The Economics of Measuring Quality of Life by the Standard Gamble Method

Eric Eisenstat, Manuela Epure, Paddy Gray

Research output: Contribution to journalArticle

Abstract

Of the countless methods for measuring the quality of life (QOL) that have been proposed and analysed by the vast multi-disciplinary literature over the past decades, only a select few are alluded to in Romanian scientific circles, and even fewer are actually implemented in practical applications. In adapting existing techniques and engineering a variable measurement system specific to Romania, there exists an important opportunity to re-evaluate the merits and shortcomings of established approaches. As a specific example, we consider the Standard Gamble (SG) method of eliciting 'subjective utilities' related to particular health states. The re-evaluation is accomplished from three perspectives: theoretic consistency, interpretability and practicality. It is demonstrated that consistent withe economic theory, the appropriate interpretation of SG derived measures is that of a Hicksian change in welfare valuation, rather than a cardinal measure of preferences. A practical consequence of teh latter is that SG will necessarily produce a higher QOL value for individuals exhibiting more risk aversion. This leads to contemplate that in fact SG may be a more appropriate methodology in other contexts, nat necessarily health-related, where quality of life may indeed be correlated with the willingness to take risks.
Original languageEnglish
Pages (from-to)81-100
JournalAnnals of "Spiru Haret" University
Volume2 (11)
Issue number1
Publication statusPublished - 11 Mar 2011

Keywords

  • Quality of life. measurement
  • cost-effectiveness analysis
  • von Neumann-Morgenstern utilities
  • Romanian well-being index

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