B-C analysis vs. cost-effectiveness analysis

Opportunity costs

Tangible vs. intangible costs

Discount rates & time - Present value vs. future value

Valuing inputs & outcomes - hedonic cost pricing, willingness to pay, travel cost method

Aggregation problems

Blackboard readings

Patton & Sawicki: 243 - 313

The proposed NC International Terminal in Brunswick County is an example of where benefit-cost analysis is being used to provide information to decision makers.  See the economic impact map, summary of projected economic impacts, planning assumptions, business plan overview, and business plan for examples.  You can also see a competing analysis prepared by the critics.  While the b-c analysis is a decision making tool and people for and against the port proposal will make different assumptions to advance their arguments, the politics associated with locating a major port along the coast are an entirely different matter.  As you can see from this article in the Raleigh News and Observer (5/20/10) and more recently in the Star News (5/12) and a variety of political strategies will be used to block the port proposal regardless of the results of any b-c analysis. 

What do you use for the value of a life in a b-c analysis?  See this interesting article on the declining value of a life according to EPA (MSNBC 7/08).  Why do you think the value of a life declined?  Now that President Obama is in office, do you think the EPA now has an incentive to increase the value of a life?

Economics can place values on just about anything.  Interestingly, so can the Internal Revenue Service.  If you have a piece of rare art and it is against the law to sell it does it have value?  See this interesting article from the NY Times (7/12) that looks at the question.   Lets hope you don't have the misfortune of inheriting something like the people in the article.

One of the major uses of b-c analysis is the federal government and it is mandated in a wide range of situations.  See this interesting report by the Office of Management and Budget (OMB) on the costs and benefits of unfunded mandates (2003)

It is also important to recognize that the techniques associated with b-c analysis are used on a regular basis by businesses and can even be used by you to make major purchasing decisions.  For example, if you are thinking of buying a car does it make economic sense to pay what is often a premium to purchase a hybrid vehicle to receive better gas mileage?  See this interesting article from the USA Today (5/12) that examines this very question. 

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Discounting tables from Patton and Sawicki

Federal discount rates for cost-effectiveness analyses - 2008 (federal register notice - and budget assumptions)

OMB Circular No. A - 94 - memo, guidelines,

OMB Circular No. A - 4 (regulatory analysis ) - memo, guidelines, circular

Economic Analysis of Federal Regulations under E.O. 12866 (guidelines)

Guidelines to standardize cost-benefit analyses and the format of accounting statements

To be added