James K. Hammitt

Willingness to Pay for Health Protection: Inadequate Sensitivity to Probability?

Efficient investments in health protection require valid estimates of the publics willingness to forgo consumption for diminished probabilities of death, injury, and disease. Stated valuations of risk reduction are not valid measures of economic preference if the valuations are insensitive to probability variation. This article reviews the existing literature on CV studies of reductions in health risk and finds that most studies are poorly designed to assess the sensitivity of stated valuations to changes in risk magnitude. Replication of a recent study published in this journal by Johannesson et al. (1997) demonstrates how serious the problem of insensitivity can be, even for a study that reports plausible results. New empirical results are presented from telephone surveys designed to provide internal and external tests of how WTP responds to size of risk reduction. The effect of variations in instrument design on estimated sensitivity to magnitude is examined. Overall, estimated WTP for risk reduction is inadequately sensitive to the difference in probability, that is, the magnitude of the difference in WTP for different reductions in risk is typically smaller than suggested by standard economic theory. Additional research to improve methods for communicating changes in risk is needed, and future studies of stated WTP to reduce risk should include rigorous validity checks.

Valuing Mortality-Risk Reduction: Using Visual Aids to Improve the Validity of Contingent Valuation

We investigate the validity of contingent valuation (CV) estimates of the value per statistical life (VSL). We test for sensitivity of estimated willingness to pay (WTP) to the magnitude of mortality-risk reduction and for the theoretically predicted proportionality of WTP to risk reduction using alternative visual aids to communicate risk. We find that WTP is sensitive to the magnitude of risk reduction for independent subsamples of respondents presented with each of three alternative visual aids, but not for the subsample presented with no visual aid. Estimated WTP is consistent with proportionality to risk reduction for the subsamples presented with a logarithmic scale or an array of 25,000 dots, but not for the subsample receiving a linear scale. These results suggest that CV can provide valid estimates of WTP for mortality-risk reduction if appropriate methods are used to communicate the risk change to respondents.

Associations of Gestational Weight Gain With Short- and Longer-term Maternal and Child Health Outcomes

The authors investigated the rate of gestational weight gain associated with the lowest combined risk of 5 short- and longer-term maternal and child health outcomes for 2,012 mother-child pairs recruited in 1999-2002 into Project Viva, a prebirth cohort study in Massachusetts. Within each maternal prepregnancy body mass index (BMI, kg/m(2)) stratum, they performed a logistic regression analysis predicting all 5 outcomes, from which they determined the rate of gain at which average predicted prevalence of the adverse outcomes was the lowest. The mean rate of total gestational weight gain was 0.39 kg/week (standard deviation, 0.14). The prevalence of small for gestational age was 6%, large for gestational age was 14%, preterm delivery was 7%, substantial postpartum weight retention was 16%, and child obesity was 10%. The lowest predicted outcome prevalence occurred with a 0.28-kg/week gain for women whose BMI was 18.5-24.9, a 0.03-kg/week loss for a BMI of 25.0-29.9, and a 0.19-kg/week loss for a BMI of >or=30.0 kg/m(2)--the lowest observed weight changes in overweight and obese women. For normal-weight and overweight women, lowest-risk gains varied modestly with adjustment for maternal characteristics and with different outcome weightings. For obese women, the lowest-risk weight change was weight loss in all models. Recommendations for gestational weight gain for obese women should be revised.

QALYs Versus WTP

Quality adjusted life years (QALYs) and willingness to pay (WTP) are alternative measures of the value of reductions in health risk that are often used in evaluating environmental, health, and safety practices. Although both methods are based on individual preferences, the underlying assumptions differ. The different bases yield systematically different conclusions about the relative value of reducing health and mortality risks to individuals that differ in age, preexisting health conditions, income, and other factors. The choice of which method to use depends on judgments about what constraints should be placed on individual preferences and what factors should be considered in aggregating preferences across people.

The Income Elasticity of the Value per Statistical Life: Transferring Estimates between High and Low Income Populations

The income elasticity of the value per statistical life (VSL) is an important parameter for policy analysis. Mortality risk reductions often dominate the quantified benefits of environmental and other policies, and estimates of their value are frequently transferred across countries with significantly different income levels. U.S. regulatory agencies typically assume that a 1.0 percent change in real income over time will lead to a 0.4 to 0.6 percent change in the VSL. While elasticities within this range are supported by substantial research, they appear nonsensical if applied to populations with significantly smaller incomes. When transferring values between high and lower income countries, analysts often instead assume an elasticity of 1.0, but the resulting VSL estimates appear large in comparison to income. Elasticities greater than 1.0 are supported by research on the relationship between long-term economic growth and the VSL, by cross-country comparisons, and by new research that estimates the VSL by income quantile. Caution is needed when applying these higher elasticities, however, because the resulting VSLs appear smaller than expected future earnings or consumption in some cases, contrary to theory. In addition to indicating the need for more research, this comparison suggests that, in the interim, VSL estimates should be bounded below by estimates of future income or consumption.

