EPPS 7304 (501) Spring 2013 Professor Simon Fass Wednesday 7:00-9:45 pm SLC 2.304 Office: GR 3.224 Office hours: TBD phone: (972) 883-2938 e-mail: please use elearningpilot COST-BENEFIT ANALYSIS (preliminary) Cost-benefit analysis, an important analytical method for policy and program assessment in the public sector, is a structured approach to weighing the pros and cons of alternative courses of action. More simply, it compares the benefits that come from projects, programs, or policies to the costs that these actions incur to produce the benefits. This comparison helps to distinguish public and private actions that make better use of resources to reach their objectives from actions that make poorer use of them. Organized around basic microeconomic theories of consumer and producer behavior, the course provides a conceptual and practical introduction to the method. Themes covered include identification of cost and benefit components, valuation of these components, converting future to present values, dealing with uncertainty, estimating impacts, and accounting for transfers between winners and losers that invariably result from public intervention. Learning Outcomes: The student will: become familiar with theoretical underpinnings and other aspects of cost-benefit analysis; appreciate the wide range of applications for this method of evaluation; distinguish between high and low quality analyses, and be able to critique both well; and be able to contribute to preparation of cost-benefit studies and research in practice. Pre-requisite: None, although it is helpful to have completed a course in microeconomics. In any case, initial class sessions will review the essentials. Required Texts: Boardman, Greenberg, Vining and Weimer, Cost Benefit Analysis: Concepts and Practice, 4th edition, Prentice Hall, 2011. [BGVW] Other required readings will be available on elearningpilot or library electronic reserve Grading Criteria: The course grade is based on the results of five in-class quizzes (each worth 12% of the final grade), a case assignment (15%) and a research paper (25%). The grading structure is: 92% and higher = A (4.00) 88% to 91.9% = A- (3.67) 84% to 87.9% = B+ (3.33) 80% to 83.9% = B (3.00) 76% to 79.9% = B- (2.67) 72% to 75.9% = C+ (2.33) 68% to71.9% = C (2.00) less than 68% = F (0.00) CLASS SCHEDULE (subject to change on extremely short notice) 1. January 16: Introduction to the Course and the Method BGVW: Ch 1. Introduction to Cost-Benefit Analysis Texas Institute for Economic Development. 2005. Economic Impact Study: A Study of the Economic Impact of The University of Texas System, prepared by the Institute for Economic Development, University of Texas at San Antonio. 1
2. January 23: Foundations BGVW: Ch 2. Conceptual Foundations of Cost-Benefit Analysis BGVW: Ch 3. Microeconomic Foundations of Cost Benefit Analysis Heinzerling, L. and Ackerman, F. 2002. Pricing The Priceless: Cost-Benefit Analysis of Environmental Protection, Georgetown Environmental Law and Policy Institute Georgetown University Law Center, Washington D.C. 3. January 30: Estimating Values for Benefits and for Costs BGVW: Ch 4. Valuing Benefits and Costs in Primary Markets BGVW: Ch 5. Valuing Benefits and Costs in Secondary Markets 4. February 6: Estimating Values Example of Casino Gambling Grinols, E. and J. Omorov, 1996, Development or Dreamfield Delusions?: Assessing Casino Gambling s Costs and Benefits, The Journal of Law and Commerce, Fall, 1996 Reno, R. 1996, The Diceman Cometh: Will Gambling be a Bad Bet for Your Town? Policy Review, March-April n76 p. 40(6) Grinols, E. and D. Mustard. 2001. Business Profitability Versus Social Profitability: Evaluating Industries with Externalities, the Case of Casinos, Managerial and Decision Economics 22, pp. 143 62. 5. February: 13 QUIZ 1 [Outline of Research Paper Due] 6. February 20: Estimating Values Examples of Team Sports and of Risk Noll, R and A. Zimbalist. 1997. The Economic Impacts of Sports Teams and Facilities, in Noll, R and A. Zimbalist, eds. Sports, Jobs & Taxes: The Economic Impact of Sports Teams and Stadiums, Brookings Institution, pp.55-91. Herzog, H and A. Schlottman. 1990. Valuing Risk in the Workplace: Market Price, Willingness to Pay, and the Optimal Provision of Safety, Review of Economics and Statistics, pp. 463-70. Durkin, J.T., and Greeley, A.M. 1991. "A Model of Religious Choice Under Uncertainty: On Responding Rationally to the Nonrational," Rationality and Society, 3:2. 178-196 7. February 27: The Effect of Time on Value BGVW: Ch. 6. Discounting Benefits and Costs in Future Time Periods. BGVW: Ch.10. The Social Discount Rate Lind, R. 1999. Chapter 17: Analysis for Intergenerational Decision making, in P. Portney and J.P. Weyant, eds. Discounting And Intergenerational Equity, Resources for the Future. Newell, R. and W. Pizer, 2002. Discounting the Benefits of Climate Change Policies Using Uncertain Rates Resources, Winter, Issue 146. Moore M.A., Boardman, A.E., Vining, A.R., Weimer D.L. and Greenberg, D.H. 2004. Just Give Me a Number! Practical Values for the Social Discount Rate, Journal of Policy Analysis and Management, Vol. 23, No. 4, 789 812 8. March 6: QUIZ 2 [Selection of Case Assignment Due] 2
