RE: Cost benefit analysis
In the Defense Department you have a creative tension environment. The group trying to sell the project must have estimates reviewed independently by groups who don't care about the particular project. The estimates are all compared to the benefits that each system brings to the overall weapons system. The principle player in this is PAE which has a sub group call the CAIG - Cost Analysis Improvement Groupwhich reviews estimates for their robustness and sets standards that must be met. They also conduct independent analysis of the projects or oversee other groups that do that work. The estimates are put into an overall creative tension environment in which the different services compete for funding call the Planning Programming and Budgeting System...which fundamentally came in the early 60s. I'm sure DoD still gets bad analysis in the sense that it is influenced by politics...but given all the politics the process any BAD CBA presented into the system is going to get run through the system and it is very hard to hide. The process does create information (CBA) that are challenged and improve over time as the process necks down to a decision. Overall it seems to be doing pretty well in the past 25 years it has produced a set of weapons that as the Air Force slogan saysno body come close! jdd John D Driessnack, PMP, CCE/A Professor, Defense Acquisition University PMT-250/352, DAU Risk/Tools Subject Matter Expert DAWIA PM, Acq Logi, FM Level III NE-Capital Campus, Faculty Department Program Management and Leadership 9820 Belvoir Rd, Building 205, Room 115B Ft Belvoir, VA 22060-5565 703-805-4655 (DSN-655) [EMAIL PROTECTED] FAX 703-805-3728 -Original Message- From: William Dickens [mailto:[EMAIL PROTECTED]] Sent: Thursday, February 13, 2003 9:34 PM To: [EMAIL PROTECTED] Subject: RE: Cost benefit analysis Fred, You completely misunderstand my point. If a cost benefit analysis is presented it makes very clear what the assumptions are that lead to the policy conclusions. Thus any debate of the question is going to be much better informed and much more closely focused on the issues that matter. Its going to be more logical. I am not saying that a bad CBA trumps a good verbal argument in deciding an issue. I'm saying that as a starting point for a debate a bad CBA is still a good point of departure because it spells out the assumptions and logic that the person presenting it is making. - - Bill Dickens [EMAIL PROTECTED] 02/13/03 05:37PM On Thu, 13 Feb 2003 15:52:43 -0500, William Dickens [EMAIL PROTECTED] said: Any CBA is better than no CBA - - even a badly skewed one. Its the same argument for formalizing theory in economics. It makes clear what your assumptions and logic are and makes it easy to identify areas of agreement and disagreements between opponents on an issue. - - Bill Dickens Did I just read what I think I read? So here is the scenario - a *badly skewed* CBA is used by misguided (do-gooder) policy makers to influence legislation by defeating a more reasonable (logical) argument. This CBA had more traction (the bad science environmentalists had a well funded propaganda campaign) and the resultant legislation ended up killing millions of people (refrigerators in third world countries no longer able to keep food cold or pesticides no longer available to kill mosquitos which carried disease). I find it hard to agree that any CBA is better than no CBA. -Fred Childress [EMAIL PROTECTED] 02/13/03 01:57PM One problem with applying CBA to policy formulation is ensuring reliability and objectivity. Too often, CBA is manipulated for predetermined policy positions. EPA once produced a Regulatory Impact Analysis that contended that benefits from the phaseout of CFCs are $8 trillion to $32 trillion. In such cases, CBA does more to confound, rather than illuminate, rational policy formulation. Is there a practical way for policy makers to assess the reliability and objectivity of CBA? Walt Warnick -Original Message- From: Driessnack, John [mailto:[EMAIL PROTECTED]] Sent: Thursday, February 13, 2003 9:56 AM To: [EMAIL PROTECTED] Cc: [EMAIL PROTECTED] Subject: RE: Cost benefit analysis In defense you can say that almost all of the weapons related spending (Procurement and RDTE budget - almost half of the budget when you consider the spare purchases) is accomplished having gone through some CBA in the process of deciding the approach to develop, procure, and then maintain the equipment. An Analysis of Alternative is required along with estimates (actually by several layers of organizations). The other source to look at would be the Federal Acquisition Regulations (FAR). This policy drives use of CBA for certain purchases. So you could estimate off of this policy! jdd John D Driessnack, PMP, CCE/A Professor, Defense Acquisition University PMT-250/352, DAU
Re: Cost benefit analysis
Hi Fred, Yes, that is a good question. I think the answer is that it does take a fairly sophisticated economist to write a cost-benefit analysis, but it doesn't take much savvy to know when one is badly biased. Anyone knowledgeable about the topic - - even if they have only a minimal understanding of CB technique - - can tell when analysis is being skewed by biased assumptions. Of course you are also right that it is often very difficult to apply CBA given available information. In those cases CBA can be a guide to what sorts of information is lacking to make a good decision. Let me also back off just a tad from my original pronouncement. There are situations where a cost benefit analysis is irrelevant. A harm is alleged and the proposed remedy for it so cheap that costs and benefits are obvious. The issue in cases such as this is not the CBA but making the case that the harm is real (or isn't) and that the remedy will work (won't work). For lots of issues these are the questions rather than CBA BTW, my academic perspective was honed by working as a senior economist with Clinton's CEA. One of the things I did during my time with the CEA was fight a losing battle with OSHA over the introduction of CBA considerations into some parts of rules-making. For what its worth, it is the pro-regulation, pro-environment, pro-safety crowd that are the most ardent critics of CBA. If you are a libertarian I think that CBA is more often that not your friend. But that is another story... - - Bill Dickens [EMAIL PROTECTED] 02/13/03 11:23PM From: William Dickens Fred, You completely misunderstand my point. If a cost benefit analysis is presented it makes very