Cost Benefit Analysis
Individuals and organizations are frequently presented with decisions about how best to allocate
limited resources. Public organizations in particular have an obligation to use consistent and
transparent analytic tools to inform tradeoffs among competing policy priorities such as the
environment, health, safety, and security. Economics provides a theoretical foundation for the
allocation of scarce resources, but in practice, there are a variety of challenges in measuring
benefits and costs in quantitative and monetary terms. Such challenges include determining how
to value benefits and costs experienced in the future, reductions in the risk of premature death and
injury, and the distribution of these impacts among affected populations, as well as appropriately
characterizing uncertainty. The ability to assess key assumptions and limitations is critical for
both producers and consumers of cost-benefit analysis.
Through case studies, discussions, readings, lectures, problem sets, written assignments, and
presentations, students will develop knowledge and skills that will enable them to:
• Understand and identify the assumptions and limitations of cost-benefit analyses.
• Critically assess cost-benefit analyses conducted by others.
• Evaluate and compare alternative policies using the tools of cost-benefit analysis and
• Communicate the results of the cost-benefit analysis to stakeholders in such a way as to
facilitate political or administrative processes.
• Apply the analytic tools and techniques of cost-benefit analysis and microeconomics in
the formulation and assessment of real-world policies.
• Contribute to the development of defensible and transparent cost-benefit analyses.
The learning objectives above will be evaluated by completion of the course requirements below.
Students must have completed EITHER 90-709 Intermediate Economic Analysis OR 90-710 Applied Economic Analysis, as well as 90-711 Empirical Methods.