The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Health State Evaluation and Utility Theory

  • Alastair McGuire
Reference work entry


Valuing health outcomes is a fundamental concern in health economics. This article considers a measure of health outcomes: the Quality Adjusted Life Year (QALY). The QALY has been used extensively for two main reasons: (1) it arguably values health outcomes in a more acceptable metric than money does; and (2) it feeds more easily into the wider medical decision-making. To be an acceptable measure of health state preferences, however, the QALY requires a number of restrictive assumptions to hold. We discuss these assumptions and conclude that, if these do not hold, the QALY reverts to a measure of health state rather than to a health state preference.


Disability Adjusted Life Years (DALY) Quality Adjusted Life Year (QALY) Social policy Utility theory Years of Healthy Life (HYL) 

JEL Classifications

I120 I180 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Alastair McGuire
    • 1
  1. 1.