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Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2016. Advancing the Power of Economic Evidence to Inform Investments in Children, Youth, and Families. Washington, DC: The National Academies Press. doi: 10.17226/23481.
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Glossary

Attrition: In the context of research studies, refers to the gradual loss of study participants, which can occur for a variety of reasons, including adverse effects of the treatment.

Average cost: Total cost divided by the quantity of output or the cost per unit of output. Also, in the context of this report, the total intervention cost divided by the number of participants. Average cost accounts for both fixed (or sunk) and variable costs. See also marginal cost.

Benefit-cost analysis (BCA): A method of economic evaluation in which both costs and outcomes of an intervention are valued in monetary terms, permitting a direct comparison of the benefits produced by the intervention with its costs (also referred to as cost-benefit analysis).

Benefit-cost ratio: A common way to express the results from a benefit-cost analysis. The ratio is calculated by dividing total intervention benefits by total intervention costs, after relevant discounting and inflationary adjustments have been made.

Break-even analysis: A method of economic evaluation that can be used when the outcomes of an intervention are unknown. Can be used to complement a cost analysis as a way of anticipating potential economic returns.

Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2016. Advancing the Power of Economic Evidence to Inform Investments in Children, Youth, and Families. Washington, DC: The National Academies Press. doi: 10.17226/23481.
×

Budgetary impact analysis: A special case of cost-savings analysis that examines the impact, year-by-year, of an intervention on the government budget for aggregate or specific agencies.

Constant dollar: An adjusted value of currency used for comparison of dollar values from one time period to another, free of the effects of inflation. Because of inflation, the purchasing power of a dollar changes over time; current dollars, or actual dollars paid, include inflationary effects. Current, also referred to as “nominal,” dollars can be converted to constant, or “real,” dollars through the use of a price index (e.g., consumer price index [CPI]) that measures inflation in a given time period, often annually, through this formula: Constant dollarsyear x = Current dollarsyear y × (CPI year x/CPIyear y).

Contingent valuation analysis: A method of obtaining estimates of the worth of a social good or benefit in which people are asked how much they would pay for a particular outcome given a particular hypothetical scenario.

Cost: In economic evaluation, the full economic value of the resources required to implement a given social intervention.

Cost analysis (CA): A type of cost and outcome evaluation that provides a complete accounting of the economic costs of implementing a given intervention. Cost analysis is one component of all other cost and outcome evaluation methods (see also benefit-cost analysis, cost-effectiveness analysis, and cost-savings analysis), although it may be of interest in its own right.

Cost-effectiveness (CE) ratio: A common way to express the results from a cost-effectiveness analysis. The ratio is calculated by dividing the intervention costs net of monetized outcomes (defined below) by the change in a focal outcome measured in its natural unit.

Cost-effectiveness analysis (CEA): A method of economic evaluation in which outcomes of an intervention are expressed in nonmonetary terms, typically their natural units. The outcomes and costs are compared with both the outcomes (using the same outcome measures) and the costs for competing interventions, or with an established standard, to determine whether the outcomes are achieved at reasonable monetary cost.

Cost-effectiveness acceptability curve: Displays the probability that an intervention yielded a positive return at different monetary values of a quality-adjusted life year (QALY).

Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2016. Advancing the Power of Economic Evidence to Inform Investments in Children, Youth, and Families. Washington, DC: The National Academies Press. doi: 10.17226/23481.
×

Cost-savings analysis: A type of cost and outcome evaluation that entails performing a benefit-cost analysis but only from the perspective of the government sector. The present value of the intervention’s costs is compared with the present value of the stream of future benefits to the government sector. See also benefit-cost analysis, cost analysis, and cost-effectiveness analysis.

Cost-utility analysis: A cost-effectiveness analysis that uses a quality-of-life measure (e.g., a disability-adjusted life year [DALY] or quality-adjusted life year [QALY]) as the unmonetized outcome.

Costs net of monetized outcomes: The cost of an intervention less the economic benefits resulting from the intervention’s impacts that have been expressed in dollar terms.

