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Axiomatic Foundations For Cost‐Effectiveness Analysis

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  • David Canning

Abstract

We show that individual utilities can be measured in units of healthy life years. Social preferences over these life metric utilities are assumed to satisfy the Pareto principle, anonymity, and invariance to a change in origin. These axioms generate a utilitarian social welfare function implying the use of cost‐effectiveness analysis in ordering health projects, based on maximizing the healthy years equivalents gained from a fixed health budget. For projects outside the health sector, our cost‐effectiveness axioms imply a form of cost–benefit analysis where both costs and benefits are measured in equivalent healthy life years. Copyright © 2013 John Wiley & Sons, Ltd.

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  • David Canning, 2013. "Axiomatic Foundations For Cost‐Effectiveness Analysis," Health Economics, John Wiley & Sons, Ltd., vol. 22(12), pages 1405-1416, December.
    • Handle: RePEc:wly:hlthec:v:22:y:2013:i:12:p:1405-1416
    DOI: 10.1002/hec.2889
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    Cited by:

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    2. Juan D. Moreno-Ternero & Lars Peter Østerdal, 2017. "A normative foundation for equity-sensitive health evaluation: The role of relative comparisons of health gains," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(5), pages 1009-1025, October.
    3. Skarda, Ieva & Asaria, Miqdad & Cookson, Richard, 2022. "Evaluating childhood policy impacts on lifetime health, wellbeing and inequality: Lifecourse distributional economic evaluation," Social Science & Medicine, Elsevier, vol. 302(C).
    4. Moreno-Ternero, Juan D. & Østerdal, Lars Peter, 2014. "Normative foundations for equity-sensitive population health evaluation functions," DaCHE discussion papers 2014:1, University of Southern Denmark, Dache - Danish Centre for Health Economics.

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