This topic intersects the aspect of ethics with economic theories in policy analysis by using the tool that is often referred to as “cost-benefit analysis.” The goal of a cost-benefit analysis is to measure a project’s economic efficiency by providing a formal description of the associated costs and benefits. This topic will be concerned with the evaluation of private, non-profit, and public projects from a societal viewpoint. Cost-benefit analysis has become almost a standard practice in the realm of policy analysis.
Topic Learning Outcome: Students will consider applications of cost-benefit analysis to a wide range of public policy issues such as economic development, infrastructure, social, and environment projects. Also, students will eventually be equipped with the theoretical background and practical skills required to be able to critically assess a cost-benefit analysis and to perform their own cost-benefit analysis.
Core Concepts associated with this Topic:
University of Toronto: PPG 2022 (Moral Foundations of Public Policy)
Jonathan Wolff, “Safety,” Ethics and Public Policy, ch. 4.
Harvey S. Rosen, Bev Dahlby, Roger S. Smith and Paul Boothe, “Cost-Benefit Analysis,” ch. 7 of Public Finance in Canada (Toronto: McGraw Hill Ryerson, 2003).
Amartya Sen, “The Discipline of Cost-Benefit Analysis,” Journal of Legal Studies, 29 (2000).
Elizabeth Anderson, Value in Ethics and Economics (Cambridge, MA: Harvard University Press, 1993), ch. 8.
Cass Sunstein, “Cognition and Cost-Benefit Analysis,” Journal of Legal Studies, 29 (2000).
Carleton University: PADM-5215 (Benefit-Cost Analysis)
R.J. Brent (2006), Applied Cost-Benefit Analysis , 2nd edition, Edward Elgar Publishing: Northhampton, MA, United States. Chapter 1 (Introduction to CBA), Chapter 2 (Compensation Tests), Chapter 6 (Public Goods), Chapter 7 (Risk and Uncertainty) & Chapter 8 (Measurement of Intangibles).
D. Pearce, G. Atkinson and S. Mourato (2006), Cost-Benefit Analysis and the Environment-Recent Developments, OECD Publishing. Chapter 2 (The Foundations of Cost-Benefit Analysis) & Chapter 3 (The Stages of a Practical Cost-benefit Analysis)
American University: PUAD-671 (Cost-Benefit Analysis)
Boardman, Anthony E., David H. Greenberg, Aidan R. Vining, and David L. Weimer. Cost-Benefit Analysis: Concepts and Practice. 4th edition. Pearson-Prentice Hall, 2011. Chapter 3 (Basic Microeconomic Foundations of Cost-Benefit Analysis), Chapter 6 (Discounting Benefits and Costs in Future Time Periods), Chapter 7 (Dealing with Uncertainty: Expected Value, Sensitivity Analysis, and the Value of Information), Chapter 12 (Valuing Impacts from Observed Behavior: Direct Estimation of Demand Curves) & Chapter 13 (Valuing Impacts from Observed Behavior: Other Revealed Preference Methods)
Krutilla, K. (2005). “Using the Kaldor-Hicks Tableau Format for Cost-Benefit Analysis and Policy Evaluation.” JPAM, 24(4).
Cellini, S. (2008). “Causal Inference and Omitted Variable Bias in Financial Aid Research: Assessing Solutions.” The Review of Higher Education, 31(3).
Manski, C. F. (2010). “Policy Analysis with Incredible Certitude” NBER Working Paper #16207.
Vining, A. & D. Weimer (2010). “An Assessment of Important Issues Concerning the Application of BenefitCost Analysis to Social Policy” JBCA, 1(1).
Sample Assessment Questions:
1.) Pick one of the recent policies enacted by the government (federal, provincial or local) and critically assess the cost-benefit analysis performed before decision-making. If no CBA has been performed on such policy, discuss hypothetical costs and benefits of the decision.
Page created by Matthew Seddon; updated by James Ban on 18 August 2015.