Counterfactual: The base condition used as the basis of comparison when evaluating an intervention. No treatment, the current situation, and the best proven treatment are common counterfactuals.

DALY (disability-adjusted life year): A general measure of disease burden on quantity of life lived. One DALY can be thought of as one lost year of “healthy” life.

Dependent variable(s): The factor(s) that change as a result of an experimental treatment or intervention, such as the academic skills of children who have participated in an early childhood education program.

Direct costs: May refer to those resources required to provide services directly to participants of the intervention (e.g., classroom time, home visits).

Discount rate: A factor used to estimate the value of future cash flows (i.e., future benefits of avoided costs) at the current equivalent value, used with the goal of attempting to take into account likely changes in valuation, opportunity costs (defined below), and other factors.

Discrete choice: A method for estimating shadow prices (defined below), referring to experiments in which respondents’ preferences are assessed from a sequence of hypothetical scenarios that vary on several attributes, which can include the price of the nonmarket commodity of interest.

Economic evidence (in the context of this report): The information produced from cost and cost-outcome evaluations, including cost analysis, cost-effectiveness analysis, and benefit-cost analysis.

Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2016. Advancing the Power of Economic Evidence to Inform Investments in Children, Youth, and Families. Washington, DC: The National Academies Press. doi: 10.17226/23481.
×

Economies of scale: Advantages that accrue when an intervention is conducted on a larger scale than initially, and that result from opportunities to use resources more efficiently and reduce average costs.

Effect size: The magnitude of results, or effects on participants, of a particular intervention.

Fixed costs: Costs that do not change, over a certain range, with variation in the amount of goods produced or services provided. In social interventions, often refers to costs that do not vary with the number of participants served.

Government sector: Represents individuals collectively as taxpayers who may bear the costs of an intervention or experience benefits as a result of its impacts.

Government perspective: Narrowly focused on a specific government agency or level of government (e.g., federal, state, local).

Impact: A change in outcome(s) that can be attributed to an intervention.

Independent variable: One of the characteristics of an experiment’s subjects that are considered in the study design, such as the age and gender of the participants in an early childhood intervention.

Indirect costs: May refer to the overhead costs (defined below) related to administrative functions of an intervention or to services not provided directly to but on behalf of the participants.

Intangible cost (or benefit): A cost (or benefit) that cannot be measured directly in dollar terms. In the case of the costs of crime, for example, intangible crime victim costs include pain and suffering and loss of the feeling of personal safety. See also tangible cost (or benefit).

Intent to treat: An approach to analyzing the results of a trial in which all participants are treated as if they received the intervention as intended, even if some did not.

Internal rate of return: For a given intervention, the discount rate that equalizes the present value of the future stream of benefits with the present value of the future stream of costs (i.e., the discount rate that sets net present-value benefits to zero). Discount rates below the internal rate of return will result in positive net present-value benefits, while the reverse is

Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2016. Advancing the Power of Economic Evidence to Inform Investments in Children, Youth, and Families. Washington, DC: The National Academies Press. doi: 10.17226/23481.
×

true for discount rates above the internal rate of return. See also benefit-cost ratio and net present-value benefits.

Intervention: In the context of this report, a broad term used to denote programs, practices, and policies relevant to children, youth, and families.

Intervention specificity: When an intervention’s specific purpose, intended recipients, approach to implementation, causal mechanisms, and intended impact can be described in sufficient detail.

Hidden costs: Additional resource costs needed to implement an intervention (e.g., resources for adoption, development, training, technical assistance, and sustainability). These costs may include resources required beyond the intervention to ensure full implementation

Knowledge brokering: A function often performed by translators or intermediaries who work at the intersection between producers and consumers of evidence to facilitate the diffusion and uptake of information.

Linked economic impacts: Impacts attributable to an intervention that are not directly caused by the intervention. For example, a delinquency intervention may have direct economic impacts on criminal justice system and victimization costs, as well as linked effects on lifetime earnings because of the relationship between reducing delinquency and increasing high school graduation.

Logic model: A pictorial representation of an intervention’s theory of change. Logic models typically show the relationship among resources, or inputs, needed to carry out an intervention; major activities involved in the intervention; and the results of the intervention, expressed as outputs, outcomes, and/or impacts.

