A CRITIQUE OF COST-EFFECTIVENESS
It is important that a decision take into account all the relevant information whether or not this information lends itself to inclusion in formal analysis. All forms of analysis have their virtues and drawbacks. None can take into consideration or present all the information. A single cost-effectiveness calculation leaves out a good deal but it does emphasize the aspects that are usually the most important and of greatest interest to the decisionmaker. It gives excellent results provided the alternatives are reasonably similar and seek the ultimate goal through the same target so that their effectiveness in attaining that target can be measured on the same scale. Cost-benefit analysis can take into account many more aspects of a decision but it does so at the expense of emphasis and through a great deal of heroic quantification that is extremely arbitrary and, where values are concerned, is based on the judgment of the wrong people. Multiple cost-effectiveness calculations, including some that do not translate all costs into monetary units obviously go farther in taking things into account than the traditional single comparison that we often think of when we say cost-effectiveness analysis. It has the additional advantage that it not only forces the judgment on the right people but calls their attention to which judgments are needed.
- Presented at the session on Cost-Effectiveness, ORSA/TIMS, 17 Nov 75, Las Vegas, Nevada.
RAND Corporation1776 Main Street, P.O. Box 2138
Santa Monica, CA USA 90407-2138
- QUADE, E S
- Publication Date: 1975-11
- Pagination: 9 p.
- TRT Terms: Analysis; Cost effectiveness; Costs; Decision making
- Uncontrolled Terms: Cost analysis
- Subject Areas: Administration and Management; Finance; Marine Transportation;
- Accession Number: 00136248
- Record Type: Publication
- Source Agency: National Technical Information Service
- Report/Paper Numbers: P-5524
- Files: TRIS
- Created Date: Jul 22 1976 12:00AM