THE ECONOMICS OF MEASURING QUALITY OF LIFE BY THE STANDARD GAMBLE METHOD
Eric EISENSTAT (),
Manuela Epure () and
Patrick Francis GRAY ()
Additional contact information Eric EISENSTAT: Faculty of Marketing and International Affaires, Postal: Spiru Haret University
Patrick Francis GRAY: University of Ulster, UK
Of the countless methods for measuring the quality of life (QOL) that have been proposed and analyzed 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 viable 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 with 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 the latter is that SG will necessarily produce a higher QOL value for individuals exhibiting more risk aversion. This leads us to contemplate that in fact SG may be a more appropriate methodology in other contexts, not necessarily health-related, where quality of life may indeed be correlated with the willingness to take risks.
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