Box 3-1

Value of Information from a Decision-Making Point of View

A useful perspective in designing or redesigning a public statistical system or survey is to consider the value of information. The perspective is valuable because the purpose of the system is to improve the efficiency of actions by the government and other users of the data. Empirical valuation of information is extremely difficult (National Research Council, 1976a; Savage, 1985) for a variety of reasons: uses may not be identified, uses may be identified but the role of data may be imperfectly understood, valuation of alternative choices under different states of nature may be infeasible. Some examples in which the valuation of information may be feasible are discussed by Spencer (1982).

The basic idea for the value of a survey such as the NCVS may be illustrated by the following stylized example. Suppose that in the absence of NCVS data, alternative actions A1, A2,…,Am would be taken with respective probabilities p1, p2,…,pm. With the NCVS, the alternative actions A1, A2,…,Am are taken with respective probabilities q1, q2,…,qm. The expected value of information for this use alone may be represented as

where U(A1) is the expected value if action A1 is taken. The information is valuable if it leads to higher probabilities of more valuable actions being taken. Differences in values of alternative actions may reflect the differences in value of passing one law (or one version of a law) rather than another. Even if dollar valuation is not feasible, a sense of the impact of alternative laws may lead to a sense that the difference in value is on the order of tens or hundreds of thousands of dollars, or perhaps more.

this section, we take a practical approach to assessing the value of NCVS information by comparing the cost of the NCVS with several relevant benchmarks: estimates of the fiscal cost of crime, the costs of other federal survey data collections, and the expenditures of other countries in measuring victimization.

The Cost of Crime

The total cost of crime in the United States—including both tangible economic costs and intangible costs and covering such components as damages to victims and expenditures on the justice and correctional systems—is an elusive quantity to estimate. A large research literature has tried to estimate the economic costs of crime, and we briefly summarize some points from this work in this section. There is certainly a large speculative element to these figures, and the calculation of intangible costs is especially uncertain. In raising the cost of crime as a comparison benchmark for the NCVS, we do not suggest that the costs of crime and the costs of victimization measurement should be directly linked (e.g., that spending on the NCVS should be some set fraction of the cost of crime). Instead, we offer the comparison for two purposes. The first is to reinforce the idea that crime is a sufficiently important and complex phenomenon facing the United States as to warrant

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