PAM 3300
Intermediate Policy Analysis
Spring 2012
Professor: Don Kenkel, PhD
TAs:
Catalina Herrera Almanza
Shooshan Danagoulian
What this course is about
In-depth treatment of the tools of cost-benefit
analysis (CBA)
Introduced CBA in PAM 2300
CBA is a

Outline: 2/28/12
Test format
Review
Practice problems
TA office hours:
Tuesday (today): 4:30 5:30 pm
Wednesday:
11 am 12:30
Extra office hours:
Wednesday:
2 pm 3:30 pm
Test format
Shorter True-False-Uncertain questions: typically
require you to know

Outline: 3/13/2012
Social discount rate (SDR)
Market-based approach/ opportunity cost of
capital
Optimal choices of consumption today versus
consumption in future
Optimal growth rate approach
Intergenerational discounting
Homework #4 due
Next: climate cha

Outline: 3/15/2012
The economics of climate change policies
Science
Estimates of the total economic effect of
climate change
Estimates of the carbon externality
Controversy about social discount rate
After Spring Break: Dealing with
uncertainty
Science of

Outline: 3/27/2012
Dealing with uncertainty
Expected value
Decision trees
BGVW, Ch. 7, pp. 167-177
Next: expected utility and risk aversion
Review intermediate micro
BGVW, Ch. 8
Expected Value Analysis
Math/ statistical term
Discrete case
Set of contingen

Outline: 3/29/2012
CBA under uncertainty
Extend the idea of compensating variation to
include uncertainty
Expected utility and risk aversion
Review intermediate microeconomics
Option price
Homework #5 due Thursday, 4/5
Expected Utility and Risk
Aversion
G

Outline: 4/10/2012
Next part of syllabus (BGVW, Ch. 12)
Evaluation Designs
CBAs of Education & Training Programs
Example: the Perry Pre-School Program
James Heckman, Professor, University of Chicago, &
Nobel Laureate
"Hard Evidence on Soft Skills
April 26

Outline: 4/03/2012
CBA under uncertainty
Review
Graphs
Option price (OP): compensating variation in
income for a policy that changes uncertainty
Friedman Savage preferences
OP for a policy (dam) that reduces but
doesnt eliminate uncertainty
Homework #5 du

Value of a statistical life:
4/24/2012
Road map: valuing benefits of non-market goods
Revealed preference methods (Ch. 14)
Value of a statistical life: pages 345 349
Ex: health and safety regulations
Stated preference methods: contingent valuation
surv

Outline: 03/6/2012
Road map
Discounted present value: simple
example
PV: multiple years
Homework #4: Due Tues. 3/13/2012
(Prelim #1 will be handed back next time)
Road Map: Review & Preview
Review: first prelim covered the basics of valuing
benefits

Outline: 2/23/2012
Examples of using distributional weights/
social surplus approach
Luxury tax
Minimum wage
Thinking about equity/efficiency tradeoffs
Example: evaluating the growth of US
economy
Prelim Exam: Thursday, March 1
Example 1: tax luxuri

Outline: 2/21/12
Clarification/ extension from last time: the
incidence of the costs of regulation
Distributionally weighted cost-benefit
analysis
Next time: more discussion about
distributional concerns
Homework #3: due Thursday, Feb. 23
Prelim #1:

PAM 3300
Intermediate Policy Analysis
Spring 2012
Professor: Don Kenkel, PhD
TAs:
Catalina Herrera Almanza
Shooshan Danagoulian
What this course is about
In-depth treatment of the tools of cost-benefit
analysis (CBA)
Introduced CBA in PAM 2300
CBA is a

Outline: 1/26/2012
Conceptual Foundations of CBA (Ch. 2)
Pareto principle
Kaldor-Hicks criterion
Utilitarian social welfare function
2 digressions: standing & consequentialism
CBA in the federal government
CBA and multi-goal analysis
Next time: Pl

