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Welfare, Welfarism, and Extrawelfarism
Decisions need to be made when there are at least two alternatives to choose from. Like other decision making, medical decision making is about making such choices between alternatives. To do so in a rational, systematic, and optimal way, a decision-making framework must be developed, which stipulates how we should evaluate the different options. This first of all requires a definition of what exactly it is that we are seeking to improve by making optimal decisions, that is, the underlying goal of our decisions, and what it is that will be lost if we fail to do so. In economics, this underlying maximand has normally been labeled welfare, hence the term welfare economics. In essence, welfare economics is concerned with defining optimal allocations of scarce resources, where optimality is defined by the allocation of resources that maximizes (social) welfare. A dominant coherent normative framework has been developed to judge whether changes from state of the world A to B would improve welfare, either for an individual or a society.
Welfare
If welfare is the appropriate maximand of individuals and societies, in its most comprehensive form, it needs to represent some ultimate objective of individuals and societies. It should be an overall representation (index) of well-being of individuals or societies, in which all relevant underlying components of welfare are embraced. In this case, attaining higher levels of welfare is equivalent to saying that the involved individual or society is better off. Note that this is also possible when some underlying components of welfare decrease while others improve, as long as the latter compensate, in an acceptable way, for the former. Welfare is therefore also the sphere in which changes in individual underlying components of welfare can be traded off. Sometimes, it has been suggested that the components of welfare would be limited to goods and services only, and a few economists have even equated welfare, at either the individual or the societal level, with income or wealth in applied work. This, however, seems unnecessarily restrictive. Rather, the components of welfare can be diverse and may include aspects such as friendship, leisure, and marriage. For instance, an individual may trade off a loss of leisure against a gain of income and decide to be better off, that is, improve his or her welfare, by working more. A society may trade off the loss of an ancient forest against reduced travel time and decide to be worse off, that is, reduce welfare, when sacrificing the forest for more roads. It is especially such tradeoffs of losses and gains that form the heart of welfare economics, as typically observed in economic evaluations.
Utility
In economics, a commonly used term for welfare is utility. Its meaning has always been ambiguous. In the days of Jeremy Bentham and John Stuart Mill, utility was often equated with happiness (as in the utilitarian motto “the greatest happiness for the greatest number”) or with life satisfaction, although this equation always has been the topic of debate. The interpretation of utility as happiness or life satisfaction appears to become more popular again more recently, also in applied economics. However, the dominant view on utility moved away from this interpretation, also due to the problems of measurability and interpersonal comparability of utility (discussed below). The focus on the emotional evaluation of states of the world was rejected and utility is now usually taken to represent simply preference orderings or an index of choice. Within health economics and medical decision making, the term utility is indeed often used to refer to preference weights for different health states used in quality-adjusted life years (QALYs) calculations.
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- Basis for Making the Decision
- Acceptability Curves and Confidence Ellipses
- Beneficence
- Bioethics
- Choice Theories
- Construction of Values
- Cost-Benefit Analysis
- Cost-Comparison Analysis
- Cost-Consequence Analysis
- Cost-Effectiveness Analysis
- Cost-Minimization Analysis
- Cost-Utility Analysis
- Decision Quality
- Distributive Justice
- Dominance
- Equity
- Evaluating Consequences
- Expected Utility Theory
- Expected Value of Perfect Information
- Extended Dominance
- Health Production Function
- League Tables for Incremental Cost-Effectivenes: Ratios
- Marginal or Incremental Analysis, Cost-Effectiveness Ratio
- Monetary Value
- Moral Choice and Public Policy
- Net Benefit Regression
- Net Monetary Benefit
- Nonexpected Utility Theories
