Multiple Effectiveness Units Scott Matthews Lecture /

Admin Issues zProject 2 Due Wednesday zHW 6 posted zTire Pressure Case y Writeup Due Monday IN CLASS (no late) yRead 2 links, answer questions posted

Mutiple Effectiveness Measures zSo far, we have considered externality problems in one of 2 ways: y1) By monetizing externality and including it explicitly as part of BCA y2) Finding cost, dividing by measured effectiveness (in non-monetary terms) zWhile Option 2 is preferred, it is only relevant with a single effectiveness

MAIS Table - Used for QALY Conversions Comprehensive Fatality / Injury Values Injury Severity1994 Relative Value MAIS MAIS MAIS MAIS MAIS Fatality1.0

Single vs. Multiple Effectiveness zRecall earlier examples: yCost per life saved yCost per ton of pollution zWhen discussing “500 Interventions” paper, talked about environmental regs yHad mortality and morbidity benefits yVery common to have multiple benefits/effectiveness yUnder option 1 above, we would just multiply by $/life and $/injury values.. yBut recall that we prefer NOT to monetize and instead find CE/EC values to compare to others

Multiple Effectiveness  In Option 2, its not relevant to simply divide total costs (TC) by # deaths, # injuries, e.g. CE 1 = TC/death, CE 2 = TC/injury zWhy? yMisrepresents costs of each effectiveness zInstead, we need a method to allocate the costs (or to separate the benefits) so that we have CE ratios relevant to each effectiveness measure

Options for Better Method zUse “primary target” as effectiveness yAllocate all costs to it (basically what we’ve been doing) zAdd effectiveness measures together yE.g., tons of pollution yIs as ridiculous as it sounds (tons not equal, lives not equal to injuries)

Improved Method zIn absence of more information or knowing better, allocate costs evenly yE.g., if 2 pollutants each gets 1/2 the cost yEasy to make slight variations if new information or insight is available zCould use our monetization values to inform this (e.g., external cost values, $/life values, etc.)

Recall from previous lecture

Another Option zFor each effectiveness, subtract marginal cost/benefit values of all other measures from total cost so that only remaining costs exist for CE ratios yAgain could use median $ values on previous slide to do this yExamples..

Wrap Up zThere is no “accepted theory” on how to do this. zHowever when we have multiple effectiveness measures, we need to do something so we end up with meaningful results.