The theory of how to measure and maximise utility is called utility theory (Baron 2000). The concept of utility can be defined slightly different depending on the discipline or the
perspective of the author. In economic theory, consumer behaviour is formulated in terms of consumer preferences under a budget constraint, and utility is seen as a way to describe preferences. Earlier, in Victorian days, economists and philosophers thought of utility as a numeric measure of a person’s happiness (Varian 1990).
Another view is that utility, as a concept, can encompass the variety of human goals. In other words; what people want to achieve. The amount of money we would be willing to pay to achieve an outcome does not necessarily represent the utility of the outcome, as money is not a universal means to achieve all that we want. We can for example not pay for a total
absence of disease. We can pay for an injection in order to avoid a disease but we have to endure the pain accompanying it. Neither is utility the same as happiness or satisfaction. We can be happy when we are expecting to achieve our goals even if we are not achieving them now and we get satisfied when we have achieved our goals. There can be many important goals which we do not achieve in our lives (Baron 2000).
A third way of describing utility is as a summary measure of to what degree outcomes affect our ultimate goals or values. According to Broome, utility is not a perfect word since it leads us to believe that an outcome only has a value as a means to something else. He means
“good” is better and defines utility as the amount of good or goodness (Broome 1991).
As seen above, the concept of utility can have slightly different meanings. In this thesis, the concept of utility is seen as a way to describe consumer preferences, as in standard economic theory.
The total utility for society is the unweighted sum of household utilities according to a utilitarian or Benthamite social welfare function but this distribution of utility can be a source for controversies (Johansson 1991). The distribution of total gains across patients, i.e.
if many receive a little or if a few receive much, is ignored in standard economic evaluations
equal to a small gain to many if the total utility is the same in the two distributions (Olsen 2000). Societal value as a simple, unweighted sum of health benefit is referred to as the assumption of distributive neutrality (Nord 1999).
The assumption of distributive neutrality has been criticised in recent years. The
maximisation of health gains may be at the expense of fairness. Some distributions can be viewed as more fair than others and society might want to reach a balance between
maximisation of health gains and treating individuals in a fair way (Nord 1999) (Williams 1997).
The concept of utility is used in policy decisions. The public’s preferences for different benefits compared to others can be used in many of the economic evaluations to evaluate which programme generates most utility. Consumer preferences are important to elicit since they constitute the basis in the economic concept of utility.
Different types of preferences form the basis for valuation of benefits of health care. The valuation can be formed from two main perspectives. If an individual is asked to consider what he/she prefers for himself/herself, the individual perspective is used. If he is asked to consider how he would have chosen to spend an amount of societal resources if he was to decide, it is called the societal perspective.
The underlying preferences in the individual perspective is based on the amount of health gained, measured as time and quality. There might be a positive time preference, i.e. a discounting of future health gains relative to health gains today. The individual might prefer certain gains over risky gains as the majority of people are risk averse regarding gains and prefer the expected value of a gamble to the gamble itself (Kahneman and Tversky 1984).
Life situation variables such as age, fulfilled wishes or missions, level of goal achievement and whether one has dependants might also influence the valuation of health benefits. There might be a minimum threshold quantity of health gains (both in terms of longevity and quality) before a gain is considered worthwhile (Dolan et al. 2005). This can for example mean that if a gain in longevity is considered too small to be of any significant value one would not appreciate the treatment that gave the effect to the same extent as a treatment that gave a longer increase in longevity.
The underlying preferences in a societal perspective can also be the amount of health gained, positive time preference and risk aversion. The positive time preference implies that
programmes with shorter duration (less to many) are preferred over programmes with a longer duration because the present value of the health experienced over the longer time period is diminished with relatively more. A preference for equity, i.e. it is better the more divisible health gains are between people, give the same effect. Previous research seem to indicate that the marginal social value is decreasing both with increases in quality and length of life. Another indication is that people seem to have preferences for distribution of health gains to persons who have dependants and to persons who have a bad lifetime health prospect (Dolan et al. 2005). People may also have a preference for equity between patients with respect to total life outcome. Williams argues that everybody is entitled to a lifetime of around 70-75 years and if you don’t achieve this you have in a sense been “cheated” and if you get more you have in fact got “borrowed” time. This is called the fair innings argument (Williams 1997). The possibility of a threshold effect could apply also in the societal perspective if the argument is concerning effectiveness of treatment. In the societal perspective, this means that if a health gain is considered too small to be of any value one would rather prefer to concentrate the gains to a few until the value of the health gain is considered to be of a significant size.
How can we measure utility or preferences and how can we decide which bundle of treatments that is most preferred by health consumers? Economic evaluations are used as a tool for making priorities and this tool should in principle, reflect individuals’ preferences.
In this thesis, I focus on examining whether economic evaluations really reflect individual preferences.