9. March 20: Value and Uncertainty BGVW: Ch 7. Dealing with Uncertainty: Expected Values, Sensitivity Analysis and the Value of Information BGVW: Ch 9. Existence Value Camerer, C. and H. Kunreuther.1989. Decision Processes for Low Probability Events: Policy Implications, Journal of Policy and Management, September. 8(4) pp.565-92. 10. March 27: Estimating Effects from Evaluations and from Behavior BGVW: Ch 12. Valuing Impacts from Observed Behavior: Experiments and Quasi-Experiments BGVW: Ch 13. Valuing Impacts from Observed Behavior: Direct Estimation of Demand Curves 11. April 3: QUIZ 3 [Case Assignment Due Before 5:00 pm] 12. April 10: Estimating Effects from Observation and from Surveys BGVW: Ch 14. Valuing Impacts from Observed Behavior: Indirect Market Methods BGVW: Ch 15. Valuing Impacts through Surveys: Using Surveys to Elicit Information BGVW: Ch 16. Shadow Prices from Secondary Sources Kiel, K. and J. Zabel. 2001. Estimating the Economic Benefits of Cleaning up Superfund Sites: The Case of Woburn, Massachusetts, Journal of Real Estate Finance & Economics, (22(2) pp. 163-184. Hanemann, W.M. 1994. Valuing the Environment Through Contingent Valuation, Journal of Economic Perspectives, 8(4), pp. 19-43. Diamond, P. and J. Hausman, 1994. Contingent Valuation: Is Some Number Better than No Number? Journal of Economic Perspectives, 8(4), pp. 45-64 13. April 17: Cost Effectiveness and Equity BGVW: Ch 18. Cost-Effectiveness Analysis. BGVW: Ch 19. Distributionally Weighted Cost-Benefit Analysis Zimmerman, D. 1997. Chapter 4: Subsidizing Stadiums: Who Benefits, Who Pays? in Noll, R and A. Zimbalist, eds. Sports, Jobs and Taxes: The Economic Impact of Sports Teams and Stadiums, Brookings Institution, pp. 119-145. Wolfson, A. 2001. The Costs & Benefits of Cost-Benefit Analysis, Public Interest, Fall, 93-9 14. April 24: QUIZ 5 15. May 1: Research Paper Due Before 5:00 pm ASSIGNMENT GUIDELINES Case Assignment The case assignment requires finding an applied cost-benefit study - one that no other student selects and that also meets the instructor s criteria for appropriateness for the course - and then preparing an assessment of the study. The assessment should be 800 (± 80) words in length, and conform to writing and formatting guidelines detailed further below. The case selected must be approved by March 6 th. The assignment is due on April 3 rd. 3
Research Paper The research paper is an empirical or methodological work related to cost-benefit analysis. It has two (2) parts. First, due on February 15 th, is a 300-word (maximum) outline that identifies and discusses the paper s theme, and also provides a preliminary outline for it. Make sure that you state the issue at hand at the top of the first page and, in a sentence or two, tell me why you propose to address this issue. The second part, due on May 1 st, is a 2000 original word final paper that contains: an explanation of why the issue is important and for whom it is important; your literature search and review; and your research results and conclusions. Please see the detailed guidelines, below, for further guidance on preparing the paper. Areas that the research paper can focus on include (but are not limited to): Methodological themes benefit transfer standing opportunity cost of funds individual rationality contingent valuation value of time option, existence values value of life hedonic pricing discount rate ethical, political issues Sectoral themes drug war sports facilities, events information agriculture redistribution programs housing professional regulation economic development industry policy, regulation waste disposal research and development public works forestry water supply education and training migration energy and conservation wilderness, wildlife water pollution transportation, safety parks and other recreation noise pollution health and health regulation hazardous waste commercial fisheries crime and drug abuse air pollution Guidelines for Preparing the Research Paper Literature review: All research reviews existing literature on the subject. This ensures that your work does not re-invent a long-discovered wheel. The literature review helps to show how what you write fits into a relevant body of knowledge. The literature review shows that you have enough understanding of what exists about your theme to make coherent statements about the current state of knowledge of cost-benefit analysis in general and in specific relation to the theme that you are looking at. The literature review reveals gaps in what is known, if there are