Interpretations of Utility and Their Implications for the Valuation of Health

20 Pages Posted: 23 Dec 2007

See all articles by Paul Dolan

Paul Dolan

Princeton University - Department of Economics; University of Sheffield - Department of Economics

Daniel Kahneman

Princeton University

Abstract

The term utility can be interpreted in terms of the hedonic experience of an outcome (experienced utility) or in terms of the preference or desire for that outcome (decision utility). It is this second interpretation that lies at the heart of the methods that economists have developed to value non-market goods, such as health. In this article, we argue that decision utility is unlikely to generate meaningful data on the utility associated with different experiences, and instead economists should look towards developing measures that focus more directly on experienced utility.

Suggested Citation

Dolan, Paul and Kahneman, Daniel, Interpretations of Utility and Their Implications for the Valuation of Health. The Economic Journal, Vol. 118, Issue 525, pp. 215-234, January 2008. Available at SSRN: https://ssrn.com/abstract=1077990 or http://dx.doi.org/10.1111/j.1468-0297.2007.02110.x

Paul Dolan

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

University of Sheffield - Department of Economics ( email )

9 Mappin Street
Sheffield, S1 4DT
United Kingdom

Daniel Kahneman

Princeton University ( email )

Department of Psychology 3-2-1 Green Hall
Princeton, NJ 08544
United States
609-258-2280 (Phone)
609-258-2809 (Fax)

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