- Pharmacoeconomics
- Protected Values
- Rank-Dependent Utility Theory
- Return on Investment
- Risk-Benefit Trade-Off
- Subjective Expected Utility Theory
- Toss-Ups and Close Calls
- Value-Based Insurance Design
- Welfare, Welfarism, and Extrawelfarism
- Biostatistics and Clinical Epidemiology
- Analysis of Covariance (ANCOVA)
- Analysis of Variance (ANOVA)
- Attributable Risk
- Basic Common Statistical Tests: Chi-Square Test, t Test, Nonparametric Test
- Bayes's Theorem
- Bayesian Analysis
- Bayesian Evidence Synthesis
- Bayesian Networks
- Bias
- Bias in Scientific Studies
- Brier Scores
- Calibration
- Case Control
- Causal Inference and Diagrams
- Causal Inference in Medical Decision Making
- Conditional Independence
- Conditional Probability
- Confidence Intervals
- Confounding and Effect Modulation
- Cox Proportional Hazards Regression
- Decision Rules
- Diagnostic Tests
- Discrimination
- Distributions: Overview
- Dynamic Treatment Regimens
- Effect Size
- Equivalence Testing
- Experimental Designs
- Factor Analysis and Principal Components Analysis
- Fixed Versus Random Effects
- Frequentist Approach
- Hazard Ratio
- Hypothesis Testing
- Index Test
- Intraclass Correlation Coefficient
- Likelihood Ratio
- Log-Rank Test
- Logic Regression
- Logistic Regression
- Maximum Likelihood Estimation Methods
- Measures of Central Tendency
- Measures of Frequency and Summary
- Measures of Variability
- Meta-Analysis and Literature Review
- Mixed and Indirect Comparisons
- Multivariate Analysis of Variance (MANOVA)
- Nomograms
- Number Needed to Treat
- Odds and Odds Ratio, Risk Ratio
- Ordinary Least Squares Regression
- Parametric Survival Analysis
- Poisson and Negative Binomial Regression
- Positivity Criterion and Cutoff Values
- Prediction Rules and Modeling
- Probability
- Propensity Scores
- Randomized Clinical Trials
- Receiver Operating Characteristic (ROC) Curve
- Recurrent Events
- Recursive Partitioning
- Regression to the Mean
- Sample Size and Power
- Screening Programs
- Statistical Notations
- Statistical Testing: Overview
- Subjective Probability
- Subset Analysis: Insights and Pitfalls
- Survival Analysis
- Tables, Two-by-Two and Contingency
- Variance and Covariance
- Violations of Probability Theory
- Weighted Least Squares
- Decision Analysis and Related Mathematical Models
- Applied Decision Analysis
- Boolean Algebra and Nodes
- Decision Analyses, Common Errors Made in Conducting
- Decision Curve Analysis
- Decision Tree: Introduction
- Decision Trees, Advanced Techniques in Constructing
- Decision Trees, Construction
- Decision Trees, Evaluation
- Decision Trees, Evaluation With Monte Carlo
- Decision Trees: Sensitivity Analysis, Basic and Probabilistic
- Decision Trees: Sensitivity Analysis, Deterministic
- Declining Exponential Approximation of Life Expectancy
- Deterministic Analysis
- Discrete-Event Simulation
- Disease Management Simulation Modeling
- Expected Value of Sample Information, Net Benefit of Sampling
- Influence Diagrams
- Markov Models
- Markov Models, Applications to Medical Decision Making
- Markov Models, Cycles
- Markov Processes
- Reference Case
- Steady-State Models
- Stochastic Medical Informatics
- Subtrees, Use in Constructing Decision Trees
- Test-Treatment Threshold
- Time Horizon
- Tornado Diagram
- Tree Structure, Advanced Techniques
- Health Outcomes and Measurement
- Complications or Adverse Effects of Treatment
- Cost-Identification Analysis
- Costs, Direct Versus Indirect
- Costs, Fixed Versus Variable
- Costs, Opportunity
- Costs, Out-of-Pocket
- Costs, Semifixed Versus Semivariable
- Costs, Spillover
- Economics, Health Economics
- Efficacy Versus Effectiveness
- Efficient Frontier
- Health Outcomes Assessment
- Health Status Measurement Standards
- Health Status Measurement, Assessing Meaningful Change
- Health Status Measurement, Construct Validity
- Health Status Measurement, Face and Content Validity
- Health Status Measurement, Floor and Ceiling Effects
- Health Status Measurement, Generic Versus Condition-Specific Measures
- Health Status Measurement, Minimal Clinically Significant Differences, and Anchor Versus Distribution Methods
- Health Status Measurement, Reliability and Internal Consistency
- Health Status Measurement, Responsiveness and Sensitivity to Change
- Human Capital Approach
- Life Expectancy
- Morbidity
- Mortality
- Oncology Health-Related Quality of Life Assessment
- Outcomes Research
- Patient Satisfaction
- Regret
- Report Cards, Hospitals and Physicians
- Risk Adjustment of Outcomes
- SF-36 and SF-12 Health Surveys
- SF-6D
- Sickness Impact Profile
- Sunk Costs
- Impact or Weight or Utility of the Possible Outcomes
