Fixing Our Public Discounting Systems

The UK's National Institute for Health and Care Excellence (NICE) recently launched a consultation on the methods it uses to evaluate new health technologies, and has highlighted the issue of how 'modifiers', including equity weights, should be incorporated into its processes. The practice of applying equity weights to specific population subgroups, as a means for increasing the effective cost-effectiveness threshold for some new health technologies, is well established in health technology assessment. It is also the subject of extensive discussion in the academic literature. In this paper, we demonstrate that NICE's current approach to equity weighting has the effect of reducing both population health and equity-weighted population health, a fundamental problem that appears to place NICE in contravention of its principles and obligations. We consider two potential methods for modifying NICE's current approach to address this problem. We also consider the merits of NICE abandoning its current approach to equity weighting and adopting a standard 'net benefit' approach in its place. We find that adopting a standard 'net benefit' approach is the most desirable option, as it provides for the most transparency while avoiding specific issues that arise when attempting to modify NICE's current approach. Regardless of the approach NICE uses for equity weighting, we find that protecting the health of National Health Service patients requires that some new technologies be evaluated using an effective cost-effectiveness threshold lower than the 'supply-side' cost-effectiveness threshold. This poses a particular challenge for NICE, given its obligations under the 2019 'Voluntary Scheme' between the UK pharmaceutical industry, the National Health Service, and the UK Government. We conclude by making some recommendations as to how NICE can move forward with the use of 'modifiers' in its decision making.

Cost-benefit analysis of sustainable energy development using life-cycle co-benefits assessment and the system dynamics approach

Incorporating a household’s net sale status into a rearranged Slutsky equation with combined ordinary and endowment income effects, this paper aims to reinterpret the income elasticity of demand in the case of buying and selling and to associate it with types of goods in a novel manner. To this end, the Deaton’s (1989) net benefit ratio (NBR) approach is expressed as the difference between original and endowment budget shares, and formulated in its elasticity form as the difference between the Hicksian and Marshallian own-price elasticities at any given price, divided by the income elasticity. While the numerator in the latter expression is always positive (negative) for normal (inferior) goods, the denominator may be either positive or negative for either type of good, depending on the net sale position of the household. A positive NBR for a normal good implies that the household is a net demander of that good and that the income elasticity is positive. When the NBR is negative for such a good, it implies that the household is a net seller and that the income elasticity is negative. Again, a positive NBR for an inferior good refers to the fact that the household is a net demander and the income elasticity is negative, whereas a negative NBR reveals that the household is a net seller of that good, which has, unconventionally, a positive income elasticity.

Traffic collisions kill about 43,000 Americans a year. Worldwide, road traffic injuries are the leading cause of death by injury and the ninth leading cause of all deaths. Photo Radar speed enforcement has been implemented in the United States and many other industrialized countries, yet its cost-effectiveness from a societal viewpoint, taking all significant impacts into account, has not been reported. This paper fills this gap, reporting on a Photo Radar traffic safety program introduced in 1996 in British Columbia, Canada, and incorporating the results of rigorous statistical analyses on speed and crash impacts into a comprehensive cost-benefit analysis from both societal and sponsoring-agency perspectives. The study reveals that the Rhoto Radar Program cost C$27 million per year in 2001 Canadian dollars (?US$21 million) and generated benefits valued at $142 million per year (?US$109 million), for net societal benefits of C$115 million per year (?US$88 million). It was estimated that the sponsoring agency saved C$38 million (?US$29 million) annually in claim costs. These results are robust to plausible alternate assumptions. Societal net benefits become negative only if the reduction in injuries and fatalities is one standard error below the expected value, or if private travel time is valued at or above C$15 per hour. Agency claim cost savings are greater than program costs under all scenarios tested. These results are likely applicable to jurisdictions in developed countries with similar traffic infrastructure: Greater use of highway photo radar speed enforcement would be good public policy. © 2006 by the Association for Public Policy Analysis and Management

The Jordan River is among the world’s most famous and culturally and historically significant waterways. The lower stretch of the river, however, has been a victim of development in a water scarce region, with current flows less than 5 % of historical levels. Furthermore, as it functions as an international border in a region of conflict, access to the river and its potential as a tourist attraction has been limited. Recently, there have been numerous calls for rehabilitation of the river. This study presents a first estimate of the economic benefits of such rehabilitation and compares them to the estimated costs. Identical contingent valuation method surveys were administered in Israel, Jordan, and the Palestinian Authority. Evidence from this study shows that, despite the large opportunity costs of increasing environmental flows, rehabilitation of the lower Jordan would produce positive net economic benefits. This is true even though the study estimated only the benefits to local populations, and not to international tourists or those outside the region. Net benefits are maximized when taking a regional, as opposed to strictly national, approach.

