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The Economics Of Measuring Quality Of Life By The Standard Gamble Method

Author

Listed:
  • EISENSTAT, Eric

    () (Faculty of Marketing and International Affaires)

  • EPURE, Manuela

    () (Faculty of Marketing and International Affaires)

  • GRAY, Patrick Francis

    () (University of Ulster, UK)

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.

Suggested Citation

  • EISENSTAT, Eric & EPURE, Manuela & GRAY, Patrick Francis, 2011. "The Economics Of Measuring Quality Of Life By The Standard Gamble Method," Annals of Spiru Haret University, Economic Series, Universitatea Spiru Haret, vol. 2(1), pages 81-100.
  • Handle: RePEc:ris:sphecs:0114
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    References listed on IDEAS

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    More about this item

    Keywords

    quality of life; measurement; cost-effectiveness analysis; von Neumann-Morgenstern utilities; Romanian well-being index;

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • I19 - Health, Education, and Welfare - - Health - - - Other

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