ECF5560 · Cost benefit analysis and economic decision making

Overview

This unit introduces cost benefits analysis (CBA) and economics of decision making to what is CBA including scoping the nature of costs and benefits, understanding data requirements, and the importance of selecting the right base line for marginal analysis. It will then look more precisely into the nature of opportunity cost including the monetary and non-monetary opportunity costs of consumption and production, as well as the different categories of cost including direct and indirect costs, as well as, indirect market costs and administrative vs substantive costs in relation to policy proposals. The unit will also introduce the concept of valuation and estimation of benefits including the difference between market and shadow pricing, public goods and externalities, as well as, stated preference (i.e. contingent valuation and choice modelling) and revealed preference (i.e. hedonic pricing, market data, travel cost method and defensive expenditure) and benefit transfer valuation techniques. Finally the unit will explore the nature and importance of discounting and accounting for uncertainty and risk, including sensitivity analysis and full risk analysis (Monte Carlo analysis), as well as, look at the importance of distributional effects and decision rules including Net Present Value, Internal Rate of Return and Benefit-Cost Ratio and the balance score card approach or multi criteria analysis (MCA).

Offerings

Assessment

The Handbook does not list a final examination among the assessment items. That is not a guarantee there is none.

Assessment details may change. Please refer to the assessment information in Moodle closer to the start of the teaching period.

Requisites

The Handbook lists no prerequisite, corequisite or prohibition for this unit.

Learning outcomes

1. have broad appreciation of the concepts behind cost benefit analysis
2. understand the main elements behind the concept of opportunity cost and quantifying the cost of proposals for economic decision making purposes
3. understand concepts relating valuation of proposals for economic decision making
4. explain the difference of and when and where to use different decision rules
5. undertake CBA analysis
6. apply CBA to real world problems.

Workload

Minimum total expected workload to achieve the learning outcomes for this unit is 144 hours per semester typically comprising a mixture of scheduled learning activities and independent study. Independent study may include associated readings, assessment and preparation for scheduled activities. You are expected to complete all pre-class activities prior to your scheduled class, and post-class activities should be completed after your scheduled class. Learning activities may include a combination of teacher directed, peer directed and online engagement activities.

Student experience, not official rules. Nothing here changes what the Handbook says.