- Certainty Equivalent
- Chained Gamble
- Conjoint Analysis
- Contingent Valuation
- Cost Measurement Methods
- Decomposed Measurement
- Disability-Adjusted Life Years (DALYs)
- Discounting
- Discrete Choice
- Disutility
- EuroQol (EQ-5D)
- Health Utilities Index Mark 2 and 3 (HUI2, HUI3)
- Healthy Years Equivalents
- Holistic Measurement
- Multi-Attribute Utility Theory
- Person Trade-Off
- Quality of Well-Being Scale
- Quality-Adjusted Life Years (QALYs)
- Quality-Adjusted Time Without Symptoms or Toxicity (Q-TWiST)
- SMARTS and SMARTER
- Split Choice
- Utilities for Joint Health States
- Utility Assessment Techniques
- Willingness to Pay
- Other Techniques, Theories, and Tools
- Artificial Neural Networks
- Bayesian Networks
- Bioinformatics
- Chaos Theory
- Clinical Algorithms and Practice Guidelines
- Complexity
- Computer-Assisted Decision Making
- Constraint Theory
- Decision Board
- Decisional Conflict
- Error and Human Factors Analyses
- Ethnographic Methods
- Expert Systems
- Patient Decision Aids
- Qualitative Methods
- Story-Based Decision Making
- Support Vector Machines
- Team Dynamics and Group Decision Making
- Threshold Technique
- Perspective of the Decision Maker
- Advance Directives and End-of-Life Decision Making
- Consumer-Directed Health Plans
- Cultural Issues
- Data Quality
- Decision Making in Advanced Disease
- Decisions Faced by Hospital Ethics Committees
- Decisions Faced by Institutional Review Boards
- Decisions Faced by Nongovernment Payers of Healthcare: Managed Care
- Decisions Faced by Patients: Primary Care
- Decisions Faced by Surrogates or Proxies for the Patient, Durable Power of Attorney
- Diagnostic Process, Making a Diagnosis
- Differential Diagnosis
- Evaluating and Integrating Research Into Clinical Practice
- Evidence Synthesis
- Evidence-Based Medicine
- Expert Opinion
- Genetic Testing
- Government Perspective, General Healthcare
- Government Perspective, Informed Policy Choice
- Government Perspective, Public Health Issues
- Health Insurance Portability and Accountability Act Privacy Rule
- Health Risk Management
- Informed Consent
- Informed Decision Making
- International Differences in Healthcare Systems
- Law and Court Decision Making
- Medicaid
- Medical Decisions and Ethics in the Military Context
- Medical Errors and Errors in Healthcare Delivery
- Medicare
- Models of Physician–Patient Relationship
- Patient Rights
- Physician Estimates of Prognosis
- Rationing
- Religious Factors
- Shared Decision Making
- Surrogate Decision Making
- Teaching Diagnostic Clinical Reasoning
- Technology Assessments
- Terminating Treatment, Physician Perspective
- Treatment Choices
- Trust in Healthcare
- The Psychology Underlying Decision Making
- Accountability
- Allais Paradox
- Associative Thinking
- Attention Limits
- Attraction Effect
- Automatic Thinking
- Axioms
- Biases in Human Prediction
- Bounded Rationality and Emotions
- Certainty Effect
- Cognitive Psychology and Processes
- Coincidence
- Computational Limitations
- Confirmation Bias
- Conflicts of Interest and Evidence-Based Clinical Medicine
- Conjunction Probability Error
- Context Effects
- Contextual Error
- Counterfactual Thinking
- Cues
- Decision Making and Affect
- Decision Modes
- Decision Psychology
- Decision Weights
- Decision-Making Competence, Aging and Mental Status
- Deliberation and Choice Processes
- Developmental Theories
- Dual-Process Theory
- Dynamic Decision Making
- Editing, Segregation of Prospects
- Emotion and Choice
- Errors in Clinical Reasoning
- Experience and Evaluations
- Fear
- Frequency Estimation
- Fuzzy-Trace Theory
- Gain/Loss Framing Effects
- Gambles
- Hedonic Prediction and Relativism
- Heuristics
- Human Cognitive Systems
- Information Integration Theory
- Intuition Versus Analysis
- Irrational Persistence in Belief
- Judgment
- Judgment Modes
- Learning and Memory in Medical Training
- Lens Model
- Lottery
- Managing Variability and Uncertainty
- Memory Reconstruction
- Mental Accounting
- Minerva-DM
- Mood Effects
- Moral Factors
- Motivation
- Numeracy
- Overinclusive Thinking
- Pain
- Pattern Recognition
- Personality, Choices
- Preference Reversals
- Probability Errors
- Probability, Verbal Expressions of
- Problem Solving
- Procedural Invariance and Its Violations
- Prospect Theory
- Range-Frequency Theory
- Risk Attitude
- Risk Aversion
- Risk Communication
- Risk Perception
- Scaling
- Social Factors
- Social Judgment Theory
- Stigma Susceptibility
- Support Theory
- Uncertainty in Medical Decisions
- Unreliability of Memory
- Value Functions in Domains of Gains and Losses
- Worldviews
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