AN INTRODUCTION TO BENEFIT COST ANALYSIS
Public Affairs 518
This Outline is Subject to Change as New Material Becomes Available
Introduction
Benefit cost analysis is the dominant economic paradigm for normative economic analysis. This course is an introduction to it. The subject is extremely rich and can be approached on many different levels, both in terms of technique and in terms of philosophy. The aim of this course is to give students an understanding of many the practical aspects of benefit-cost analysis as well as its economic and philosophical foundations.
I assume in this course that you have mastered the material for PA 516. I do not advise this course for those who have not done well in PA 516. I assume also that the problems encountered in the financial sections will be fairly easy for you and that we do not need to spend a lot of time on these problems. If these assumptions are not valid, you need to take the course later at a time when the assumptions are valid or you need to make other arrangements to make them valid now-- e. g. by seeking extra help and by doing extra work on the financial problems.
Having said this, I would, however, note that benefit-cost analysis is like X country skiing. It is fairly easy to do at an elementary level and rather difficult to do at an advanced level. Thus everyone should find something of benefit in this course regardless of their level since we cover the topic at both an elementary and a somewhat more advanced level. Most practitioners do it at an elementary level and your successful completion of the course ensures that you will no more than most public project analysts about benefit-cost analysis.
Office Hours
Office Hours:; Wednesdays 1:30-2:30 and by Appt.
zerbe@u.washington.edu
Grader: Aaron Finkle, Economics Graduate Student
afinkle@u.
Savery Room 310C
Grades:
There will be no midterm and no final exam. There will be a series of problem sets and a series of questions related to case studies upon which your grade will based. These problem sets and case study questions are take home, open book exercises. You may confer on these problems with the TA and with fellow students but can not copy answers from others.
Textbook:
R. Zerbe and D. Dively, Benefit Cost Analysis in Theory and Practice, Harper Collins, 1994. There will be some additions to readings to be announced later.
No late problem sets will be accepted.
Packet of Materials = (P)
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CLASS |
TOPIC TO BE DISCUSSED |
CASE STUDY |
READINGS |
DATE |
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1 |
Introduction: plan of course: Intro. to Issues |
None Tasks: (1) hand out material, (2) collect names for an email list, (3) discuss requirements and objectives Lecture: Rational Thinking |
Monday Oct 1 |
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2 |
Introduction to Issues |
EMPHASIS ON SEASHORE EXAMPLE |
(1) Zerbe & Dively, Chap. 1 2) Lesser & Zerbe, "A Practitioner’s Guide to Benefit Cost Analysis," Chap. 7 in Handbook of Public Finance (ed. Thompson and Green) Marcel Decker, 1998., pp. 221-230. Objective: experience a mini benefit-cost exercise. |
Oct. 3 |
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3 |
Introduction to Issues |
REVIEW OF PROCEDURES IN STANDARD BENEFIT COST ANALYSIS |
1) Lesser & Zerbe continued "A Practitioner’s Guide to Benefit Cost Analysis," Chap. 7 in Handbook of Public Finance (ed. Thompson and Green) Marcel Decker, 1998., pp. 221-230. (2) Zerbe & Dively, Chap.2 Objective: discuss relationship between benefit-cost and rationale for government intervention. |
Monday Oct. 8 |
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4 |
Introduction to Financial Calculations
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FINANCE |
(1) Z & D, Chap 4, pp. 43-55, Problem Set 1 Due Objective: learn how to manipulate financial equations to solve real problems.
