This document outlines Dan Hausman's critique of economic evaluations of health that rely on eliciting and aggregating individual preferences. Hausman argues that preferences are an unreliable guide to the value of health states for several reasons. People's preferences can be distorted by cognitive flaws and irrelevant factors. They are also often uninformed since health states are unfamiliar alternatives. Rather than relying on preferences, Hausman believes health economists should directly evaluate health states based on their effects on well-being, opportunities, autonomy, and other considerations.

1. DEPARTMENT OF PHILOSOPHY
The Economic Evaluation of
Health
(Mostly not about GBD)
Dan Hausman
Department of Philosophy
University of Wisconsin-Madison

2. DEPARTMENT OF PHILOSOPHY
Outline
1. Economic evaluations
2. What is different about health?
3. Preferences and their elicitation
4. Against valuing by preferences
5. Against “the social choice model”
6. Conclusions
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3. DEPARTMENT OF PHILOSOPHY
1. Economic evaluation
• The task: valuing health (health states)
• Assume that individual rankings of health states
satisfy various formal conditions
• Derive social value from individual values
• Examples:
– Social choice theory (& social welfare functions)
– Cost-benefit analysis
– Non-welfarist possible alternatives
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4. DEPARTMENT OF PHILOSOPHY
2. Problems in valuing health
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• Ordinal rankings not sufficient
• Willingness to pay (coupled with aggregation
as “net benefit”), a morally unacceptable
measure
• Health states are unfamiliar alternatives
• Fragility of rankings
• Systematic divergences

5. DEPARTMENT OF PHILOSOPHY
3. Preference elicitation
Preferences are total comparative evaluations.
Four methods of eliciting:
1.Visual analogue scale (VAS)
–Does it yield cardinal values?
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6. DEPARTMENT OF PHILOSOPHY
2 Standard gamble
– Intellectually challenging
– For p < 1, respondents refuse standard gambles to
alleviate minor health conditions
3 Time trade-off
– People refuse trade-offs to alleviate minor ailments
4 Person trade-off
– PTO1 (1000 healthy vs. n disabled) morally dubious
– Mixes issues of fairness and value
Multiplicative intransitivity
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7. DEPARTMENT OF PHILOSOPHY
4. Against valuing by preferences
a. Problems with population surveys
1. Questions are not well-defined.
2. Respondents do not take questions seriously.
3. Questions are too difficult.
4. Respondents do not have relevant
information.
5. Respondents are subject to cognitive flaws.
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8. DEPARTMENT OF PHILOSOPHY
4. Against valuing by preferences
b. When do preferences reveal values?
1. Relevant beliefs are true
2. Preferences satisfy axioms and are not
distorted by cognitive flaws
3. Individuals are competent evaluators
4. In addition, to reflect well-being, preferences
must be “self-directed”
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9. DEPARTMENT OF PHILOSOPHY
Against valuing by preferences
c. Whose preferences?
1. A representative sample of the target
population vs.
2. Those with detailed knowledge of the health
state
1. Caregivers?
2. Those occupying the health state?
3. Averaging?
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10. DEPARTMENT OF PHILOSOPHY
Measure Current
patients
Former
patients
Community
TTO utility (0-1)* .84 .64 .63
Life satisfaction (1-7) 4.13 4.46 4.21
Quality of life (0-100) 67.60 71.32 72.60
Current health (0-100) 62.51 63.57 69.81
Positive mood (1-5) 3.15 3.06
Negative mood (1-5) 1.82 1.88
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Current patients are indifferent between living 10 yrs with a
colostomy and 8.4 yrs In full health – they are willing to
sacrifice 1.6 yrs to be rid of the colostomy. Former patients
and the community are willing to trade-off 3.6 or 3.7 years.
Smith, Sherriff, Damschroder, Lowewenstein, and Ubel 2006

11. DEPARTMENT OF PHILOSOPHY
Against valuing by preferences
d. Preferences vs. other rankings
Rankings of health states
1. By their bearing on well-being (Broome, Brock)
2. By the burden they impose on others
3. By their effects on opportunities (Daniels)
4. By their level of subjective distress (Dolan)
5. By their effects on autonomy
6. By their economic consequences
7. By preferences
Why rely on preference rankings?
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12. DEPARTMENT OF PHILOSOPHY
Arguments for relying on preferences
1. Those affected should decide
2. Implied by popular sovereignty
3. Needed to avoid paternalism
4. Needed for legitimacy
5. Preference satisfaction = well-being
6. There is no feasible alternative
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13. DEPARTMENT OF PHILOSOPHY
5 Against the social choice model
Individual (preference) rankings result from
individual evaluations of health states
Social evaluation derives from individual
evaluations (no questions asked) . . .But
1.How do individuals evaluate health states?
What do their evaluations rely on?
2.How should individuals evaluate health states?
3.Why can’t health economists evaluate health
states for themselves?
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14. DEPARTMENT OF PHILOSOPHY
Conclusions
Economic evaluation relies on
eliciting and aggregating preferences
•Prefs. = total comparative evaluations
•Preferences are unreliable guides to the
value of health states
– Depend on some irrelevant factors
– Often uninformed, cognitively flawed
Economic evaluation evades the challenge
of evaluating health states 14