THE ECONOMICS OF MEASURING QUALITY OF LIFE BY THE STANDARD GAMBLE METHOD

Eric Eisenstat, Manuela Epure and Patrick Francis Gray ()
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Patrick Francis Gray: University of Ulster, UK

Annals of Spiru Haret University, Economic Series, 2011, vol. 2, issue 1, 81-100

Abstract: 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.

Keywords: quality of life; measurement; cost-effectiveness analysis; von Neumann-Morgenstern utilities; Romanian well-being index (search for similar items in EconPapers)
JEL-codes: B41 D81 I19 (search for similar items in EconPapers)
Date: 2011
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