This article presents a cost‐benefit analysis of enlarging the Japanese judicial system, especially the civil section of District Courts (CSDC). Constructing a simple econometric model of CSDC, the effects of increase of judges on the supply of judicial services and the trial time are analyzed. Then a cost and benefit calculation is done. The basic assumption is that the total benefit of the judicial system is the aggregate of monetary value of a suit (MVS). The main conclusions are: (1) The demand elasticity for a civil trial with respect to trial time is –1.3 to about –1.4, and its income elasticity is 0.95. (2) The supply of civil trials is proportional to the number of judges. (3) Ten‐percent increase of judges will shorten the average trial time by 5.2%. (4) The net benefit of CSDC is estimated to be ¥466 billion per year if the annual discount rate is 10%. (5) Judging from the demand and supply relation, if CSDC is doubled, the net increase of total benefit per year will be ¥543 billion. (6) If the benefit of the external effect on lawyers' market is added, the total net benefit will reach almost ¥1 trillion, which is 0.22% of gross domestic product.

This article deals with moose hunting activity in the northern half of the Province of Alberta. Canada, for the purposes of reporting the method used in estimating extra‐market benefits and summarizing the research findings. An attempt was made to determine the ecologic and economic implications of a significant increase in Northern Alberta moose hunters as a result of a government program in effect since 1967. Notwithstanding aesthetic, scientific, and other social values, the net social benefits of hunting activity alone amounted to an estimated three‐quarter million dollars for society in general during 1968 and nearly double that amount because secondary net social benefits are included for the people of Alberta for the same season. However, even greater annual social net benefits could result if public policy were implemented to increase hunter activity and ensure its distribution within Northern Alberta in a manner compatible with patterns of moose harvest potential. Cet article traite de la chasse àľorignal dans le nord de la province. Elle a pour but de faire un reportage sur les ‘méthodes employées pour évaluer les bénéfices supplémentaires au marché el de résumer les conclusions de ľétude. Un essai a été fait pour déterminer les implications écologiques el économiques de ľaugmentation du nombre de chasseurs dans cette région depuis le changement du réglement par le gouvernment provincial en 1967, Néanmoins les valeurs esthétiques, scienlifiques et sociales, la chasse àľorignal a rapportéà la société en général environ trois quarts de million de dollars et presque le double à la province parce que les bénéfices secondares sont inclus en Alberta pour la même saison. Cependant un plus grand profit pourrait être réalisé si la politique était changée pour assurer une augmentation du nombre de chasseurs et la répartition de ceux‐ci dans le nord de la province ďune façon plus compatible avec la population de ľorignal.SummaryThe moose resources of Alberta Big Game Zone 1 are of considerable value to society as a whole and to the people of Alberta in particular. Notwithstanding aesthetic, scientific, and other values, the net social benefits of hunting activity alone amounted to approximately $750,000 for society in general during 1968 and nearly double that amount for the people of Alberta for the same season (Table 4). However, the moose resources in Zone 1 as a whole are currently underutilized. At least 7,000 harvestable surplus moose will be available into 1972 (Table 1). To the extent that social net benefits to the province are directly a function of the number of resident and nonresident hunters, substantial increases in these benefits can be realized. For example, should the projected 23 percent increase in Zone 1 resident hunters for 1973 relative to 1968 (Table 2) be accompanied by a smiliar increase in nonresident hunters, annual social net benefits to the province would be in the order of 1.8 million dollars (1968 dollars) by 1973.22 However, gradual increase as exemplified here depends largely upon implementation of policy to ensure a distribution of hunters compatible with area harvest potential.

T HIS research provides an estimate of the demand for educational attainment across states within a framework of optimal community choice. The communi,ty is envisioned as having the ability to choose a level of educational attainment for its students which will maximize its net benefits subject to the prevailing technical relationship. The technical relationship specified in this paper considers separately the impact of school inputs, pupil inputs, and social characteristics on educational attainment. Most previous studies of the educational industry have failed to specify a structural model of educational attainment which simultaneously accounts for supply and demand factors. Those which have attempted to measure the effects of inputs on educational attainment have failed to standardize for demand conditions. Expenditure studies have either ignored supply conditions or have resulted in reduced form equations in which the structural parameters cannot be identified. McMahon (1970) estimated the relationship between expenditures and inputs using state data. His conceptual framework did not, however, permit the estimation of the price and income elasticities of demand.' Estimates of income elasticities have been made by Hirsch (1960), Brazer (1959), and Pryor (1968). Their estimates utilized a single equation expenditure function approach which failed to take account of variations in price and the simultaneous aspects of the determination of price and quantity. With the exception of a recent paper by Barlow (1970) estimates of price elasticities have not been published in studies of educational expenditures.2 While Barlow's demand function is similar in form to our own, his single equation estimation procedure ignored the effects of supply changes and thereby introduced the possibility of simultaneous equation bias. The approach utilized in this research is to take account explicitly of the simultaneous nature of demand and supply. Our conceptual framework permits the identification of both price and income elasticities as well as output elasticities for the inputs. Our price and income elasticities are statistically significant and consistent with theoretical expectations. We find that school inputs, pupil inputs, and community characteristics all have important impacts on educational attainment.

