A Cost–Benefit Approach
Chapter 40: CBA and Equity I: Allowing for Ability to Pay
We now address the heart of the complaint from non-economists about CBA – that it is not fair to value goods and services by a person’s willingness to pay. If someone has low WTP it may be because the person is poor and not because he or she does not want to have health care. Actually, many health care economists also think that WTP is unfair. What is more surprising is that mainstream economics assumes that, even if CBA can allow for equity, it should not do so, as it is more efficient to help the poor in other ways than by biasing heath care evaluation outcomes. In this chapter we will explain and examine the validity of all these viewpoints. Although much of the discussion appears controversial, the points that will be made to resolve the controversies are really obvious if one views CBA from a social perspective. The main argument will be that to throw out WTP from health care evaluations is equivalent to the proverbial “throwing out the baby with the bathwater”. WTP is to be an essential ingredient even if it will be shown to be not the only essential ingredient. NON-ECONOMISTS’ CONCERN OVER EQUITY The concern that WTP does not allow for equity does not mean that WTP should not be a part of a health care evaluation. WTP reflects people’s preferences in general and the strength of these preferences in particular. If someone is WTP $30 for a skin cream, to deal with one of...
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