EEC 440 –Cost-Benefit Analysis
Professor: Dr. Simona Trandafir
Prerequisites: EEC 105 or permission of instructor
Catalog Description: Basic concepts in benefit-cost analysis. Measurement, comparison of benefits and costs over time, and criteria for evaluation of projects and public policies. Problems and case studies in evaluation of current natural resources issues.
Every time you make a decision you engage in some sort of benefit cost analysis. Should you continue your education/training or should you find a job? These decisions require you to compare the impacts or advantages and disadvantages of each option. Environmental projects decisions involve the same line of reasoning. The only difference being: instead of analyzing only our very own advantages and disadvantages, when environmental resources are involve we have to assess the societal advantages and disadvantages. In other words, each and every member of our society counts and their advantages and disadvantages of following a particular course of action should be counted.
Cost Benefit Analysis (CBA) is a core tool in applying economics to assess environmental and natural resource public programs and projects, such as pollution programs, energy projects, and human health policy. Policy analysts, government agencies, development banks and others use CBA to weigh whether the positive effects (benefits) of a proposed program or policy exceed the estimated costs. This course will provide you with a working knowledge of CBA concepts and methods. We will cover the basic concepts used to define benefits and costs in different cases. Discounting of future annual benefits and costs will be examined. Also to be considered is how non-marketed goods, equity, imperfect markets, and use of otherwise idle resources (e.g., labor) are included in CBA. Examples and problem sets will be used to reinforce your understanding of course material.
By the end of the semester students will be able to:
- Identify the benefits and costs of some environmental undertakings
- Discount future annual benefits and costs of environmental projects and public policies
- Asses the desirability of some environmental policies over others
- Identify the criteria for evaluation of projects and public policies
- Identify necessary data, steps, criteria and potential issues in conducting a CBA
- Conceptual foundations of CBA
- Microeconomic foundations of CBA
- Valuing benefits and costs in primary markets
- Valuing benefits and costs in secondary markets
- Discounting in CBA
- Dealing with uncertainty
- Use and non-use values
- Discount rates
- Predicting and monetizing benefits and costs
- Direct estimates of demand
- Revealed preference methods
- Contingent valuation methods
- Shadow prices
- Accuracy of CBA
Dr. Simona Trandafir
Visiting Assistant Professor
Department of Environmental and Natural Resource Economics
211 Kingston Coastal Institute
Dr. Trandafir is an environmental economist who specializes in transportation economics. Her current research interests are:
- container port competition;
- highway externalities and congestion pricing; and
- climate change.
Have ever wondered what the basis for choosing some environmental projects over others is? Or what is considered a benefit or a cost? Or whose benefits or costs count? Or whether these benefits and costs can, and should, be distributed fairly among members of society? This course will answer these questions (and many more) and equip you to become a better decision maker, whether you are on the regulatory or regulated side. On a more personal level, this course will offer you a perspective on how advantages and disadvantages of any decision we make should be considered and weighed to reach the best outcome possible.
- Society for Benefit-Cost Analysis – “The Society for Benefit-Cost Analysis is an international organization dedicated to the advancement, exchange of ideas, and research related to benefit-cost analysis (BCA), cost-effectiveness analysis, risk-benefit analysis, applied welfare economic analysis, and damage assessment.”
- U.S. Environmental Protection Agency (U.S. EPA) – The U.S. EPA is a governmental organization responsible with the implementation and enforcement of rules and regulations targeted at protecting the health and environment of our nation. The EPA’s National Center for Environmental Economics Webpage provides comprehensive guidelines for performing economic analyses for various environmental regulations and policies. Important issues such as benefits and costs and their distribution among members of society or particular groups are specified.