Outline: 2/07/12
Valuing benefits in efficient markets (cont.)
Direct supply
Reduce private sector costs
Valuing opportunity costs
Next time
Putting it all together: the basics
Example: Ending the peanut quota
Homework #1 due today
Homework #2 du

Outline: 2/2/2012
Last time: CV & Consumers Surplus
This time:
Producer Surplus
Market successes and failures
Social Surplus = CS + PS
3 basic postulates of CBA
Valuing benefits in efficient markets (to be
continued next week)
Homework #1 Due Tues

Outline: 1/26/2012
Conceptual Foundations of CBA (Ch. 2)
Pareto principle
Kaldor-Hicks criterion
Utilitarian social welfare function
2 digressions: standing & consequentialism
CBA in the federal government
CBA and multi-goal analysis
Next time: Pl

Outline: 2/14/12
Measuring benefits & costs in distorted
markets
Externalities
Measuring benefits of consumption under
addiction
Example: Australian gambling
Homework #3: TBA
Next time: hiring unemployed labor
Measuring B & C in distorted
markets
3

Outline: 2/16/12
Hiring labor
Hiring unemployed labor
Environment versus jobs
Homework #3: due Thursday, Feb. 23
Prelim #1: Thursday, March 1!
Homework #3
Textbook Exercises for Chapter 4 (pp. 110 111):
1. Implementing a minimum wage.
2. Increasing a high

Outline: 2/09/2012
Measuring benefits & costs in efficient
markets: putting it all together
Dam: simple example
Ending the peanut quota
Next time
Measuring benefits under addiction
Homework #2 due Tuesday, 2/14
Dam: simple example
CBA of a dam that

Outline: May 1, 2012
Stated preference methods (Ch. 15)
General discussion
Example about obesity policy
Exxon Valdez oil spill example
BP Deepwater Horizon example (next time)
Homework #7 (and last!) due Thursday, 5/3
On-line evaluation for courses offere

Outline: 04/05/2012
Example of a risk-increasing project
OMB Guidelines
Rationales for Expected Surplus as a Practical
Benefit Measure, pp. 215 218
Prelim #2: Thursday, April 19
Wont cover
Figures 82, 8-3, 8-4
Most of the text discussion on pages 206 215

PAM 3300: Research Designs and Causal Claims
Research Design
For our purposes, research design refers to the set of analyses that will be implemented to assess the causal effect of X on Y. The design describes how the constructs of interest are oper

PAM 3300: Regression Analysis
Omitted Variable Bias
In an OLS regression of Y on X, bOLS measures the true partial effect of X on Y () only if X is uncorrelated with the omitted variables that also affect Y (d/dX = 0). In observational studies, thi

PAM 3300: Regression Analysis
Evaluating the model: R2
A useful summary of how well a model predicts the actual outcomes is R2: R2 = Var(Yhat)/Var(Y) = 1-Var(residuals)/Var(Y) This is just the square of the correlation between Y and Yhat. Measures t

PAM 3300: Caual Reasoning (cont)
What can be a cause?
For something to be a cause, it must be possible (at least hypothetically) to expose every unit under study to the cause.
Being perceived to be a woman ok Being a woman probably not?
No

PAM 3300: Causal Reasoning
What is the effect of participation in a program?
For example:
Whats the effect of washing directly after sex on the probability of contracting HIV? Whats the effect of HRT on the probability of contracting heart disea

What are we doing here? We're creating a 'do-file, which is just a program that we will later toss into Stata, and make Stata run a bunch of commands on either data that we make up or data that we import to (or open in) Stata. Why have a program? It

PAM 3300 January 27th, 2009
Born today:
Mozart Lewis Carroll Mikhail Baryshnikov John Roberts Keith Olbermann
Today is National Chocolate Cake Day
PAM 3300 - Announcements
Got Stata? Office Hours (MVR 107)
Matt: T, Th 10-11:45AM Maggie: