Social cost-benefit analysis - Revision history

Albert at 23:05, 19 January 2018

2018-01-19T23:05:14Z

John P: /* Value of a statistical life (VASL) */

2013-10-28T10:01:26Z

Value of a statistical life (VASL)

John P: /* Measured impacts */

2013-10-28T10:00:18Z

Measured impacts

John P: /* Relevance */

2013-10-28T09:59:10Z

Relevance

John P: /* Value of a statistical life (VASL) */

2013-10-28T09:54:04Z

Value of a statistical life (VASL)

John P: /* Value of a statistical life (VASL) */

2013-10-28T09:53:39Z

Value of a statistical life (VASL)

Olav at 15:55, 15 August 2013

2013-08-15T15:55:00Z

John P: /* Value of a statistical life (VASL) */

2013-05-15T12:39:15Z

Value of a statistical life (VASL)

John P at 12:37, 15 May 2013

2013-05-15T12:37:13Z

John P: /* Measured impacts */

2013-05-15T12:09:13Z

Measured impacts

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 == Related subjects ==
 Urban planning processes employ a host of other economic tools/models:
-* [[is synonymous to::Input-output analysis|Input-output analysis]]
+* [[Input-output analysis|Input-output analysis]]
-* [[is synonymous to::Economic Impact Study|Economic impact study]]
+* [[Economic Impact Study|Economic impact study]]
-* [[is synonymous to::Business case|Business case]]
+* [[Business case|Business case]]
-* [[is synonymous to::Other economic tools|Other economic tools]]
+* [[Other economic tools|Other economic tools]]
-* [[belongs to::Economic tools|Economic tools]]
+* [[Economic tools|Economic tools]]
 See also the clickable map below:

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 ==Value of a statistical life (VASL)==
-A cost-benefit analysis can help to determine if a certain security measure designed to reduce the risk of death is worthwhile from an economic perspective. For this one needs to determine the costs of the specific measure, how many lives statistically (or in probability terms) are affected, and, finally, the (monetary) value of preventing a lethal fatality (the Value of a Statistical Life). The cost of preventing a lethal fatality can subsequently be compared with societal value of a statistical life (see example below).
+A cost-benefit analysis can help to determine if a certain security measure designed to reduce the risk of death is worthwhile from an economic perspective. In order to do this, one needs to determine the costs of the specific measure, how many lives statistically (or in probability terms) are affected, and, finally, the (monetary) value of preventing a lethal fatality (the Value of a Statistical Life). The cost of preventing a lethal fatality can subsequently be compared with societal value of a statistical life (see example below).
 Note that VASL is no the value being placed on a life. It is just another way of expressing what a society is prepared to pay to mitigate a certain risk, and should not be confused with the value society might put on the life of a real person, for example in court<ref> For more information on this subject, see e.g.:Ashenfelter, O. (2006): Measuring the Value of a Statistical Life: Problems and Prospects. NBER Working Paper Series. No. 11916. Online: http://www.nber.org/papers/w11916.pdf?new_window=1.</ref>.

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 * [[External effects]] are the costs and benefits that cannot be passed on to any existing market because they relate to issues like the environment (noise, emission of CO2 etc.), safety (traffic, external security) and nature (biodiversity, dehydration etc.).
-The model engineers try to quantify and monetize as much effects as possible. Effects that cannot be monetized are presented in such a way that they can be compared. This way, policy-makers can include these effects in their final judgement if an urban planning project (or a particular variation) is worth investing in. The method of monetizing effects can also influence the outcome of a social cost-benefit analysis and predictions will always remain uncertain. Therefore, the results of a social cost-benefit analysis are not absolute. Nevertheless, it is a sufficient instrument to investigate the strong and weak points of the different alternatives.
+The model engineers try to quantify and monetise as much effects as possible. Effects that cannot be monetised are presented in such a way that they can be compared. This way, policy-makers can include these effects in their final judgement if an urban planning project (or a particular variation) is worth investing in. The method of monetising effects can also influence the outcome of a social cost-benefit analysis and predictions will always remain uncertain. Therefore, the results of a social cost-benefit analysis are not absolute. Nevertheless, it is a sufficient instrument to investigate the strong and weak points of the different alternatives.
 == Results of a social cost-benefit analysis ==

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 == Relevance ==
-Knowledge about economic models/tools such as the social cost-benefit analysis can help the urban planner to systematically survey all the relevant (socio-economic) impact caused by an urban development and security threats. This insight will help the responsible urban planners to make the best choices from an socio-economic point of view.
+Knowledge about [[Economic tools|economic models/tools]] such as the social cost-benefit analysis can help the urban planner to systematically survey all the relevant (socio-economic) impact caused by an urban development and security threats. This insight will help the responsible urban planners to make the best choices from an socio-economic point of view.
 == The null hypothesis ==

