OECD workshop (6-7 June 2007)

1. OECD workshop (6-7 June 2007) "Measuring Education and Health Volume Output" Discussion of Draft chapter 1 Terminology and Concepts André VANOLI

2. Outcome ? • Outcome = result ; of what ? • Tautology : output = outcome of production process (G & S) • Outcome = result of utilization process ; of what ? ; what extension ? • Output, acquisition, utilization • Means versus results

3. Utilization process of G & S • Possible lag (time, quantity) between acquisition and utilization • Various lengths of utilization processes • Effects generally combined with effects of other factors : externalities, economic, natural family and social environment separability issue • Individual/societal effects • Immediate/deferred effects • Direct effects/indirect effects through changes in states

4. States and changes in states • States : education, health, culture, civic spirit, social cohesion, internal safety, external security, natural environment • States of individuals, groups, countries, societies • New branches of statistical observation and measurement to be developed • Statistics, indicators, accounts

5. Again : Outcome? • Various possible notions of outcome in economic, social and environmental observation • Overall investigation needed of the whole field of G & S and beyond • Similar basic issues arise in all cases • Necessary to investigate from both sides : - starting from types of G & S (e.g. food, cars, weapons, health services) - starting from types of outcome (e.g. life expectancy, progress of society, health states) • Discussion of the meanings of outcome in ch. 1 (box 2, table 2) too narrow

6. Means, Utilization, Results • MeansUtilization Results (outcomes) Output Combin. with . direct . Satisfactions other factors . indirect - individual through - societal changes . Utility in states . Welfare (interm. step) . Well-being . Happiness • Berndt et all.1998 Medical care State of health Utility • Ch. 1 Outcome Utility Output (interm. Step) - subjective - not directly observable

7. Characteristics • Quality as quantity of characteristics, quality adjustment as changes in quantities of characteristics • Case of output of capital goods (Triplett, Gordon) • Characteristics command the average efficiency of capital goods in use • Thus, a link between output of means and utilization of means • Characteristics in the case of consumption goods

8. Characteristics in the case of services • Issue less investigated for services, with exceptions (communication services) • Made more complex with increased sophistication of ratemaking, e.g. communication, transportation services (availability conditions) • Different degrees of complexity among services

9. Characteristics : education and health • Very often non-market services (government, NPISHs) • Market sub-sector generally controlled, little competition, insurance • Problems similar for market and non-market measures • Draft ch. 1 : sets of characteristics proposed by education and health experts numerous, very different physical units (no example given), problems of aggregation • Proposal (par. 31) : subsume several characteristics into a single indicator that reflects the contribution of the product to outcome (state of health or education)

10. Outcome and utility • Par. 31 and 32 (ch. 1) deserve careful examination • End of comment on ccls. 3, para 32 : . hedonic techniques, several utility-enhancing characteristics revealed a posteriori by examining market prices : are they not detected a priori and then their (market) prices estimated via hed. techn.? . outcome-based quality adjustment, single utility-enhancing characteristics determined a priori and measured on a non-monetary scale : risk of surreptitiously leaving field of market or transactions values-equivalent toward catching kind of "total economic value" – equivalent (cf. environmental economists)?

11. Outcome and utility (cont.) • Draft seems ambiguous in this respect • Ch. 2 Educ. Serv. - par. 1 : "in ch. 1 ….the utility enhanced by a product could be summarized in a measurable single dimension called "outcome"….." - this total utility approach not followed in N.A. for market products - however, actual approach in ch. 2 (academic scores as usual measurement level of knowledge and skills) is different :

12. Outcome and utility (cont.) • transfer of knowledge transmitted /received = direct counterpart of each other, other factors being neutralized • scores at exams (room for discussion) = a "physical" measure of both output quality and (immediate) utilization of output quality • what relation between par. 1 and the content of ch. 2 (which seems relevant from N.A. viewpoint)?

13. Outcome and utility (cont.) - Ch. 1 and 3 (Health) : cost and value weights • Value weights – ambiguity current/constant values, difficulty perceived in ch. 1, second part of par. 35 : welfare perspective controversial if implying total value of health or education services different from total expenditure for these services • however not implicitly said that welfare perspective implies including consumer's surplus (irrelevant in NA) • Compromise suggested (par. 37) : use cost weights, assume equality of cost and utility shares; formulation utility shares irrelevant in N.A. (marginal utilities different from total utilities)

14. Outcome and utility (cont.) • in ch. 3, box on the case of statins (par. 57, a report, not a recommendation) illustrates the issue for a drug : difference between value weight (life-years saved considered) of £115 per prescription and cost of £27 = a kind of consumer‘ surplus ? - QALYs (ch. 1 and 3) in this respect ? • attractive but problematic approach in N.A. central framework • ch. 3 seems reticent as regards QALYS, shows difficulties, expresses reservations

15. Outcome and utility (cont.) • However, more basic problems • characteristics of output vanish • result of weighting procedure through preferences expressed : is it significantly different from the case of statins ? • QALYs probably not relevant in N.A. Central framework • QALYs useful in context of cost (preferably means)/enlarged benefits analysis in satellite health accounts

16. Outcome and utility (cont.) - For N.A. central framework purposes • states (in various fields) to be measured as objectively as possible • try to define observable characteristics of states and changes therein

17. Road radars - An illustrative case : road radars • main characteristics : precision in measuring vehicles speed, capacity to read vehicles identification numbers, capacity to observe traffic on all road lanes • quality-adjustment in N.A. central framework based on changes in these characteristics • characteristics relevant for both output and utilization process (direct effects) • indirect effects : change in drivers behaviour, decrease in accidents number and seriousness, life-years saved

18. Road radars (cont.) • QALYs can be relevant and very useful in context of cost (preferably means)/enlarged benefits analysis in satellite health accounts, transportation or mobility accounts • Other cases to investigate : e.g. tobacco issue

19. Improved output volume measures, input measures and productivity estimates for NM Services - Often said : output volume measures will allow productivity measures in NM services - Caution : improved input volume measures to be incl. in the picture - Issue not really taken in the draft (see however scheme 2.1, ch. 2) - Intermediate inputs like pharmaceutical products - Capital inputs like medical equipment - Labour inputs in relation with technical progress and education, training of health and education services staff

20. Output, input, productivity (cont.) - Organization issues specially important ; TFP estimates - Absence in the draft of analysis of input and output relation regrettable • Analysis too much focussed on treatments of diseases (DRG, etc…) as elementary product, mainly in hospitals (patient treatment pathway) • Other health services nearly appear as anomalies • Treatments of diseases have similarity with … works in the construction industry ; however, as in the latter, inputs and components matter (is ratemaking of DRGs or similar not based on costs of inputs ?)

21. Conclusion - difficult issue, embarrassing (notably : health) - relationship with human assets/capital (alluded to in draft) - relationship with measures (indicators, aggregates) of well-being (individuals, society) - overall analysis needed, danger of inconsistencies . all G & S . all human activities perhaps . health : special emphasis on prevention - Problems of interpretation standard economic theory - current values/constant values adjustments

22. Conclusion (cont.) - caution with terminology (outcome, utility) in NA central framework - present draft : presentation state of the art (best practices), possible orientations, etc…; very useful - however premature as a Handbook ? Stress provisional status ("Towards …")