Study Review Flashcards
What is the Abecedarian Study
The Abecedarian study looked at disadvantaged children. It looked at how a stimulating environment could prevent the development of mild mental retardation in children.
How many cohorts were studied?
There were 4 cohorts of disadvantaged children studied.
How many stages of intervention
There were two stages of intervention
Use Rent Control In a Simple Diagram
View Slides from study guide
Define Price Ceiling
Price ceiling refers to a limit on how much a seller can charge for a product for example, how much a landlord can charge for rent.
Define Price Floor?
Price Floor prohibits prices from going below a certain minimum.
What are the three Approaches to estimate the value of statistical life?
The three approaches are:
- Labor Market Choices
- Product Purchase
- Government Policies
Explain Labor market choices and product purchase decisions and what they infer about VSL?
They infer VSL from tradeoffs between money and risks. Assesses VSL between 5 million and 12 million.
What is the product purchase decision approach?
This approach it looks at and estimates the amount of money necessary to compensate people for accepting higher risk/willing to pay to reduce risk and then project from that how much a person would value a statistical life.
Explain the Government Policies Approach in VSL?
This approach uses decisions about policies and estimates the value that government places on lives saved or years of life gained.
Define Risk Premium?
The risk premium is the rate of return on an investment over and above the risk-free or guaranteed rate of return. An example of risk premium would be the extra salary or wage earned for doing a risky job.
What are some problems with the VSL Approach in the labor markets?
- People have to love their job.
- Hedonic preferences can make it hard to find comparable jobs.
- Labor markets work at a margin and not a average .
- Workers may misjudge the level of risk.
- The VSL may be overestimated if the risk premium also compensates for non-fatal risks – it’s very difficult to control for these nonfatal risk considerations. Not all tiger attacks are fatal (though with one swipe of a paw, a tiger can kill a horse.
What are the four issues that Brought notes with the VSL?
- The overlooked opportunity cost
- As life nears its end, value for someone rich could be VERY high. Should the government pay for that?
- Differential treatment of known versus statistical life.
- People will pay more to save a particular person than some statistical unit
- Anomalies from the time value of money.
- Value grows as income grows, so the future will always be worth more if value is inferred based on what people are willing to pay for them.
- Individual versus social willingness to pay
- Basing VSL on currently alive people ignores impact on future generations
What solution does Broughel Propose?
Broughel proposes the use of a financial approach based no life’s productive contributions.
List some differences in VSL estimates by various govt organizations?
- Could be because of mode of death
- differences in demographic group. Politically-may be ethically problematic
- VSL has increased over time.
What are the types of discounting scenarios in Rational Addiction?
- Exponential Discounting
- Naive hyperbolic discounting
- Sophisticated Hyperbolic discounting + authoritarian commitment
What are the important Assumptions of Rational addiction?
- Time consistency of preferences
- Perfect information about the nature of using substances- people are aware of their ability to become addicted.
- Later authors would relax to the perfect information assumption.
What are some implications of Rational Addiction Theory?
- The long-run price elasticity of demand is greater than short run price elasticity of demand.
- This is not an accurate test of rational addiction
Why do empirical economists like rational addiction model?
They like it because it motivates functional form to statistically estimate with specific interpretations on key parameter estimates
Main Points of Rosenberg (2020)
To claim that your model can assess the welfare of real addicts, you need to show that they can actually face a decision problem sufficiently similar to X that Y is their optimal choice, in reality as well as theory.
Continuation of Rosenberg Sweet Points
“At best, we can say that real humans with addictions are behaving ‘as-if’ they are implementing the optimal solution to an analytically simple decision problem we are quite certain they do not face.”
What are excise taxes?
Excise taxes are major tools that can reduce consumption of bad goods in a population.
Explain Cigarette Price Elasticities
Cigarette price elasticity ranges from 0.2 to just than greater than 1.0. This interprets to that with a elasticity of 0.2 a 10% increase in price is associated with a 2% decrease in quantity demanded.
What is the heart of Rosenbergs critique?
Becker et al are asking economists to search the entire space of formalized choice problems
until they find a problem (a) whose optimal solution matches the thing they want to explain and (b) whose assumptions seem related to intuitions, anecdotes and stylized
facts concerning the behavior at hand.
Kind of like the joke about the near-sighted man who is looking for his keys at night…
Difference between implicit and explicit budget constraints.
- Implicit functions let V be the maximum value that a decision maker is willing to pay for one more QALY
- Explicit functions are a fixed amount of funding for treating the conditions that the interventions are hoping to solve.