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 Case example: dedicated surveillance on location
-{{quote|A paper by Stewart and Mueller (2008)<ref>Stewart, M.G., J. Mueller (2008). ''A risk and cost-benefit assessment of United States aviation security measures''. Springer Science.</ref> performed a cost-benefit analysis of two aviation security measures, one of them the Federal Air Marshal Service. They conclude that even if the Air Marshal surveillance prevents one 9/11 replication each decade, the $900 million annual spending on Air Marshal Service fails a cost-benefit analysis at an annual estimated cost of $180 million per life saved (compared to a societal willingness to pay to save a life of $1 - $10 million per saved life).}}
+{{quote|A paper by Stewart and Mueller (2008)<ref>Stewart, M.G., J. Mueller (2008): A risk and cost-benefit assessment of United States aviation security measures. Springer Science.</ref> performed a cost-benefit analysis of two aviation security measures, one of them the Federal Air Marshal Service. They conclude that even if the Air Marshal surveillance prevents one 9/11 replication each decade, the $900 million annual spending on Air Marshal Service fails a cost-benefit analysis at an annual estimated cost of $180 million per life saved (compared to a societal willingness to pay to save a life of $1 - $10 million per saved life).}}
 == Risk of double counting ==

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 [[Category:Social]][[Category:Economic]]
-[[File:ae.png|25px|right|This is a page providing background in a specific field of expertise]]'''Social cost-benefit analysis''' is a systematic and cohesive [[Economic tools|economic tool]](method) to survey all the impacts caused by an urban development project<ref name="ftn84"> In the Netherlands, conducting a social cost-benefit analysis is mandatory for major infrastructure projects.</ref>. It comprises not just the financial effects (investment costs, direct benefits like tax and fees, et cetera), but all the [[social impact|social effects]], like: pollution, safety, indirect (labour) market, legal aspects, et cetera. The main aim of a social cost-benefit analysis  is to attach a price to as many effects as possible in order to uniformly weigh the above-mentioned heterogeneous effects. As a result, these prices reflect the value a society attaches to the caused effects, enabling the decision maker to form a statement about the net social welfare effects of a project.
+[[File:ae.png|25px|right|This is a page providing background in a specific field of expertise]]'''Social cost-benefit analysis''' is a systematic and cohesive [[Economic tools|economic tool]](method) to survey all the impacts caused by an urban development project<ref name="ftn84"> In the Netherlands, conducting a social cost-benefit analysis is mandatory for major infrastructure projects.</ref>. It comprises not just the financial effects (investment costs, direct benefits like tax and fees, et cetera), but all the social effects, like: pollution, safety, indirect (labour) market, legal aspects, et cetera. The main aim of a social cost-benefit analysis  is to attach a price to as many effects as possible in order to uniformly weigh the above-mentioned heterogeneous effects. As a result, these prices reflect the value a society attaches to the caused effects, enabling the decision maker to form a statement about the net social welfare effects of a project.
 == Relevance ==

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 # ''Presentation of the uncertainties and risks''. A social cost-benefit analysis has several methods to take economic risks and uncertainties into account. The policy decision should be based on calculated risk.
+==Value of a statistical life (VASL)==
+A cost-benefit analysis can help to determine if a certain security measure designed to reduce the risk of death is worthwhile from an economic perspective. For this one needs to determine the costs of the specific measure, how many lives statistically (or in probability terms) are affected, and, finally, the (monetary) value of preventing a lethal fatality, the VASL (Value of a Statistical Life). The cost of preventing a lethal fatality can subsequently be compared with societal value of a statistical life (see example below).
+Note that VASL is no the value being placed on a life. It is just another way of expressing what a society is prepared to pay to mitigate a certain risk, and should not be confused with the value society might put on the life of a real person, for example in court.
+Case example: dedicated surveillance on location
+{{quote|A paper by Stewart and Mueller (2008)<ref>Stewart, M.G., J. Mueller (2008). ''A risk and cost-benefit assessment of United States aviation security measures''. Springer Science.</ref> performed a cost-benefit analysis of two aviation security measures, one of them the Federal Air Marshal Service. They conclude that even if the Air Marshal surveillance prevents one 9/11 replication each decade, the $900 million annual spending on Air Marshal Service fails a cost-benefit analysis at an annual estimated cost of $180 million per life saved (compared to a societal willingness to pay to save a life of $1 - $10 million per saved life).}}
 == Risk of double counting ==
 The impact of an urban development project can be measured in two or more ways. For example, when an improved highway reduces travel time, the value of real estate property in areas served by the highway will be enhanced. The increase in property values due to the project is a possible way to measure the benefits of a project. But if the increased property values are included, it is unnecessary to include the value of the time saved by the improvement in the highway. Unnecessary, because the value of the real estate property went up because of improvement in reach ability, so including both the increase in property values and the time saving reduction, would lead to a double counting.

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 == Measured impacts ==
-The social cost-benefit analysis calculates the direct ([[Primary economic impact|primary]]), indirect ([[Secondary economic impact|secondary]]) and external effects: [[File:Playtime construction.JPG|thumb|Playtime construction]]
+The social cost-benefit analysis calculates the direct ([[Primary economic impact|primary]]), indirect ([[Secondary economic impact|secondary]]) and external effects: [[File:Playtime construction.JPG|thumb|Construction site]]
 * Direct effects are the costs and benefits that can be directly linked to the owners/users of the project properties (e.g., the users and the owner of a building or highway).