Evidencing Value in Economics(and the role of behavioural sciences and statistics)Daniel FujiwaraLondon School of Economicsd.email@example.com
Economics• ‘Value’ has a clear definition in economics• Welfare is central – it is the ultimate intrinsicgood = Welfarism.• Basis of cost-benefit analysis, cost-effectiveness analysis etcWelfare
Value theory• Value of a good = the amount of money thatinduces the equivalent change in welfare for theindividual. (Indifference point)• Compensating Surplus andEquivalent Surplus• Related to WTP and WTA
So what is ‘welfare’? (part 1)• Economists traditionally measure this as thesatisfaction of one’s (rational) preferences.• Neuroscience – increasing evidence that somenotion of welfare underlies (and predicts) ourdecisions.• Use Revealed Preference or StatedPreference valuation methods.
Stated preferences and cultural value• Queensland Government (2009). WTP of A$20 pato support Queensland Museum.• Thompson et al. (2002). WTP of US$100+ for anincrease in government-funded artsperformances in Kentucky.• But, Behavioural science shows that preferencescan often be misinformed and inconsistent (don’talign with welfare)
So what is ‘welfare’? (part 2)• Driven by behavioral economics, economiststurning to self-report measures.• Subjective wellbeing can consist in lifesatisfaction (evaluative), happiness (hedonic),worthwhile (eudemonic).
Wellbeing valuation and cultural value• Fujiwara (2013); Fujiwara et al. (2013):- Value of cinema visit = £12- Value of participating in arts = £1,500 pa (dance, arts, music,photography)- Value of being audience to cultural events= £2,000 paPolicy intervention(culturalengagement)MoneyWellbeing
Causality is key• We’ve measured value, but how do we knowwe have created it?Econometrics Statistics
Maryland Evidence Scale (example)• Public policy institutions moving towards rankingsystems (implicitly or explicitly) for internal validity.• Must also remember external validity.