Justice policymakers must make tough decisions with limited resources. Every budget decision is a selection of one option at the expense of possible alternatives. Any number of investments, whether in law enforcement, corrections, probation—or even programs outside the justice system, such as early childhood education—can promote public safety. The critical question for policymakers is which choice produces the greatest net benefit to society. Increasingly, government officials and other decision makers are turning to cost-benefit analysis—an economic tool that compares the costs of programs with the benefits they deliver—to help weigh their options.
How is CBA conducted?
Cost-benefit analysis compares an investment’s costs and benefits in the long run. The hallmark of CBA is that costs and benefits are expressed in monetary terms so that they can be directly compared. Because the investment’s effects are expressed in dollars, CBA enables decision makers to compare policies and programs that have different purposes and outcomes. To produce these results, an analyst must complete the following steps:
- Identify the investment’s potential impacts.
- Quantify the investment’s impacts
- Determine marginal costs
- Calculate costs, benefits, and net present value
- Test the assumptions
- Report the results
For complete instructions on conducting a CBA, please see the Cost-Benefit Analysis and Justice Policy Toolkit
What to Look For in a CBA Report
Making sense of the growing body of criminal justice CBAs presents its own set of challenges for readers new to this methodology. How do you know whether a CBA is sound? To help you assess a study’s strengths and weaknesses, keep in mind 10 important questions as you review a cost-benefit report:
- Do the authors have a bias that may affect the analysis?
- Where did the data come from?
- How was the effectiveness of the investment estimated?
- Did the analysis count all of the investment’s costs?
- Did the analysis accurately estimate taxpayer costs?
- Did the analysis measure the policy’s effect on all of the relevant parties?
- What potential costs or benefits were not monetized?
- For how long did the study measure costs and benefits?
- How did the study adjust future costs and benefits?
- How much confidence should readers have in the results?
For more information on interpreting CBA finding, please see Using Cost-Benefit Analysis for Justice Policymaking