Contingent valuation studies and health policy.

I am glad to have the opportunity to respond to the fine paper by Professors Smith and Sach (2009). They raise both foundational questions concerning the justification of contingent valuation studies in the health policy area, and important implementation questions concerning the appropriate design of such studies. I will focus my attention on the question of justification. The debate about contingent valuation in health policy is part and parcel of the debate between those who favour cost–benefit analysis (CBA), and those who favour cost-effectiveness analysis (CEA) (Adler, 2006: 1–17). CBA values all well-being impacts, including health and longevity, in dollar terms, and aggregates. Technically, CBA evaluates policies by aggregating willingness-to-pay/willingnessto-accept amounts (WTPs). Standard techniques for estimating WTPs are twofold: revealed preference techniques, which estimate them based on market behaviour (such techniques have been widely used to estimate WTPs for fatality risk reduction, known as the ‘value of statistical life’); and survey techniques. ‘Contingent valuation’ is just the technical term for such survey techniques. CEA, like CBA, values non-health impacts (‘costs’) in dollar terms; but it values health impacts on some non-monetary ‘effectiveness’ scale. It then examines the incremental cost-effectiveness ratios of policies in order to determine which policies to adopt. Techniques for estimating WTPs for health impacts – in particular, contingent valuation studies of health effects – therefore have no direct role in CEA. So one can take a first crack at the question of justification for health care contingent valuation studies by asking, should CBA or CEA be used to evaluate health policies? Now, this question is often seen in the health policy literature as just a choice between ‘welfarism’ and ‘extrawelfarism’. Welfarism favours CBA, extrawelfarism favours CEA – or so it is often assumed. I think the assumption is doubly mistaken. First – although I cannot pursue the point at length here – I think that CEA should be seen by extrawelfarists as little better than CBA. To adequately develop the point, we would need to get clear about the content of extrawelfarism – a large task (Brouwer et al., 2008).