If we want to introduce distributional considerations in policy evaluation, we need a measure of individual well-being that takes into account its multidimensional nature. Focusing on one dimension of life (e.g. income, or QALY’s, the most popular measure for priority setting in health care) may lead to misleading policy conclusions. I propose a measure of well-being that is not subjectively welfarist (and, hence, that is not happiness), but that does respect individual preferences for aggregating over the different dimensions of life – the so-called equivalent income. I discuss how equivalent incomes can be estimated and how they can be implemented in policy evaluation. In my empirical application I focus on priority setting in health care and I show that using equivalent incomes can overcome some of the ethical shortcomings of the (widely used) cost-effectiveness analysis in terms of QALY’s.
Erik Schokkaert (KU Leuven)
Date & time:
20 Apr 2015 14:00 pm - 20 Apr 2015 15:30 pm
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