Marginal cost: The cost to produce one more unit of output given current levels of production (i.e., the marginal change in cost for one more unit at the current level of operation). Marginal cost typically excludes fixed costs (defined above).

Market price: The price that reflects an individual’s or society’s willingness to pay for an outcome of interest.

Monetize: In benefit-cost analysis, monetize refers to the conversion of intervention impacts from nonmonetary to monetary terms.

Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2016. Advancing the Power of Economic Evidence to Inform Investments in Children, Youth, and Families. Washington, DC: The National Academies Press. doi: 10.17226/23481.
×

Monte Carlo simulation: The repeated drawing of uncertain parameters from assumed distributions to produce a distribution of possible outcomes. In benefit-cost analysis, used to translate uncertainty in predicted resource use, impacts, and their monetized values into a distribution of predicted net present-value benefits.

Multivariate regression model: A statistical procedure for examining the relationship among several variables. This statistical technique makes it possible to isolate the effect of an experiment on an outcome after the influence of other possible factors has been taken into account.

Net present-value (NPV) benefits: A summary measure from benefit-cost analysis, defined as the present value of the stream of benefits (or costs) that results from the impacts of an intervention less the present value of the stream of costs to implement the intervention. See also benefit-cost ratio and internal rate of return.

Net (present-value) savings: A summary measure from cost-savings analysis, defined as the present value of the stream of benefits (or costs) to the government sector that results from the impacts of an intervention less the present value of the stream of costs for the public sector to implement the intervention. See also internal rate of return.

Opportunity cost: The value of alternatives not chosen and calculated as part of an analysis of the costs of the alternative that was chosen.

Outcome: An attitude, action, skill, behavior, etc. that an intervention is intended to causally influence.

Overhead: Ongoing costs of carrying out an intervention or running an organization, such as space and administrative staff costs, that have not been tied specifically to a particular activity.

P-value: In the context of this study, the probability that an outcome was produced by chance rather than as a result of an intervention.

QALY (quality-adjusted life year): A general measure of disease burden on the quality and quantity of life lived. The QALY for a year in perfect health is valued at 1, less optimal health is valued at less than 1, and death is assigned a value of 0.

Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2016. Advancing the Power of Economic Evidence to Inform Investments in Children, Youth, and Families. Washington, DC: The National Academies Press. doi: 10.17226/23481.
×

Quasi-experimental design: An experiment designed to produce evidence of causality when randomized controlled trials are not possible, using alternative statistical procedures to compensate for nonrandom factors.

Randomized controlled trial: A study in which participants are assigned by chance to receive (or not receive) the intervention or treatment being studied. When the number of participants in the trial is sufficiently large, any differences among them that might influence their response to the treatment will be distributed evenly, and as a result, differences in response can be attributed to the treatment.

Return on investment (ROI): A method of economic evaluation used in special cases in which benefit-cost analysis is conducted for a specific stakeholder group.

Regression discontinuity design: A quasi-experimental analysis that can be used in program evaluation when randomized assignment is not feasible. It is based on the assumption that individuals who fall just above or below a cut-off point on a particular scale are likely to be similar, so that this group can be treated as varying randomly.

Revealed preference: An approach for estimating shadow prices (defined below). Estimates what people pay for products with the attributes that need to be valued but are not priced directly.

Selection bias: An unrecognized systematic difference between participants and controls that may explain differences in outcomes and therefore confounds assessment of intervention impact.

Sensitivity analysis: An analysis performed to address uncertainty in an economic evaluation.

Shadow price/shadow value: In the context of this study, the estimated true value of a resource or impact or cost of the results of a particular decision, as calculated when no market price is available or when market prices do not reflect the true value; a dollar value attached to an opportunity cost.

Societal perspective: Captures the public sector and the private sector and includes all stakeholders who have some relationship to an intervention as bearers of costs or as beneficiaries, as well as those who may be affected only indirectly.

Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2016. Advancing the Power of Economic Evidence to Inform Investments in Children, Youth, and Families. Washington, DC: The National Academies Press. doi: 10.17226/23481.
×

Stakeholders: A person, group, or organization that has an interest in or use for cost and outcome evaluation. The broadest stakeholder is society as a whole. Society as a whole may be subdivided into specific stakeholders, typically defined as the government sector (or individuals as taxpayers), intervention participants (as private individuals), and the rest of society (intervention nonparticipants as private individuals).

Standard error: A sample’s standard deviation divided by the square root of the sample size. The smaller the standard error, the more representative the sample will be of the overall population.

Stated preference: A method for estimating shadow prices (defined above) that uses survey data to estimate prices where markets do not exist or are distorted.

Tangible cost (or benefit): A cost (or benefit) that can be measured directly in dollar terms. In the case of the costs of crime, for example, tangible crime victim costs include medical expenses, property damage and loss, and lost wages. See also intangible cost (or benefit).

Time horizon: The period of time applied to the economic evaluation. At minimum, this includes the period over which the intervention is implemented. It is of note that for discrete interventions, outcomes may be observed only during the intervention period, may extend further into the future after the intervention ends, or may be projected beyond the period when outcomes were last measured.

(Interrupted) Time series design: A type of quasi-experiment in which measures on a sample or a series of samples from the same population are obtained several times before and after a manipulated (e.g., an intervention) or naturally occurring event.

Total costs: An intervention’s aggregate costs, calculated by multiplying all resources used by their unit costs and then summing these totals.

Variable costs: In contrast to fixed costs, those costs that vary as the amount of goods produced or participants served by an intervention varies.

Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2016. Advancing the Power of Economic Evidence to Inform Investments in Children, Youth, and Families. Washington, DC: The National Academies Press. doi: 10.17226/23481.
×
Page 241
Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2016. Advancing the Power of Economic Evidence to Inform Investments in Children, Youth, and Families. Washington, DC: The National Academies Press. doi: 10.17226/23481.
×
Page 242
Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2016. Advancing the Power of Economic Evidence to Inform Investments in Children, Youth, and Families. Washington, DC: The National Academies Press. doi: 10.17226/23481.
×
Page 243
Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2016. Advancing the Power of Economic Evidence to Inform Investments in Children, Youth, and Families. Washington, DC: The National Academies Press. doi: 10.17226/23481.
×
Page 244
Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2016. Advancing the Power of Economic Evidence to Inform Investments in Children, Youth, and Families. Washington, DC: The National Academies Press. doi: 10.17226/23481.
×
Page 245
Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2016. Advancing the Power of Economic Evidence to Inform Investments in Children, Youth, and Families. Washington, DC: The National Academies Press. doi: 10.17226/23481.
×
Page 246
Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2016. Advancing the Power of Economic Evidence to Inform Investments in Children, Youth, and Families. Washington, DC: The National Academies Press. doi: 10.17226/23481.
×
Page 247
Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2016. Advancing the Power of Economic Evidence to Inform Investments in Children, Youth, and Families. Washington, DC: The National Academies Press. doi: 10.17226/23481.
×
Page 248
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In recent years, the U.S. federal government has invested approximately $463 billion annually in interventions that affect the overall health and well-being of children and youth, while state and local budgets have devoted almost double that amount. The potential returns on these investments may not only be substantial but also have long-lasting effects for individuals and succeeding generations of their families.

Ideally, those tasked with making these investments would have available to them the evidence needed to determine the cost of all required resources to fully implement and sustain each intervention, the expected returns of the investment, to what extent these returns can be measured in monetary or nonmonetary terms, and who will receive the returns and when. As a result of a number of challenges, however, such evidence may not be effectively produced or applied. Low-quality evidence and/or a failure to consider the context in which the evidence will be used may weaken society’s ability to invest wisely, and also reduce future demand for this and other types of evidence.

Advancing the Power of Economic Evidence to Inform Investments in Children, Youth, and Families highlights the potential for economic evidence to inform investment decisions for interventions that support the overall health and well-being of children, youth, and families. This report describes challenges to the optimal use of economic evidence, and offers recommendations to stakeholders to promote a lasting improvement in its quality, utility, and use.

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