Is there a case for using Visual Analogue Scale valuations in Cost-Utility Analysis?

This paper critically reviews theoretical and empirical propositions regarding visual analogue scale (VAS) valuations of health states and their use in Cost Utility Analysis. An oft-repeated conclusion in the economic evaluation literature is the inferiority, on theoretical grounds, of VAS valuations. Common criticisms are that VAS lacks a theoretical foundation; that VAS values are not ‘choice based’; that VAS values are not consistent with utility-under-uncertainty requirements; and that context and range effects observed in VAS valuation data mean that they cannot even be considered to represent measurable value functions. We address each of the above points, critically reviewing the economic and psychometric literature relating to theories of utility and theories of utility measurement, and the welfarist and non-welfarist literature relating to social choices and QALYs. We conclude that there are strong grounds, both theoretical and empirical, for challenging the apparently emerging consensus that VAS valuations should not be used in economic assessments. The theoretical appeal of alternatives such as the standard gamble is valid only at the level of individuals, rather than social decision-making. Further, the non-welfarist foundations of CUA do not require health state valuations to be grounded in any particular theory of utility, suggesting that the selection of the appropriate valuation method should be based on empirical performance. The VAS has important advantages over rival techniques such as standard gamble and time trade-off. However, we identify a number of areas in which further research is required to establish and consolidate the potential of VAS as a valuation method

A Multidimensional Framework for Financial-Economic Decisions

Most financial-economic decisions are made consciously, with a clear and constant drive to ???good???, ???better??? or even ???optimal??? decisions. Nevertheless, many decisions in practice do not earn these qualifications, despite the availability of financial economic theory, decision sciences and ample resources. We plea for the development of a multidimensional framework to support financial economic decision processes. Our aim is to achieve a better integration of available theory and decision technologies. We sketch (a) what the framework should look like, (b) what elements of the framework already exist and which not, and (c) how the MCDA community can co-operate in its development.decision making;finance;decision analysis;financial decisions;multiple criteria

Supporting Decisions: Understanding natural resource management assessment techniques

Report to the Land and Water Resources Research and Development Corporation. This document presents a review of NRM decision support techniques. It draws upon previous studies in the fields of management science, operations research, environmental economics and natural resource management. The objectives of the document are to: Explain the workings of the more significant (representative) methods of NRM decision support (including the latest developments); Discuss how these decision support methods may influence the outcome of NRM decisions; and Provide practicing NRM decision makers with guidance for choosing which methods to apply.Australia;natural resource management;assessment;decision support;

Cost-benefit analysis and valuation uncertainty

This thesis addresses the economic trade-offs between hydropower and fish production, based on an empirical assessment of the costs and benefits of changing the water flow of the Ume/Vindel River in northern Sweden at a major hydropower plant in ways that would reduce its production of electricity but increase the number of wild salmon in the river. A theoretical framework for dynamic cost benefit analysis (CBA) is presented and applied to the salmon passage-hydropower production conflict. The approach has wider applicability than suggested here, and should be useful in other, similar contexts. To obtain estimates for the benefit of increasing the number of wild salmon the contingent valuation method (CVM) was applied. The CVM is a survey-based method developed for measuring values of non-market goods by using willingness to pay (WTP) questions. A new open-ended valuation question, the “classic and interval open-ended” (CIOE) question, was introduced to accommodate the fact that many people have an inability to state their preferences accurately. Interpretation of the resulting valuation uncertainty is more straightforward with this type of question than with other types of valuation question. There are other advantages as well. In addition, methods are introduced for: finding a WTP point estimate for the CIOE question; estimating lower and upper boundaries for the WTP; and for estimating confidence intervals for the total present benefit. An important element of the empirical analysis is that estimated changes in resource conditions are based on detailed river-specific data. The resource dynamic considerations were introduced into both the scenarios and the WTP questions, using an estimated salmon population model for the Vindel River as a base. A model predicting the effects of varying the water flows on the salmon’s migration behaviour was used to estimate the costs of increasing the number of salmon. A total of 1785 individuals received a questionnaire including the CIOE question; the response rate was 66%. Passive use (non-use) values are the major contributors to the benefit (96-517 MSEK) of increasing the wild salmon stock in the Vindel River. The sensitivity analysis suggests that the opportunity costs in terms of lost electricity are typically higher than the estimated benefits

