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On Balance: BCA, the Choice of Numéraire, and Weighted BCA

Benefit-cost analysis, as usually practiced, sums the monetary values of effects on individuals. It can be justified by the potential compensation test: if the total monetary gain to the “winners” (those who gain from a policy) exceeds the total monetary loss to the “losers” (those who are harmed), the “winners” could (in principle) pay compensation to the “losers” so that everyone would judge herself better off with the combined policy and compensation than without. The idea is that by summing the net benefits across individuals, BCA measures “efficiency” or the size of the social pie, and that questions about distribution can be evaluated separately. Logically, policies that expand the social pie permit everyone to have a bigger slice; a smaller pie guarantees that at least some people get a smaller slice. 

 

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On Balance: Benefit and Cost Considerations in Evidence-Based Foreign Policy

Over the course of the past few years, there has been greater attention and scrutiny as to the high cost of America’s “Endless Wars” and over the past few months, alarms have sounded at the estimated price tag of $2.313 trillion in treasure and approximate 243,000 in direct lives lost from the War in Afghanistan (2021, Brown University, Watson Institute Costs of War Project) as well as calls for resignations at the collapse of Kabul. Similarly, the question of what were the benefits, if any at all, and the associated and more philosophical question of “Was it Worth it?” are even more difficult to explain and justify. The answer to these questions will be for each individual and generation to ponder, but it is expected that government leaders and policymakers should fully consider and take into account the benefits and costs prior to the declaration of war – not years and certainly not decades after the fact.

 

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On Balance: So You want to Conduct a Benefit-Cost Analysis? Experts Share Their Stories

This blog series is a partnership of the Society for Benefit-Cost Analysis On Balance blog and Dr. Zoë Plakias’ Spring 2021 Benefit-Cost Analysis (AEDECON 5330) class at The Ohio State University. Students interviewed experts in benefit-cost analysis to learn about what they do and why they do it. All interviews have been edited for brevity and clarity with the help of Dr. Plakias and are shared with the approval of the interviewer and interviewee.

  • Expert: Dr. James Hammitt
  • Interviewer: Loryssa Lake

Dr. James Hammitt is a Professor of Economics and Decision Sciences at Harvard University. He is also the director for the Harvard Center for Risk Analysis and has affiliations with the Harvard University Center for the Environment, Harvard School of Public Health, Harvard Center for Risk Analysis, Harvard Environmental Economics Program, the Harvard China Project, and a joint appointment at the Toulouse School of Economics

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On Balance: So You want to Conduct a Benefit-Cost Analysis? Experts Share Their Stories

This blog series is a partnership of the Society for Benefit-Cost Analysis On Balance blog and Dr. Zoë Plakias’ Spring 2021 Benefit-Cost Analysis (AEDECON 5330) class at The Ohio State University. Students interviewed experts in benefit-cost analysis to learn about what they do and why they do it. All interviews have been edited for brevity and clarity with the help of Dr. Plakias and are shared with the approval of the interviewer and interviewee.

  • Expert: Dr. Sandra Hoffmann
  • Interviewer: Melissa Ferruso

Dr. Sandra Hoffmann is a Senior Economist with the Food Economics Division of the USDA Economic Research Service (ERS). She received her undergraduate education at Iowa State University and went on to earn a J.D. from the University of Michigan Law School. She holds a Ph.D. from the Department of Agricultural and Resource Economics, University of California, Berkeley and an M.A. in Agricultural Economics from the University of Wisconsin-Madison.  She worked on pesticide regulation as an attorney.  She also served on faculty at the University of Wisconsin-Madison and was a research fellow at Resources for the Future before joining USDA Economic Research Service. Most of her work with the USDA concentrates on food safety and on valuation of the health benefits related to public policies. I had the wonderful opportunity to meet with Dr. Hoffmann to discuss her work with the USDA, as well as the career and education paths that brought her to where she is today.

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On Balance: So You want to Conduct a Benefit-Cost Analysis? Experts Share Their Stories

This blog series is a partnership of the Society for Benefit-Cost Analysis On Balance blog and Dr. Zoë Plakias’ Spring 2021 Benefit-Cost Analysis (AEDECON 5330) class at The Ohio State University. Students interviewed experts in benefit-cost analysis to learn about what they do and why they do it. All interviews have been edited for brevity and clarity with the help of Dr. Plakias and are shared with the approval of the interviewer and interviewee.

  • Expert: Lisa A. Robinson
  • Interviewer: Katherine Bowman

Lisa A. Robinson is Deputy Director of the Center for Health Decision Science and Senior Senior Research Scientist at the Center for Health Decision Science and Center for Risk Analysis at the Harvard T.H. Chan School of Public Health. She served as the President of the Society for Benefit-Cost Analysis in 2014.

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