Nobel Economist Kahneman on How to Measure the Value of a Human Life

Nobel prize winner Daniel Kahneman is one of the most influential thinkers alive. Along with his now-deceased colleague Amos Tversky, he invented the discipline of behavioral economics, probably the most important movement in the field of economics in the last half century.

Kahneman is probably most famous for calling into question traditional conceptions of human rationality in economic models, but he has also called into question another model that we use to measure the value of the state of our health.

The “QALY” or “Quality-Adjusted Life Year” is one of the most important tools health experts use to decide how to apportion aid and health care around the world. If you have perfect health, your QALY is 1. If you’re dead, your QALY is 0. If you are a paraplegic and your quality of life is 50% of what it would be if you were in full health, then your QALY is .5. If you are suffering to the point where your life experience is worse than being dead, then your QALY is negative.

That’s the QALY. This may seem like a very nerdy, abstract, and esoteric metric, and it certainly is. But very often, it is a nerdy, abstract, and esoteric metric that determines who lives and who dies.

QALYs are used in health administrative systems in the UK, Netherlands, Germany, Australia, Canada, and New Zealand[1] to inform pricing and reimbursement decisions and by many of the most influential charity organizations to determine who will receive benefits of charitable gifts. It is an essential component of the theoretical framework for the increasingly popular trend of Effective Altruism.

Kahneman’s issue with QALYs is that there are, we might say “consistent inconsistencies” in the way that people perceive their conditions that affect the data. For example, someone with a colostomy will rate their general well being as relatively high, while someone who used to have a colostomy – but no longer does – will say that they were miserable when they had it. (Smith, Ubel, Sheriff, 2006). Further, there is ample evidence that those who suffer severe spinal cord injuries – after an initial period of sadness – adjust their level of happiness upwards after about five years after suffering their debilitating injury.

If we know this to be true, how do we assess the QALY of someone who has a colostomy? Do we use the survey data from the person who currently has a colostomy and says that she is not miserable or the survey data from the person no longer does and says she was miserable when she did have a colostomy?

Perhaps there might be a way of using some sort of weighted average of all the potential life experiences and incorporating them into the assessment of a revised form of QALY. According to Kahneman, we should “[s]et up one scale facing all the complexities of the data, the internal inconsistency, philosophical issues, the relative weight of experience, and other ways to look at utilities.”

Kahneman presented this paper – which seems to provide valuable input that could improve on the QALY metric – back in 2009. Since then, it does not appear that that sufficient momentum has built behind his ideas to change the status quo.

[1] The US has literally outlawed this approach. See also, A. Torbica, R. Tarricone, M. Drummond, The use of CEA in health care—is the US exceptional? (2016).