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Oct. 10 |
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5 |
Introduction to Financial Calculations continued |
FINANCE |
(1) Z & D, Chap 4, pp. 56-64, Objective: learn how to manipulate financial equations to solve real problems. |
Monday Oct. 15 |
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6 |
Making Financial Decisions |
FINANCE |
(1) Z & D, Chap. 9, pp. 176-204 Objective: learn how to manipulate financial equations to solve real problems |
. Oct. 17 |
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7 |
Making Financial Decisions |
FINANCE |
(1) Z & D, Chap. 9, pp. 204-210 & pp. 215-223 Objectives: learn how to manipulate financial equations to solve real problems |
Monday Oct. 22 |
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8 |
The Willingness to Pay and to Accept |
VALUATION |
(1) Z & D, Chapter 5: Sections 5.3.3 to 5.5.3, Problem Set 2 Due |
Oct. 23 |
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9 |
The Measurement of Aggregate Welfare Changes |
VALUATION |
(1) Z & D, Chapter 6 |
Monday Oct. 29 |
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10 |
Calculations of Costs and Benefits in Partial Equilibrium |
VALUATION |
(1) Z & D, Chapter 7, pp. 121-132 |
Oct. 31 |
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11 |
Calculations of Costs and Benefits in Partial Equilibrium |
VALUATION |
(1)Z & D, Chapter 7, pp. 132-144 (2) David M. Newbery , "Pricing and Congestion" from Layard and Glaister, (ed.) Cost Benefit Analysis, Cambridge Press, 1994, pp. 396-417 |
Monday Nov. 5 |
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12 |
Expanded Partial Equilibrium, and Some General Equilibrium |
VALUATION |
(1) Z & D, Chapter 7, pp. 145-153, prob. 1,2,4, 6,7 recommended Problem Set 3 Due |
Nov. 7 |
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NO CLASS VETERANS DAY MONDAY NOV 12 |
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13 |
The Place of Benefit Cost Analysis in Philosophy and in Valuation |
FOUNDATIONS |
(1)R. Zerbe, "The Purchase of Moral Satisfaction: forthcoming paper (2). Talbot Page, "Environmental Existentialism", Ecosystem Health (ed. by Constanza et al)
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Nov. 14 |
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15 |
The Place of Benefit Cost Analysis in Philosophy and in Valuation: Distributional Effects |
THE PROPANE MERGER CASE |
(1) Z & D, Chaps 11 & 12 (2) Zerbe @ Knott, The Propane Case |
Monday Nov. 19 |
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16 |
Think about putting in a section based on chap 21 of Boardman. |
To Be Determined |
Nov. 21 |
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17 |
Evaluating Social Programs |
SOCIAL PROGRAMS: |
PROBLEM SET 4 DUE (1) Plotnick, "Applying Benefit-Cost Analysis to Substance Use Prevention Programs", The International Journal of Addictions 29 (3) 339-359, 1994 (2) Boardman et al., p. 71-74 (on reserve) (3) Martha Burt, "Estimating the Public Costs of Teenage Childbearing", Family Planning Perspectives, 18 (5) pp. 221-226, 1986. (4) Steven Levitt, "The Effect of Prison Population Size on Crime Rates", Quarterly. J. of Econ. , pp. 319-351, May, 1996 (on reserve)
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Monday Nov. 26 |
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18 |
Public Sector Discount Rate |
DISCOUNT RATE |
(1) Z & D, Chap. 13 (2) Zerbe & Jones, "A Simple Guide to the Sophisticated Choice of Discount Rates for Benefit Cost Analysis" (paper written for this class- on reserve) |
Nov. 28 |
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19 |
Techniques for Analyzing Uncertainty |
UNCERTANITY |
PROBLEM SET 5 DUE (1)Z & D, Chap 17, probs. 1, 4 recommended (2) Excerpt from Chap 5, R. Zerbe, Efficiency in Law and Economics, Edward Elgar, 2001 (3) Robert Hahn, Chap. 10, Reg. Reform from Risks, Costs and Lives Saved, ed. Hahn, Oxford U. Press, 1996 (on reserve) |
Nov. 28 |
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20 |
Techniques for Analyzing Uncertainty |
UNCERTAINITY |
Monday Dec 3 |
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21 |
The Case of the Snail Darter & Tellico Dam. The Case of the Alouette River |
UNCERTAINITY & POLICY ANALYSIS |
(1) Z & D, Chap. 23 (2) T. McDaniels, Robin Gregory and Daryl Fields, "Democrating Risk Management: Successful Public Involvement in Local Water Management Decisions," 19 (3) Risk Analysis, pp. 497-510, 1999
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Dec. 5 |
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22 |
Impact Analysis and B/C Analysis |
To be determined |
Monday Dec 10 |
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23 |
Review |
Class Evaluation Forms |
Dec 12 |
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