any, which you can use as a basis for an original contribution to the subject matter. Writing: The logic and presentation of what you submit ought to be clear to me. Say what you want to say in your own words. Write like you talk is good rule. If I understand what you say when you talk but cannot understand what you say when you write, then there is a brain-hand dysfunction that needs cure. Do not be intimidated by what you think may be an academic writing style. Most researchers would not be researchers if they had talent for writing. Give me, the reader, a "roadmap" at the beginning of your outline and paper and, as appropriate, recap sentences at the beginning and end of subsections. If I cannot figure out within a minute or so what your submission is about and where it will take me, then you are in trouble. If I get bored, you are in deeper trouble. Format: I have specific preferences about format. Please try to adhere to them : margins: 1-inch on all sides paper: white bond, 8½ inches by 11 inches orientation: portrait font: times new roman, regular, 12 points alignment: left justification: none page numbering: on all pages, centered at the bottom line spacing: single-space within paragraphs (not default 1.15 space), double-space between paragraphs indentation: none 4
paper title: at top of first page on one line (i.e. no cover sheet) student name: next line after the title citations in text: in any standard format (e.g., Smith, 2004) bibliography: in standard format (e.g., as you see them at the end of published articles) spelling: no errors (i.e., use spelling checker, and also review manually for wrong words) grammar: do not be horrible (i.e., use grammar checker set to strictest/most formal level) endnotes: place after bibliography (no footnotes) tables or graphics: include only if essential, place at very end. Length: 2000 (± 200) original words, excluding quoted material, bibliography, notes, tables, graphics etc. In other words, the adjective original refers to what you yourself write. Though rarely necessary, you can include quoted text. But this text does not count as part of the required length. Media: All submissions should be electronic via elearningpilot, saved in any format that MSWord or WordPerfect can read directly. Honesty: It is better to be safe than sorry. Please heed the notice on Academic Integrity from the UTD Office of Judicial Affairs detailed further below. Make-up Exams Extra Credit Late Work Class Attendance Classroom Citizenship Additional Course Policies: none none 10% of case assignment or research paper value is lost for each day overdue. not obligatory civility and politeness are appreciated Student Conduct and Discipline The University of Texas System and The University of Texas at Dallas have rules and regulations for the orderly and efficient conduct of their business. It is the responsibility of each student and each student organization to be knowledgeable about the rules and regulations which govern student conduct and activities. General information on student conduct and discipline is contained in the UTD publication, A to Z Guide, which is provided to all registered students each academic year. The University of Texas at Dallas administers student discipline within the procedures of recognized and established due process. Procedures are defined and described in the Rules and Regulations, Board of Regents, The University of Texas System, Part 1, Chapter VI, Section 3, and in Title V, Rules on Student Services and Activities of the university s Handbook of Operating Procedures. Copies of these rules and regulations are available to students in the Office of the Dean of Students, where staff members are available to assist students in interpreting the rules and regulations (SU 1.602, 972/883-6391). A student at the university neither loses the rights nor escapes the responsibilities of citizenship. He or she is expected to obey federal, state, and local laws as well as the Regents Rules, university regulations, and administrative rules. Students are subject to discipline for violating the standards of conduct whether such conduct takes place on or off campus, or whether civil or criminal penalties are also imposed for such conduct. Academic Integrity The faculty expects from its students a high level of responsibility and academic honesty. Because the value of an academic degree depends upon the absolute integrity of the work done by the student for that degree, it is imperative that a student demonstrate a high standard of individual honor in his or her scholastic work. Scholastic dishonesty includes, but is not limited to, statements, acts or omissions related to applications for enrollment or the award of a degree, and/or the submission as one s own work or material that is not one s own. As a general rule, scholastic dishonesty involves one of the following acts: cheating, plagiarism, collusion and/or falsifying academic records. Students suspected of academic dishonesty are subject to disciplinary proceedings. 5