The relationships among the income (expenditures) level, expenditure for education and tobacco consumption were analyzed based on the data of workers households reported in Family Income and Expenditure Survey of Japan between 1980 and 1995. For all the observed years, elasticities of tobacco to living expenditure were less than -0.4 and the deviation from zero point had increased (-0.41 in 1980, and -0.95 in 1995). By contrast, elasticities of education to living expenditure were over 1.5 for the observed period. In the case of income elasticity, values of tobacco were negative with the same chronological tendency as in elasticity to living expenditure and those of education were around 1.10. The findings regarding the relationship between income level and tobacco consumption was quite different from most of the studies conducted in western countries, which suggested a positive elasticity between the two. According to the present results, we discussed two strategies in order to reduce the smoking prevalence rate in Japan: education and an increase in the cigarette price by higher cigarette taxes.

Replacing traditional products with green products has become a key way to achieve decoupling between economic development and environmental pollution. As an incentive mechanism, subsidies can be provided by a government to facilitate the popularization and acceptance of green products. Subsidies play a significant role in encouraging the development of green products. We explored the proper optimal subsidy mechanism for green products from the angle of maximizing the net policy return, which cannot only encourage the development of green products but also do not aggravate financial burden for the government. In order to explore the optimal subsidy level for green products from the perspective of net policy benefit maximization, this paper established the optimal subsidy principal-agent models and a numerical example was presented to verify the effectiveness of the model we constructed. The results show that improving investors’ preference and eliminating asymmetric information contribute to reduce subsidy cost savings. Additionally, improving consumer environmental awareness, promoting the development and application of green technology, and reducing market risk reduce subsidy costs. This article provides policymakers with an effective subsidy scheme to accelerate the development of green products and achieve sustainable development goals.

A mathematical model has been built based on an analysis of the cost-benefit of opening-up policy of developing country. Employing this model by economic data of China over the last thirty years, it proves that the benefit of opening-up policy of China economy is much larger than its cost, and its net benefit is growing more rapidly. On these bases, some suggestions have been proposed as to the opening-up policy of China economy in future.

US investment to decrease pollution in rivers, lakes, and other surface waters has exceeded $1.9 trillion since 1960, and has also exceeded the cost of most other US environmental initiatives. These investments come both from the 1972 Clean Water Act and the largely voluntary efforts to control pollution from agriculture and urban runoff. This paper reviews the methods and conclusions of about 20 recent evaluations of these policies. Surprisingly, most analyses estimate that these policies' benefits are much smaller than their costs; the benefit-cost ratio from the median study is 0.37. However, existing evidence is limited and undercounts many types of benefits. We conclude that it is unclear whether many of these regulations truly fail a benefit-cost test or whether existing evidence understates their net benefits; we also describe specific questions that when answered would help eliminate this uncertainty.

With a view to examining the impact of E.C. product price changes on land values and rents in the U.K., econometric models are developed to show the effect of farm incomes on these variables. The long-run effect conforms closely with the often expressed theoretical view that the benefits of farm support policies are capitalised into higher land values. The elasticity of net farm income with respect to product prices is then calculated and, combined with coefficient estimates from the econometric models, indicates that a 1% increase in product prices would, ceteris paribus, raise land prices by about 10% and rents by almost 30% in the long run.

We adopt a multi-sectoral approach and consider the full range of climate projections. Biophysical damages are translated into economic costs using a dynamic economy-wide model. Our results indicate that the negative impacts on agriculture and roads are modest to 2050. Larger costs are caused by rising sea levels and cyclone strikes. Overall, climate change is likely to reduce national income by between one and two percent by 2050 (relative to a historical baseline). Damages double under more extreme projections. Our findings suggest that there are net benefits from selected pre-emptive actions though careful consideration of opportunity costs is required.

Objectives: This paper examines the cost effectiveness of the compulsory bicycle helmet wearing law (HWL) introduced in New Zealand on 1 January 1994. The societal perspective of costs is used...