9. Global Public Goods for Health: Use and Limitations
Richard D Smith, David Woodward
Assessment of costs and benefits of GPGH
- Assessment of costs and benefits important to consider desirability of GPGH and establish incentives to different players
- Key questions:
- which costs and benefits to measure?
- how to compare or aggregate health benefits with financial costs and benefits?
- how aggregate financial costs and benefits at different income levels to reflect welfare effects?
There is a need to assess the costs and benefits relating to the GPGH and their distribution and timing. This is important, both to consider the desirability of GPGH provision, and because the "collective action" problem underlying the GPG concept makes the incentives to different players, including the costs and benefits they face, critical to the provision of a GPGH.
There are three key questions in considering how to analyse the costs and benefits of GPGH:
- which costs and benefits to measure;
- how to compare or aggregate health benefits with financial costs and benefits; and
- how to aggregate financial costs and benefits at different income levels to reflect their welfare effects.
From a GPG perspective, the relevant questions are what additional action is required beyond autonomous national activities, what benefits this would bring and how much it would cost. This means that the calculus of costs and benefits for analysis will vary considerably between different GPGH, according to variations in their excludability characteristics, in the balance between expenses incurred at the national and international levels, in the current levels of provision in different countries and in the balance between benefits within each country as a result of its own contribution to providing the GPG, and cross-border benefits to other countries.
Comparing financial costs or benefits with health benefits is a long-standing problem in cost-benefit analysis. We propose replacing absolute financial costs and benefits with a multiples of per capita household income (for private costs and benefits) or Gross National Product (GNP) per capita (for public sector costs and benefits), and then valuing life, ill-health and disability as multiples of income on the basis of 'willingness-to-pay' for reductions in risk. In effect, this assumes that it is a one per cent change in income that has an equivalent effect on welfare at all levels of income, rather than a one dollar change, as in conventional cost-benefit analysis.