National Health Insurance and precautionary saving: evidence from Taiwan

Abstract By reducing uncertainty about future medical expenses, comprehensive health insurance can reduce households’ precautionary saving. We examine this effect using Taiwan micro-data spanning the 1995 introduction of National Health Insurance. The effects of National Health Insurance are identified using employment-based variation in prior insurance coverage. Replacement of the households’ prior insurance coverage with National Health Insurance is exogenous to the household, so our estimates are not subject to selection bias. Compared with the preceding government insurance programs, National Health Insurance reduced saving by an average of 8.6–13.7% with the largest effects for households with the smallest saving.

Background Risks and the Value of a Statistical Life

We examine the effects of background mortality and financial risks on an individuals willingness to pay to reduce his mortality risk (the value of statistical life or VSL). Under reasonable assumptions about risk aversion and prudence with respect to wealth in the event of survival and with respect to bequests in the event of death, background mortality and financial risks decrease VSL. The effects of large mortality or financial risks on VSL can be substantial, but the effects of small background risks are negligible. These results suggest that the commonplace failure to account for background risk in evaluating VSL is unlikely to produce substantial bias in most applications.

A comparison of organic and conventional fresh produce buyers in the Boston area.

Food safety concerns and the demand for organically grown produce have increased significantly in the United States over the last decade. Key differences in lifestyle characteristics, food safety attitudes and beliefs, perceived food safety risks, and valuation of health risk reductions between organic and conventional food buyers remain largely unknown, however. To better characterize how buyers of organic fresh produce differ from their conventional counterparts, over 700 food shoppers were sampled from ten major retail stores in the Boston area. Survey results show that self-reported organic buyers are more likely than conventional buyers to engage in a variety of health-promoting and environmentally friendly behaviors. Organic buyers are less trusting of federal food safety agencies than are conventional buyers, and perceive greater benefits associated with organically grown produce than do their conventional counterparts. Further, organic buyers have significantly higher risk perceptions than do conventional buyers for food safety hazards associated with conventionally grown produce. Compared to conventional buyers, organic produce buyers also perceive significant risk reductions associated with switching to organically grown produce and are willing to pay a higher price to reduce perceived food safety risks. Few sociodemographic differences between buyer types were observed, possibly due to how organic and conventional food stores were matched. Survey findings highlight the need for greater public education about a range of food safety issues and farming practices to ensure that consumers are making informed decisions in the marketplace.

Estimating population exposure to power plant emissions using CALPUFF: a case study in Beijing, China

Abstract Epidemiological studies have shown a significant association between ambient particulate matter (PM) exposures and increased mortality and morbidity risk. Power plants are significant emitters of precursor gases of fine particulate matter. To evaluate the public health risk posed by power plants, it is necessary to evaluate population exposure to different pollutants. The concept of intake fraction (the fraction of a pollutant emitted that is eventually inhaled or ingested by a population) has been proposed to provide a simple summary measure of the relationship between emissions and exposure. Currently available intake fraction estimates from developing countries used models that look only at the near field impacts, which may not capture the full impact of a pollution source. This case study demonstrated how the intake fraction of power plant emissions in China can be calculated using a detailed long-range atmospheric dispersion model—CALPUFF. We found that the intake fraction of primary fine particles is roughly on the order of 10−5, while the intake fractions of sulfur dioxide, sulfate and nitrate are on the order of 10−6. These estimates are an order of magnitude higher than the US estimates. We also tested how sensitive the results were to key assumptions within the model. The size distribution of primary particles has a large impact on the intake fraction for primary particles while the background ammonia concentration is an important factor influencing the intake fraction of nitrate. The background ozone concentration has a moderate impact on the intake fraction of sulfate and nitrate. Our analysis shows that this approach is applicable to a developing country and it provides reasonable population exposure estimates.

A Theoretical Foundation for Life‐Cycle Assessment

Summary The presence of value judgments in life-cycle impact assessment (LCIA) has been a constant source of controversy. According to a common interpretation, the international standard on LCIA requires that the assessment methods used in published comparisons be “value free.” Epistemologists argue that even natural science rests on “constitutive” and “contextual” value judgments. The example of the equivalency potential for climate change, the global warming potential (GWP), demonstrates that any impact assessment method inevitably contains not only constitutive and contextual values, but also preference values. Hence, neither life-cycle assessment (LCA) as a whole nor any of its steps can be “value free.” As a result, we suggest a more comprehensive definition of objectivity in LCA that allows arguments about values and their relationship to facts. We distinguish three types of truth claims: factual claims, which are based on natural science; normative claims, which refer to preference values; and relational claims, which address the proper relation between factual knowledge and values. Every assessment method, even the GWP, requires each type of claim. Rational arguments can be made about each type of claim. Factual truth claims can be assessed using the scientific method. Normative claims can be based on ethical arguments. The values of individuals or groups can be elicited using various social science methods. Relational claims must follow the rules of logic. Relational claims are most important for the development of impact assessment methods. Because LCAs are conducted to satisfy the need of decision makers to consider environmental impacts, relational claims about impact assessment methods should refer to this goal. This article introduces conditions that affect environmental decision making and discusses how LCA—values and all—can be defended as a rational response to the challenge of moving uncertain scientific information into the policy arena.