policy is efficient.

In: Barer ML, Getzen TE and Stoddart GL (eds) Health, Health Care and Health Economics, Perspectives on Distribution. New York: John Wiley and Sons, pp. 1–52.

Sen AK (1979) Personal utilities and public judgments: or what’s wrong with welfare economics. Economic Journal 589: 537–8.

Sen AK (1980) Equality of What? The Tanner lectures on human values. Cambridge:

Cambridge: Cambridge University Press.


Sen AK (1985) Commodities and Capabilities. Amsterdam: North Holland.

Sugden R and Williams A (1978) The Principles of Practical Cost–Benefit Analysis. New York, Oxford: Oxford University Press.

Tobin J (1970) On limiting the domain of inequality. Journal of Law and Economics 13: 263–77.

Williams A (1963) Public Finance and Budgetary Policy. London: Allen and Unwin.

Williams A (1981) Welfare economics and health status measurement. In: Van der

Gaag J and Perlman M (eds) Health, Economics and Health Economics. Amsterdam:

North-Holland, pp. 159–70.

Williams A (1983) The role of economics in the evaluation of health care technologies.

In: Culyer AJ and Horisberger B (eds) Economic and Medical Evaluation of Health Care Technologies: papers presented at a symposium held April 1982,Wolfsberg, Switzerland.

Berlin: Springer Verlag, pp. 38–68.

Williams A (1985) Economics of coronary artery bypass grafting. British Medical Journal 291: 326–9.

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