Plagiarism, especially from the web, from portions of papers for other classes, and from any other source is unacceptable and will be dealt with under the university s policy on plagiarism (see general catalog for details). This course will use the resources of turnitin.com, which searches the web for possible plagiarism and is over 90% effective. E-mail Use The University of Texas at Dallas recognizes the value and efficiency of communication between faculty/staff and students through electronic mail. At the same time, email raises some issues concerning security and the identity of each individual in an email exchange. The university encourages all official student email correspondence be sent only to a student s U.T. Dallas email address and that faculty and staff consider email from students official only if it originates from a UTD student account. This allows the university to maintain a high degree of confidence in the identity of all individual corresponding and the security of the transmitted information. UTD furnishes each student with a free email account that is to be used in all communication with university personnel. The Department of Information Resources at U.T. Dallas provides a method for students to have their U.T. Dallas mail forwarded to other accounts. Withdrawal from Class The administration of this institution has set deadlines for withdrawal of any college-level courses. These dates and times are published in that semester's course catalog. Administration procedures must be followed. It is the student's responsibility to handle withdrawal requirements from any class. In other words, I cannot drop or withdraw any student. You must do the proper paperwork to ensure that you will not receive a final grade of "F" in a course if you choose not to attend the class once you are enrolled. Student Grievance Procedures Procedures for student grievances are found in Title V, Rules on Student Services and Activities, of the university s Handbook of Operating Procedures. In attempting to resolve any student grievance regarding grades, evaluations, or other fulfillments of academic responsibility, it is the obligation of the student first to make a serious effort to resolve the matter with the instructor, supervisor, administrator, or committee with whom the grievance originates (hereafter called the respondent ). Individual faculty members retain primary responsibility for assigning grades and evaluations. If the matter cannot be resolved at that level, the grievance must be submitted in writing to the respondent with a copy of the respondent s School Dean. If the matter is not resolved by the written response provided by the respondent, the student may submit a written appeal to the School Dean. If the grievance is not resolved by the School Dean s decision, the student may make a written appeal to the Dean of Graduate or Undergraduate Education, and the deal will appoint and convene an Academic Appeals Panel. The decision of the Academic Appeals Panel is final. The results of the academic appeals process will be distributed to all involved parties. Copies of these rules and regulations are available to students in the Office of the Dean of Students, where staff members are available to assist students in interpreting the rules and regulations. Incomplete Grades As per university policy, incomplete grades will be granted only for work unavoidably missed at the semester s end and only if 70% of the course work has been completed. An incomplete grade must be resolved within eight (8) weeks from the first day of the subsequent long semester. If the required work to complete the course and to remove the incomplete grade is not submitted by the specified deadline, the incomplete grade is changed automatically to a grade of F. Disability Services The goal of Disability Services is to provide students with disabilities educational opportunities equal to those of their nondisabled peers. Disability Services is located in room 1.610 in the Student Union. Office hours are Monday and Thursday, 8:30 a.m. to 6:30 p.m.; Tuesday and Wednesday, 8:30 a.m. to 7:30 p.m.; and Friday, 8:30 a.m. to 5:30 p.m. The contact information for the Office of Disability Services is: The University of Texas at Dallas, SU 22 PO Box 830688 Richardson, Texas 75083-0688 (972) 883-2098 (voice or TTY) Essentially, the law requires that colleges and universities make those reasonable adjustments necessary to eliminate discrimination on the basis of disability. For example, it may be necessary to remove classroom prohibitions against tape recorders or animals (in the case of dog guides) for students who are blind. Occasionally an assignment requirement may 6
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