ECON 361 Cost-Benefit Analysis and Project Evaluation Spring 2024

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Cost-Benefit Analysis and Project Evaluation

Spring 2024

ECON 361

Course Description

Calendar Description for ECON 361:

Methods for evaluating private and public projects; decision rules, efficiency conditions, and methods of conducting cost-benefit analysis. Application of the technique. This course assumes prior familiarity with probability, expected values, and variance.

Prereq: ECON 201 or ECON 290; ECON 221 or any prior course in probability and/or basic statistics

Trade-offs are inherent to the economic policy-making process. Scarce public resources devoted to one program in one policy area inevitably constrain spending in all other policy areas. This course introduces the method of Cost-Benefit Analysis, which is instrumental in providing policy makers with specialized tools and information for determining the economic merits of various projects. This is achieved by carefully taking into account the comprehensive list of appropriately monetized and discounted costs and benefits to society that are associated with any policy. Relying on basic principles of microeconomics, the course will develop a sound understanding of the main advantages and limitations of the Cost Benefit Analysis method, along with a proficiency in both assessing and conducting such analyses in practice. This is achieved using a combination of theory, discussions, case studies and practical examples. New topics include updated discussions – based on the latest research – on experimental and behavioural evidence associated with non-pecuniary effects of employment, the social discount rate in the context of climate change mitigation and adaptation, cost-effectiveness and cost-utility analysis. An added emphasis on the practical applicability of each concept will permeate the course content.

Learning Outcomes

Successful students will be able to:

Comprehend the usefulness and limitations of the CBA process

Become proficient in employing the main microeconomic building-blocks as used in CBA, such as: willingness to pay and the accept, Pareto efficiency, the role of externalities, discounting, economic surplus, private and social cost and value

Understand the basic components of CBA, including: estimation of impacts, monetization, market and non-market valuation methods, estimation and prediction under uncertainty

Become an informed consumer, critic, and producer of CBA

Tentative Course Schedule

Please see the Course Schedule in LEARN for complete details.

Texts / Materials

Title / Name                                         Notes / Comments                  Required

Boardman, Greenberg, Vining, and                                                               Yes

Weimer. “Cost-Benefit Analysis:

Concepts and Practice”, 5th Edition,

Cambridge University Press, 2018.

There is an e-text purchase option for Boardman, available through our UW VitalSource e-store (https://uwaterloo-store.vitalsource.com/products/cost-benefit-analysis-anthony-e-boardman-v9781108245814?term=9781108401296).

Students may also find this textbook online, used or for rent at more affordable prices than a new print copy.

Previous editions of the text are also usable, however students should note that chapter numbers may differ, and some new content has been added in the latest version. Any reference to a chapter (or page number) in Boardman et al. refers to the 5th edition!

Recommended:

World Bank – Impact Evaluation in Practice

(https://openknowledge.worldbank.org/bitstream/handle/10986/25030/9781464807794.pdf?

sequence=2&isAllowed=y) , 2nd edition

Cost-Benefit Analysis in World Bank’s Projects

(https://openknowledge.worldbank.org/bitstream/handle/10986/2561/624700PUB0Cost00Box0361484B0PUBLIC0.pdf?

sequence=1&isAllowed=y)

Course reserves for students (https://uwaterloo.ca/library/services/course-reserves-students) are used in this course.

Course Reserves can be accessed using the Library Resources widget on the Course Home page in LEARN.

Student Assessment

Component                                           Value

Introduce Yourself                               Ungraded

Preliminary Activities                            Ungraded

Weekly Exercises                                  30%

Group Discussions                                 20%

Midterm Assignment                              20%

Final Project Assignment                        30%

Assignment Screening

Text matching software (Turnitin) will be used to screen assignments in this course. This is being done to verify that use of all material and sources in assignments is documented. In the first week of the term, details will be provided about the arrangements for the use of Turnitin and alternatives in this course. See Administrative Policy below for more information and links.