What are the two ways in which an intervention is dominated?
Interventions can be in a strict sense or a dominated sense
Explain the difference between strict and extended domination
Strict sense means that you make a comparison to see if one thing is more expensive than another. Extended sense refers to when the Incremental Cost Effective Ratio is higher than that of the next most effective treatment.
What is the Dynamic Model used in the Methadone benefit/cost simulation by Zarkin et al 2005?
- Simulates life paths for 1,000,000 people
- When individuals start in the model at age 18, they may or may not be using heroin. From 18 onward, the model generates simulated life paths for each person based on the outcome of a series of transitions.
- parameter estimates would typically require a mean and a measure of variance for continuous variables and an average proportion for proportions
- The transition probabilities are drawn from a statistical distribution, and the moments of that distribution are either from data or parameter estimates in the literature. Transition probabilities bw model states from month to month and include personal attributes
What did the transition probabilities in the Dynamic Model Reveal?
- It was found that men are more likely than women to use heroin and more likely to resume heroin use after stopping.
What are the strengths of the Dynamic Model?
- Allows researchers to position what if scenarios
- cheaper and quicker than gathering data under each scenario
What are the limitations of the model?
- Does not capture realities such as costs to the patient
- Relies on making assumptions for some parameters
Cost Benefit Analysis Notes
CBA) estimates the equivalent money value of the benefits and costs – typically to ‘society’ - of projects, interventions or programs to determine whether they are worthwhile.CBA measures the benefits and costs of projects in money terms.
This often requires that we place dollar values on years of life or improvements in health and well-being.
Cost Benefit Analysis Continued
The most fundamental question in economic evaluation
•Whose costs? Whose outcomes? Whose benefits?
•Academic economists often take the societal perspective
•At a practical level, only ‘first-order’ costs and benefits are frequently measured
Cost Benefit Analysis Continued
Societal perspective includes the costs and benefits to all members of society.
It should exclude pure transfers that are ‘zero-sum’, because they are, well, zero sum and both parties are included in society
Some things are very difficult to value but are first order to key stakeholders in the program:
Nebulous things like choice, fear, certainty, safety, comfort
Health! Life!
The costs and benefits are difficult to value for certain stakeholders. Examples:
Children’s time in school programs
The utility cost of re-entry programs for offenders
Difference between Cost benefit, Cost Effectiveness and Cost Analysis
- Cost Benefit asks the question is it worth it, everything is monetized and similar to the Return-on-Investment, used In Business.
- Cost Effectiveness Analysis, this asks what is the trade-off and outcome is measured in natural units and the Cost-utility analysis may use QALYs
- Cost Analysis asks the question what does it costs and more powerful and useful than you think.
What is the Cost effectiveness analysis
- What is the cost of achieving each incremental change in outcome using a particular intervention, strategy, treatment, or program?
- Almost can be expressed as bang-for-buck (the answer is really expressed as buck-per-bang)
- Outcome expressed in natural units or QALY
- Not expressed in dollar terms. This is opposite of the cost benefit analysis where everything is monotonized.
What does QALY mean?
Quality of Adjusted Life and means Used frequently by health economists because the convert health states into the same metric
E.g., Instead of number of years in a wheelchair, convert it into a QALY
•To construct a QALY, each year of life is given a statistical weight, q
Quality Adjusted Life Expectancy is the discounted sum of the product quality weights q of each year times the likelihood of survival to each year. The qaly weight is q, the time span takes time t from 0 to end (e); prob is the probability of surviving to the next year.
Need to estimate delta – the discount factor, the QALY weight, and the probability of surviving to the each year
Measuring Quality
Difficult because the researcher and/or study subject are comparing 2 (often hypothetical), dissimilar states of the world
•Survey – e.g using visual analog scale (see right)
•Standard gamble:
•researcher offers a certain health state C versus a gamble of perfect health with probability p vs death with probability (1-p)
•The p that makes the respondent indifferent between C and the gamble is p* - this is the estimate of q
•Time trade off
•Similar to standard gamble
•Choose b/w living for t years with C and then dying vs living with perfect health but for less time k and then dying
•The k* that makes the respondent indifferent is the estimate of q
Problem with a survey: survey-takers are asked to consider health states one at a time. The result is a ranking of health states that does not necessarily reflect the intensity of respondents’ preferences. Respondents tend to evenly spread the rankings even if one or two are particularly intense
Person trade-off: ask people how many outcomes of one kind they consider equivalent in social value to X outcomes of another kind
