Is value objective or subjective?
A common, though oversimplified and exaggerated view, is that Adam Smith was the father of economics. His views were published in 1776 in his Wealth of Nations.He along with several other early giants of classical economists,David Ricardo,John S. Mill, promoted the Labor theory of value. Karl Marx continued that line of thinking in 1867 in his magnum opus Capital in which he said " If a pair of shoes usually takes twice as long to produce as a pair of pants,for example then..the competitive price of shoes will be twice the price of pants."
Lawrence H, White , in his book The Clash of Economic Ideas talks about what he describes as the fundamental flaw in the labor theory of value is "its supposition that the price of a good reflects an intrinsic feature of the good,...rather than something in the minds of its buyers". The belief was that input costs determines the selling price rather than the reverse.
It was not until 1871 that the labor theory of value was displaced by what is known as the subjective or marginal utility theory of value. Karl Menger one of the three co-founders of this idea,who worked independently, said in his Principles of Economics , "Goods always have value to certain economizing individuals and this value is also determined only by those individuals."
Simply put the value of a good or service is the subjective evaluation of the buyer.
In fact,it is this subjective value that underlies exchange-Fred values the apple more than dollar he give the grocer who in turn value the dollar more than the apple.Both party typically thank each other as exchange is mutually beneficial.
So since the late 19th century economists of almost all stripes have agreed that value is subjective.
If this is the overwhelming consensus views of economists what is the rationale or justification for organizations such as the American College of Physicians and others to claim to be able to determine which medical procedures and treatments are "high value". Are they claiming that value is objective,that they can determine scientifically the real value,and further determine which value are high enough to merit the designation "High value"
First how is value determined by health outcome experts and how is a value determination judged to be "high". Is the process objective and scientific all the way down or is it the case that at some point someone's subjective value is inserted .
Through clinical research it is possible to determine if the outcome of treatment X versus treatment Y is better in terms of survival.So one could talk about life years saved by treatment X versus treatment Y-this is clinical effectiveness research.X is better-more effective than Y in terms of simple survival. But to determine value cost has to be injected into the analysis.How much did X cost versus how much did Y cost.,then one could look at life years saved per dollars and compare X and Y in that way.
Obviously years lived per se is not the only relevant outcome to consider.How one lives (pain,mobility,level of cognition etc) are all important and those and other elements are lumped under the heading "quality of life" (QOL). Measuring quality to transform life years into quality adjusted life years is a difficult and ambiguous slippery area and we will defer a discussion about whether than can ever be done for later but for discussion we'll assume that something called quality adjusted life years(QALY) can measured. (I seriously doubt that it can be measured because in part I do not believe you can aggregate quality of life.I doubt that it is meaningful to add Frank and Fred life quality of life and transform that some aggregate of quality years.)
After the QALY are determined for procedure X and Y then in theory one can sum the cost of the two procedures and then derive a ratio of QALY s per dollar spent. Ignoring for the moment the difficulties and ultimately the arbitrary nature of teasing out cost from charges in the context of what is certainty not a free market unencumbered by price control but rather one whose costs exist behind a veil of various variable negotiated prices between providers groups and third party payers with an even more opaque series of subsidies and discounts.
When you brush past the bewildering display of statistical artifacts and step to view the overall landscape what you see is another utilitarian procedure. Some new wine is there but the bottles are stamped underneath with the imprint "utilitarian analysis" A joint resurrection of Benthams "greatest good for the greatest number." in the form of a cost benefit analysis done in the tradition of and with the tools of Neo-classical economics.