20090921-Cost_Benefit - Policy Analysis Tools: CostBenefit...

Info iconThis preview shows pages 1–16. Sign up to view the full content.

View Full Document Right Arrow Icon
Policy Analysis Tools: Cost-Benefit  Analysis
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Cost-Benefit Analysis A technique for systematically estimating the  efficiency  impacts of policies Valuable in identifying and categorizing costs and  benefits for  rational  decision making in the public  arena Used with  variable success  in a broad range of  public policy areas  Success of use depends on the degree to which  cost and benefits can be  monetized
Background image of page 2
But, it can answer logical, rational questions such as: Should government  produce  a good/service? e.g., public housing, parking garage Should government  intervene  in the market? Regulating airline safety, automobile safety How much  of the good/service should be produced? Superfund cleanups, public transportation Cost-Benefit Analysis
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Cost-Benefit Analysis It is a technique that can be used to  evaluate government projects and  programs. It encompasses an appraisal  of a policy based on the costs and  benefits of the project,  measured in  comparable units within and across  time.
Background image of page 4
Most policies involve budget allocation costs. Limitations to Cost-Benefit Analysis However, many policy benefits and costs are neither tangible nor economically visible.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Limitations to C-B Analysis in the Social Policy Arena Measurement of benefits  Some excellent sources of data: Some immeasurable benefits
Background image of page 6
Measurement of costs Direct outlays are easy to determined Private cost Social costs Concentrated highly visible costs  Widespread invisible  Opportunity costs  Limitations to C-B Analysis in the Social Policy Arena
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Criterion of efficiency Bottom line for decision making? Issues of equity Who pays, who gains? Externalities Unintended side effect (+ and -) Offsetting behavior Limitations to C-B Analysis in the Social Policy Arena
Background image of page 8
Advantages of Cost-Benefit Analysis
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Advantages of CBA Provides a decision making tool that is  based on  objective standards Allows for a quantitative comparison  between  multiple solutions  for policy  problems Can be used to monitor the  efficiency   of  existing programs
Background image of page 10
Central C-B Concepts Time Value of Money Cost of life
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Cost-Benefit Concepts Time Value of Money Time Value of Money : inflation  discount rate
Background image of page 12
Inflation A dollar today is always more valuable  than a dollar next year Consumer Price Index (CPI) An index of prices used to measure the change  in the cost of basic goods and services in  comparison with a fixed base period Measures inflation Considerable variation across time
Background image of page 13

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 14
Inflation In a cost-benefit analysis decisions  must be made in “constant” dollars You can’t add “apples” and “oranges”
Background image of page 15

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 16
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 78

20090921-Cost_Benefit - Policy Analysis Tools: CostBenefit...

This preview shows document pages 1 - 16. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online