Considerations in Applying Benefit-Cost Analysis to Preventive Interventions for Children, Youth, and Families Workshop Summary (2014) / Chapter Skim
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2 Benefit-Cost Analyses: Examples from the Field
2 Benefit-Cost Analyses: Examples from the Field
Pages 9-20
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From page 9... ...
A major activity of the institute is to conduct benefit-cost analyses of policy changes being considered by the state. As the institute's director, Steve Aos, said at the workshop, the institute essentially functions as an investment advisor for the spending authority of government.
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From page 10... ...
It then combines studies that would be relevant to the state of Washington, a procedure Aos described as not only good science but good politics. Legislators can be suspicious of results based on a single study, he said, but if the results derive from every relevant study done in a particular field, those results have resonance.
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From page 11... ...
Outcomes include reduced child welfare and victim costs, lower criminal justice costs, and savings in public assistance and health care. For example, the lower child welfare costs take into account the proportion of cases placed out of their homes and the marginal costs for foster care and other services provided to these youth.
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From page 12... ...
$24,131 Increased earnings Reduced crime (child & mother) $5,333 Lower CJ & victim costs Increased K–12 costs –$1,738 Higher K–12 costs Other $2,854 Pub asst, health care $ Deadweight cost of program –$4,933 Total Benefits per Family $26,743 Cost per Family $9,788 = $2.73 B/C Net Benefits (NPV)
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From page 13... ...
Third, the institute's results are calculated on an annual cash flow basis from three perspectives: that of taxpayers, that of participants in the program, and that of others who are affected by the program, such as the victims of crime. Different legislators can be interested in different aspects of the results, Aos pointed out, depending on whether they are on the fiscal committee, for instance, or the juvenile justice committee.
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From page 14... ...
COMMUNITIES THAT CARE2 Communities That Care is a preventive intervention that takes a public health approach to promoting positive youth development and reducing problem behavior. As described by Margaret Kuklinski, Communities That Care relies on coalitions of diverse stakeholders, including mayors, police chiefs, teachers, and parents, who receive training and carry out Communities That Care in their communities.
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From page 15... ...
The Communities That Care program relied heavily on board members, volunteers, and teachers donating their time, which raises additional questions about how to value these nonbudgetary economic resources, Kuklinksi pointed out. One approach would be to assume that the time cost is fully offset by the benefits volunteers and teachers receive, in which case the net opportunity costs would be zero.
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From page 16... ...
These standards cou apply to r s, s s uld research desiggn, the assessment of costs, and th estimation of benefits. For example, he n in com mplex multisit trials wher costs vary, the assessme of costs h te re ent has cations for disseminating preventive interventions Similarly, in implic d s.
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From page 17... ...
Moreover, the need for standards has increased as the number of studies and applications has increased. The results of benefit-cost analyses can include many types of information, including internal rates of return, cash flows, investment risks, discount rates, and benefits and costs organized by various stakeholders.
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From page 18... ...
Three randomized controlled trials of programs found savings in health care, welfare, and criminal justice costs. The Coalition for Evidence-Based Policy recently declared that the Nurse–Family Partnership program is in the first tier for being an effective program.
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From page 19... ...
Michalopoulos also made the point that significance tests are often the wrong choice for making policy decisions. For example, an intervention with an average net benefit of $400 and a standard error of $200 would be statistically significant, but if the standard error were $300, it would not be significant.
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From page 20... ...
He also called attention to two areas of tension: the contrast between the complexity of benefit-cost analyses and the simple answers policy makers want and need, and the need to focus on key outcomes while still measuring everything of importance. The diversity of outcomes from most interventions emphasizes the need to focus on key outcomes that can be monetized with reasonable certainty, Michalopoulos concluded.
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