CEA is increasingly being used to evaluate resource allocation decisions in health care.
Most forms of CEA involve the maximisation of an effect variable for a given budget, which
typically involves funding all programmes with a cost-per-unit-outcome below a certain
threshold level. Economists have considered the extent to which this form of analysis is
compatible with a standard welfare economic framework and, in particular, with CBA.
Under welfarist models, individuals are the best judges of their own welfare and individual
WTP is taken to be the appropriate monetary valuation of any benefit. CBA sums WTP over
all those affected and compares this figure to net costs, implementing only those programmes
that increase net benefit (defined in monetary terms). CBA is seen as the welfarist ‘gold
standard’, whilst CEA can be argued to lack a theoretical foundation (see Johannesson and
Karlsson, 1997).