1. Evidencing Value in Economics
(and the role of behavioural sciences and statistics)
Daniel Fujiwara
London School of Economics
d.f.fujiwara@lse.ac.uk

2. Economics
• ‘Value’ has a clear definition in economics
• Welfare is central – it is the ultimate intrinsic
good = Welfarism.
• Basis of cost-benefit analysis, cost-
effectiveness analysis etc
Welfare

3. Value theory
• Value of a good = the amount of money that
induces the equivalent change in welfare for the
individual. (Indifference point)
• Compensating Surplus and
Equivalent Surplus
• Related to WTP and WTA

4. So what is ‘welfare’? (part 1)
• Economists traditionally measure this as the
satisfaction of one’s (rational) preferences.
• Neuroscience – increasing evidence that some
notion of welfare underlies (and predicts) our
decisions.
• Use Revealed Preference or Stated
Preference valuation methods.

5. Stated preferences and cultural value
• Queensland Government (2009). WTP of A$20 pa
to support Queensland Museum.
• Thompson et al. (2002). WTP of US$100+ for an
increase in government-funded arts
performances in Kentucky.
• But, Behavioural science shows that preferences
can often be misinformed and inconsistent (don’t
align with welfare)

6. So what is ‘welfare’? (part 2)
• Driven by behavioral economics, economists
turning to self-report measures.
• Subjective wellbeing can consist in life
satisfaction (evaluative), happiness (hedonic),
worthwhile (eudemonic).

7. Wellbeing valuation and cultural value
• Fujiwara (2013); Fujiwara et al. (2013):
- Value of cinema visit = £12
- Value of participating in arts = £1,500 pa (dance, arts, music,
photography)
- Value of being audience to cultural events= £2,000 pa
Policy intervention
(cultural
engagement)
Money
Wellbeing

8. Causality is key
• We’ve measured value, but how do we know
we have created it?
Econometrics Statistics

9. Maryland Evidence Scale (example)
• Public policy institutions moving towards ranking
systems (implicitly or explicitly) for internal validity.
• Must also remember external validity.