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

2. 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. 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. 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. 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. 6 Means, Utilization, Results Means Utilization 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. 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. 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. 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. 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. 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. 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. 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. 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. 15 Outcome and utility (cont.) However, more basic problems ocharacteristics of output vanish o 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. 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. 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. 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. 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. 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. 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. 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 …")