Tuesday, February 27, 2007

Value Of Life And Other Big Numbers


Being Big doesn't make it right
Last month we blogged the QALY, which is used by the National Institute for Health and Clinical Excellence (NICE) as a tool in healthcare rationing.

We pointed out that while QALYs are supposedly based on the officially assessed value of a human life- which in Britain is £1,311,490- in practice that's only included as a bit of pseudo-scientific window dressing for a crude rationing system (see earlier blog).

In any normal human sense of course, you can't put a value on human life at all. But since we economics types aren't really human, we do. We reckon that in an imperfect world of limited resources, putting a financial value on saving life can help to illuminate the costs and benefits of alternative policy choices.

Originally such value of life calculations included only the lifetime value of economic output lost when a drone died, which would make a pensioner worthless. But today our £1.3m Brit Value includes £860,380 for the "human cost" (pain, grief, intrinsic enjoyment of life etc), as well as the £451,110 for lost output.

That £860,380 is based on a serious methodology that assesses the value people themselves put on avoiding physical risk (eg through job choice). But clearly with such a wibbly wobbly concept as "intrinsic enjoyment of life" you could come up with all kinds of astronomical numbers. Especially if you had an axe to grind.

Like wanting more public money.

Yesterday, we had a report from the Audit Commission on road safety. It reckoned that the total cost of road accidents is running at around £15bn pa (well, that's what the detail of their report says, although the figure they actually chose to headline was only £8bn). Of that £15bn, £7.8bn is the cost of our "willingness to pay to avoid individuals’ pain, grief and suffering."

In fairness, the Commission notes that "this element for pain, grief and suffering has the greatest effect on the calculations, though it is inevitably subjective."

Quite. But that caveat was missing in the headlines.

Today we have a report from the Alzheimer's Society which reckons that dementia already costs us £17bn pa, or nearly 1.5% of GDP. They say that most of that cost currently falls on families struggling to provide care, and they want taxpayers to pay much more. After all, what's a couple of billion extra if it relieves costs of £17bn?

Which is fair enough- they're a campaigning organisation. But the rest of us need to hear a little more detail.

The Report doesn't explain quite how they got their £17bn, but it does give some pointers. 36% of it (ie £6bn) represents the value of unpaid work by family carers. And 41% (£7bn) is free "accomodation". Which together account for most of the cost.

Clearly, coping with dementia is appalling. As the Society points out, as we all live longer, it's getting more and more prevalent, and most of us will know dreadful individual cases. So let's take it as read that we do have a problem here.

But their Big Figure of £17bn is a tad misleading in terms of being "the cost of dementia". Take that £7bn accomodation cost. True, £7bn may be the cost of accomodation for dementia sufferers, but surely they'd have to live somewhere even if they didn't have dementia. It's not a net additional cost of dementia itself.

Big Numbers are certainly a good way of grabbing headlines. They always sound so hard-edged. But when it comes to tapping the public purse, BNs from even the worthiest axemen must be treated with suspicion.

1 comment:

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