Critique and Some Recent Contributions to the Theory of Cost Utility Analysis

The theme of this paper is that the objectives of cost utility analysis as it is currently practiced have been driven by economic conventions which, in the case of utility measurement are misleading. Adherence to these conventions has meant that social objectives in the health sector have been poorly investigated. In particular, the role of population values-ethical beliefs-has been neglected. This theme will be illustrated with two main arguments: (1) that the use of the standard gamble to measure `utility' (preferences under risk) has been subject to two related technical errors and has presupposed what may prove to be an incorrect social objective and (2) that the ethical values embodied in the simple QALY are far more restrictive than those that operate in the health sector.