Acting in the public interest – a framework for analysis - ICAEW

In this instance, while national security was considered to carry significant weighting, this wasnot considered an excuse to avoid mitigation of the effect.An international study on particular medical treatments considered criteria for patient selection. 193It found that social value criteria were widely applied. The actual weightings were largely theproduct of the beliefs of individual doctors, although clinical criteria were provided by someprofessional bodies. Another medical study of 450 dialysis and transplant doctors was able todetermine a set of weightings actually applied. They range from medical benefit, with a weightingof 4.2, through, for example, willingness – 3.7, age – 2.7, and ability to pay – 1.8, to gender –1.0. 194 Many of the aspects considered are clearly removed from broadly based impact criteriaand social value criteria can be seen as arbitrary and unfair. 195 Not least of the controversy iswhether the decisions should be left to specialists or take into consideration wider public views.Sometimes there are absolute values that are so important (for example basic human rights)that they need to prevail in all but the most extreme situations. These can be dealt with by,in effect, applying a weighting of 100% or near to it.8.2.6 Trade-off of interestsGiven conflicts between the interests of different elements of the relevant public, the issuearises of whether it is right and proper to benefit one section of the community at the expenseof another: in economic terms, what is maximising the end result considered to mean?One measure, known as Pareto efficiency, takes it that output is maximised when it wouldbe impossible to make someone better off, without making someone else worse off. Welfareeconomics, which considers distributive economic efficiency, often regards Pareto efficiencyas the appropriate measure. In perfectly competitive markets there will be a set of prices atwhich aggregate demand equals aggregate supply for each commodity. This is competitiveequilibrium. The key principles of welfare economics are that:• every competitive equilibrium is Pareto efficient; and• every Pareto efficient outcome can be achieved by an appropriate allocation of resources.Extending the logic, every Pareto efficient allocation can be changed by reallocationbetween the parties involved. 196However, this takes no account of the distribution issues that arise if consideration is beinggiven to interfering with the market equilibrium point in order to move to a different pointon an output curve, or a point on a different curve.Panel 8.4: Pareto allocationConsider an example of possible utility outcomes for various parts of a society: 197BCAThe axes show increasing amounts of utility achieved by two different sections of society, fordifferent outcomes.Position A represents the utility outcome achieved under market equilibrium. However,because of some sort of market failure, government interference to correct that failure couldachieve positions B or C. Both B and C are on higher utility outcome curves than A so bothwould be an advance in terms of overall utility, but which, if either, is a success?B is on a higher Pareto curve than C so in Pareto terms B would be a welfare success and C awelfare failure. However, in the absence of offsetting transfers (which is a political option), toget from A to B, the much higher utility of one section is offset by a small reduction in utilityin another section. There is an argument that in economic terms, government intervention islegitimate only if the position achieved through interference is better, or at least no worse, inevery way. This would the case with outcome C, which marks an improvement in utility forall sections, but B would be regarded as a failure in these terms.193Quoted in Pleasence and Maclean, ‘The Public Interest’.194Quoted in Pleasence and Maclean, ibid.195Pleasence and Maclean, ibid.196Kay, The Truth About Markets, Besley, Welfare Economics and Public Choice.197Based on Besley, ibid.58Aggregation and decision