Limits to rationality: economics, economists and priority setting.

This paper investigates why economic approaches to priority setting have had only limited impact in practice. It argues that obstacles to the take-up of the economic approach centre on (1) limitations in the theory and practice of economic evaluations, and (2) the nature of the wider context within which decisions on priority setting take place. On the first point, it argues that, despite advances in research methods, there is still debate about the theoretical basis of measures typically used in economic evaluations, such as QALYs, and that much of the extant empirical data is of questionable quality. On the second point, it maintains that politicians, health care professionals and local people attach importance to other factors besides allocative efficiency. If economic approaches are to have more impact in the future, it argues that health economists need to adopt a wider research agenda, focusing on public sector decision-making and, in particular, the incentives and constraints governing the use of economic data in different types of health care organisation.