A Normative Model of Medical Research Resource Allocation

by Emmett B. Keeler, Joseph P. Newhouse

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This memorandum is concerned with the allocation of resources to biomedical research. In particular, it asks the question: How much should the country spend on such research? A simple mathematical model of individuals' preferences is proposed that gives reasonable predictions to qualitative questions posed. In lieu of obtaining sample data about consumer preferences, the model is used to determine what biomedical research is worth to consumers. The answer is that the probability of achieving future advances appears to be sufficiently low to warrant the conjecture that the nation is already spending more for biomedical research than it is worth to consumers. This revision expands the original by explicitly treating uncertainty rather than assuming it away. In addition, the first version assumed, incorrectly, that the important parameter a could not be greater than one. This revision corrects that assumption. Certain other less important errors also have been corrected.

This report is part of the RAND Corporation Research memorandum series. The Research Memorandum was a product of the RAND Corporation from 1948 to 1973 that represented working papers meant to report current results of RAND research to appropriate audiences.

This research in the public interest was supported by RAND, using discretionary funds made possible by the generosity of RAND's donors, the fees earned on client-funded research, and independent research and development (IR&D) funds provided by the Department of Defense.

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