See selected analyses conducted by our center community and colleagues.
Valuing Mortality Risks
FREQUENTLY ASKED QUESTIONS
What is benefit-cost analysis and how does it differ from cost-effectiveness analysis?
Both cost‐effectiveness analysis and benefit‐cost analysis provide information on the costs and consequences of investments. The primary difference is that in benefit‐cost analysis, all outcomes are measured in monetary units. In contrast, in cost‐effectiveness analysis the health benefits are measured in a nonmonetary units such as disability‐adjusted life years (DALYs) averted, while costs and other effects are measured in monetary units. Which type of economic analysis is most appropriate depends on the nature of the problem to be addressed and the needs of the decision‐makers.
Why measure outcomes in money?
By using money as a common metric, benefit‐cost analysis in principle allows the simultaneous, integrated consideration of multiple consequences, including both health and non‐health impacts. Money is not important per se; it is simply a convenient way to measure the trade‐offs individuals and societies are willing to make. If an individual chooses to purchase a particular good or service, he or she presumably values that good or service at least as much as the other things he or she could have used that money to buy. More generally, if a country or other funder chooses to spend more on one initiative, it will have fewer resources available to devote to other purposes – including other initiatives that address the same or similar problems.
What is willingness to pay?
Willingness to pay (WTP) is the maximum amount of money an individual would relinquish (i.e., give up, pay) in exchange for some good or service. It is essentially the highest “price” a person would pay for something, such as a health outcome (for example, an individual could have a WTP of $1,000 for a drug that alleviates flu symptoms).