From Comparative Risk to Decision Analysis: Ranking Solutions to Multiple-Value Environmental Problems

While recognizing that the making of environmental policy is sufficiently complex that no one method can serve all conditions, Dr. Kadvany urges that more attention be given to multiattribute utility and decision analysis. He suggests this can help, e.g., to illuminate stakeholder values and generate alternative approaches

Improving the Regulatory Analysis of the Cooling Water Intake Structure Rule: What Does an Economist Want?

As part of an edited volume devoted to the usefulness of benefit-cost analysis to inform regulatory review, this chapter presents a case study of the regulation of cooling water intake structures (CWIS) at existing power plants. The chapter first focuses on the consistency of the CWIS benefit-cost analysis with quality criteria to which the agency might have been expected to adhere. Second, criteria and outcomes with respect to decision rules for the selected alternatives are investigated. Finally, the challenge faced by agency analysis is described due to the difficulty in linking ecological and economic impacts. Suggestions for improvement are noted. As of the date of writing, the regulation is under review by the Supreme Court.Water, regulation, benefit-cost

Environmental valuation, ecosystem services and aquatic species

The thesis consists of an introduction and four articles that can be read independently of each other. The common topic is environmental valuation and cost-benefit analysis. The applications relates to the growing concern of invasive species, and to waterpower externalities. In broad terms, all of the articles relates to water management. Article 1: "A Cost-Benefit analysis of introducing a non-native species: the case of signal crayfish in Sweden", assesses the economic impact of introducing the signal crayfish into a Swedish lake. Two scenarios are set up and compared. The first one assumes that there is no introduction of signal crayfish, so that the noble crayfish is preserved. In the second scenario, the signal crayfish is introduced, which immediately wipes out the entire stock of noble crayfish. The values of noble- and signal crayfish populations are measured as present values of their net future revenues. The values are than compared and net benefit of an introduction is calculated. The result indicate that net benefit of an introduction is positive if the intrinsic growth rate or the carrying capacity of the noble crayfish is below 40 % that of the signal crayfish. Article 2: "Assessing management options for weed control with demanders and non-demanders in a choice experiment", estimates the benefits of having a weed management program for a lake in Sweden, and then compares them with corresponding costs. The policy recommendation from a simple cost-benefit rule is to control the weed at some specific sites of the lake. This paper also suggest how to distinguish those that have a positive WTP for at least one of the attributes (demanders) from those that have zero WTP for all attributes (non-demanders). The advantage of the suggested approach is that it facilitates to more clearly distinguish between conditional and unconditional willingness to pay. The suggested approach could also overcome some of the problems in the literature with negative welfare measures. Article 3: "Assessing transfer errors in the benefit transfer method: An application of invasive weed management using choice experiment", tests the accuracy of transferring benefits of a weed management program from one lake to another using choice experiment. The transfer errors are assessed and the convergent validity hypothesis is tested. Estimating the accuracy of benefit transfer for weed management is policy relevant as there are a number of lakes in Sweden infested with the water weed. The convergent validity was rejected for three out of five welfare estimates with a ten per cent significance level. Article 4: "Willingness to pay for environmental improvements in hydropower regulated rivers", assesses the benefits of environmental improvements along hydropower regulated rivers using choice experiments. Remedial measures that improve the conditions for fish, benthic invertebrates and river-margin vegetation were found to have a significant welfare increasing impact. The results can be of value for the implementation of the Water Framework Directives in Sweden, which aims to reform the use of all surface water and ground water in the member states