Ten tools for understanding and performing cost-benefit analysis

by , January 22, 2013

We recently published the 9th and 10th parts of our online CBA toolkit: the Time Horizons tool and the Monetizing Benefits tool. The core set of 10 tools focuses on the foundational elements of a cost-benefit study. We encourage you to look at the main toolkit page on our website, as well as any of the tools you haven’t read.

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New CBKB tool: Monetizing benefits in cost-benefit analysis

by , December 27, 2012

CBKB’s cost-benefit analysis toolkit can help you understand or perform cost-benefit studies of justice-related initiatives. We just published the Monetizing Benefits tool, which discusses methods used to assign a dollar value to intangible benefits when performing calculations for a cost-benefit analysis. The new tool also describes how to address benefits that are rarely, if ever, monetized.

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New CBKB tool: Time horizons in cost-benefit analysis

by , December 20, 2012

CBKB’s cost-benefit analysis toolkit can help you understand or perform cost-benefit studies of justice-related initiatives. We just published the Time Horizons tool, which discusses how to choose the appropriate length of time to measure the costs and benefits of a policy when conducting a CBA. The new tool also describes how different time horizons can affect CBA results.

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New CBKB tool: Sensitivity analysis

by , September 3, 2012

CBKB’s cost-benefit analysis toolkit can help you understand or perform cost-benefit studies of justice-related initiatives. We just published the Sensitivity Analysis tool, which explains how to address uncertainties in cost-benefit studies. The new tool describes four methods of performing a sensitivity analysis and explains when you might use a particular method.

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May focus on reading cost-benefit analyses: A CBKB guide

by , May 31, 2012

If you have been following CBKB and reading our blog, you know that we recently hosted a webinar called “Making Sense of the Bottom Line: A Guide to Reading Cost-Benefit Reports.” We also created this two-page handout, which summarizes the webinar and explains what to look for in a justice-related cost-benefit analysis (CBA).

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May focus: What to look for in a cost-benefit analysis

by , May 3, 2012

In last week’s webinar, we provided a guide on how to read cost-benefit analysis (CBA) reports. This month on the blog we’ll continue in the same vein and share checklists and other resources to help you know what to look for in a CBA.

If you’re new to cost-benefit analysis, you may want to read about CBA basics, including a glossary of commonly used terms.

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April focus: Resources on cost-benefit methods on our radar screen

by , April 19, 2012

We keep certain resources within arm’s reach when preparing a cost-benefit analysis. Here are some of the places we look when we need information about cost-benefit methods.

Cost-Benefit Analysis: Concepts and Practice (2011)
Now in its fourth edition, this textbook by Anthony Boardman, David H. Greenberg, Aidan Vining, and David Weimer is one of the most comprehensive sources on cost-benefit analysis.

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New tool on reporting cost-benefit analysis results

by , March 6, 2012

CBKB’s cost-benefit analysis (CBA) toolkit can help you understand and perform cost-benefit studies of criminal justice initiatives. We just added the Reporting Results tool, which discusses three metrics commonly used to report CBA findings.

The new tool describes how to calculate the benefit-cost ratio, return on investment, and net present value and discusses how these metrics differ.

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New tool on discounting

by , December 8, 2011

CBKB’s cost-benefit analysis (CBA) toolkit can help you understand and perform cost-benefit studies of criminal justice initiatives. The discounting tool describes how to compare the dollar value of costs and benefits received in different time periods. Discounting is a key component of accurately measuring an initiative’s economic impact because future benefits and costs must be adjusted to account for the time value of money.

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Discounting

by , November 4, 2011

Cost-benefit studies examine the future benefits and costs of a program or policy as well as current benefits and costs. Discounting provides a way to compare the dollar value of costs and benefits received in different time periods to present values. This document describes the purpose of discounting, explains how it is used in cost-benefit analysis (CBA), and provides information on selecting discount rates.

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Monetizing Benefits

by , August 4, 2011

Cost-benefit analysis (CBA) compares the positive and negative outcomes of a policy or program by converting them into a common unit: dollars. Because some benefits are not naturally expressed in dollar terms, they must be monetized—that is, converted into a dollar value—to be included in a cost-benefit calculation. This document explains the methods commonly used to monetize benefits.

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Time Horizons

Cost-benefit analysis (CBA) examines the costs and benefits of policies over a long-term period. The period in which benefits and costs are assessed is referred to as the time horizon or the time frame. CBAs should, in concept, measure both costs and benefits for as long as they persist, but in practice may estimate them for a shorter duration.

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Sensitivity Analysis

Some degree of uncertainty is inherent even in the most rigorous cost-benefit study. The impacts of policies or programs may be difficult to measure or predict, and the value of those impacts may be hard to monetize. Sensitivity analysis is a group of techniques that can be used to examine the degree of uncertainty in a cost-benefit analysis (CBA) and how that affects a study’s results.

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Reporting the Results of Cost-Benefit Analysis

by , August 1, 2011

Cost-benefit analysts typically use one of several metrics—or a combination of them—to report their findings. The benefit-cost ratio, return on investment, and net present value report the results of a cost-benefit analysis by comparing discounted costs with discounted benefits. This document briefly describes each metric, the information it conveys, and its advantages for reporting cost-benefit findings.

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New tool on cost-benefit analysis and victim costs

by , March 18, 2011

CBKB’s cost-benefit analysis (CBA) toolkit can help you understand and perform cost-benefit studies of criminal justice initiatives. The Victim Costs tool, one of 10 tools in the toolkit, discusses how to apply victim costs in a CBA.

A comprehensive CBA of an initiative that affects crime, whether directly or indirectly, needs to take into account victim costs.

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Types of Economic Analysis

by , March 31, 2011

Policymakers have a variety of economic analyses at their disposal to help them assess policies and programs. Cost analysis, fiscal impact analysis, cost-effectiveness analysis, and cost-benefit analysis are among the most commonly used tools. This document describes these four types of economic analysis, compares and contrasts them, and explains which circumstances warrant their use.

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Taxpayer costs

by , May 31, 2011

Taxpayer costs, also known as government costs, are a key consideration in the policymaking process. Decision makers want to know how much it will cost the government to implement criminal justice policies and programs, so it is critical that you estimate these costs accurately in a cost-benefit analysis (CBA). This document outlines the taxpayer costs of the criminal justice system and provides guidance on how to measure these costs.

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Victim Costs

by , September 1, 2010

Crime victims may experience substantial financial, psychological, and physical harm. In recent years, economists have placed a dollar value on these harms to measure the victim costs of crime. This document defines victim costs, describes the methods used for estimating them, provides cost estimates from recent studies, and discusses the role of victim costs in cost-benefit analysis.

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Marginal Costs

by , November 4, 2010

A reliable projection of costs and benefits for any initiative requires the use of accurate, credible cost estimates. Too often, average costs are used to conduct a cost-benefit analysis, when marginal costs are the more appropriate measure. This document defines marginal costs, explains how they differ from average costs, and outlines several approaches for estimating marginal costs.

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Perspectives

by , January 3, 2011

From an analytical standpoint, a cost-benefit analysis (CBA) should capture the costs and benefits to all parties affected by the policy under examination. That is, a CBA should include the perspective of all relevant stakeholders, to provide a comprehensive view of the policy’s impact. In reality, however, studies may not account for all perspectives, given the practical challenges of conducting rigorous CBAs, as well as diverse opinions about which perspectives matter in an analysis.

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