clear what the assumptions are that lead to the policy conclusions. Bill, I don't think I completely misunderstood. I do apologize, however, as I allow myself to gravitate from your purely academic response back into the real world. Your point is well taken, but my mind was on the earlier question. Is there a practical way for policy makers to assess the reliability and objectivity of CBA? I thought this was an excellent question. How many policy makers do you know that are actually able to understand the necessary variables to arrive at a meaningful assumption in order to evaluate the analysis? I work in government. CBA is seldom used. I would like to see it used more often, but data are relatively sparse due to the disjointed accounting systems and other road blocks (E.g. - collective bargaining agreements). Seldom does a cost center actually represent the work being performed. -Fred Childress - Original Message - From: William Dickens [EMAIL PROTECTED] To: [EMAIL PROTECTED] Sent: Thursday, February 13, 2003 9:33 PM Subject: RE: Cost benefit analysis Fred, You completely misunderstand my point. If a cost benefit analysis is presented it makes very clear what the assumptions are that lead to the policy conclusions. Thus any debate of the question is going to be much better informed and much more closely focused on the issues that matter. Its going to be more logical. I am not saying that a bad CBA trumps a good verbal argument in deciding an issue. I'm saying that as a starting point for a debate a bad CBA is still a good point of departure because it spells out the assumptions and logic that the person presenting it is making. - - Bill Dickens [EMAIL PROTECTED] 02/13/03 05:37PM On Thu, 13 Feb 2003 15:52:43 -0500, William Dickens [EMAIL PROTECTED] said: Any CBA is better than no CBA - - even a badly skewed one. Its the same argument for formalizing theory in economics. It makes clear what your assumptions and logic are and makes it easy to identify areas of agreement and disagreements between opponents on an issue. - - Bill Dickens Did I just read what I think I read? So here is the scenario - a *badly skewed* CBA is used by misguided (do-gooder) policy makers to influence legislation by defeating a more reasonable (logical) argument. This CBA had more traction (the bad science environmentalists had a well funded propaganda campaign) and the resultant legislation ended up killing millions of people (refrigerators in third world countries no longer able to keep food cold or pesticides no longer available to kill mosquitos which carried disease). I find it hard to agree that any CBA is better than no CBA. -Fred Childress [EMAIL PROTECTED] 02/13/03 01:57PM One problem with applying CBA to policy formulation is ensuring reliability and objectivity. Too often, CBA is manipulated for predetermined policy positions. EPA once produced a Regulatory Impact Analysis that contended that benefits from the phaseout of CFCs are $8 trillion to $32 trillion. In such cases, CBA does more to confound, rather than illuminate, rational policy formulation. Is there a practical way for policy makers to assess the reliability and objectivity of CBA
Re: Cost benefit analysis
William Dickens wrote: For what its worth, it is the pro-regulation, pro-environment, pro-safety crowd that are the most ardent critics of CBA. If you are a libertarian I think that CBA is more often that not your friend. But that is another story... - - Bill Dickens This is a very interesting observation. It seems to mirror the biases of most econ textbooks, where we talk about trade-off between efficiency and equity, but never efficiency and liberty, or efficiency and merit. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] But being alone he had begun to conceive thoughts of his own unlike those of his brethren. --J.R.R. Tolkien, *The Silmarillion*
Re: Cost benefit analysis
Does anyone know how often CBA is actually used in making policy? What percent of the federal budget (or state or local) has been determined by CBA?Cyril Morong I'm sure it's used frequently. It's probablyapplied something like this: "what's the minimum amount of taxpayer-funded benefits that I need to dispense to guarantee my re-election?" ~Alypius
RE: Cost benefit analysis
In defense you can say that almost all of the weapons related spending (Procurement and RDTE budget almost half of the budget when you consider the spare purchases) is accomplished having gone through some CBA in the process of deciding the approach to develop, procure, and then maintain the equipment. An Analysis of Alternative is required along with estimates (actually by several layers of organizations). The other source to look at would be the Federal Acquisition Regulations (FAR). This policy drives use of CBA for certain purchases. So you could estimate off of this policy! jdd John D Driessnack, PMP, CCE/A Professor, Defense Acquisition University PMT-250/352, DAU Risk/Tools Subject Matter Expert DAWIA PM, Acq Logi, FM Level III NE-Capital Campus, Faculty Department Program Management and Leadership 9820 Belvoir Rd, Building 205, Room 115B Ft Belvoir, VA 22060-5565 703-805-4655 (DSN-655) [EMAIL PROTECTED] FAX 703-805-3728 -Original Message- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]] Sent: Tuesday, February 11, 2003 11:16 PM To: [EMAIL PROTECTED] Subject: Cost benefit analysis Does anyone know how often CBA is actually used in making policy? What percent of the federal budget (or state or local) has been determined by CBA? Cyril Morong
RE: Cost benefit analysis
Oneproblem with applying CBA to policy formulation isensuring reliability and objectivity.Too often, CBA is manipulatedforpredetermined policy positions.EPA once produceda Regulatory Impact Analysis that contended that benefits fromthe phaseout of CFCsare $8 trillion to $32 trillion. In such cases, CBA does more to confound, rather than illuminate, rational policy formulation. Is there a practical way for policy makers to assess the reliability and objectivity of CBA? Walt Warnick -Original Message-From: Driessnack, John [mailto:[EMAIL PROTECTED]]Sent: Thursday, February 13, 2003 9:56 AMTo: [EMAIL PROTECTED]Cc: [EMAIL PROTECTED]Subject: RE: Cost benefit analysis In defense you can say that almost all of the weapons related spending (Procurement and RDTE budget almost half of the budget when you consider the spare purchases) is accomplished having gone through some CBA in the process of deciding the approach to develop, procure, and then maintain the equipment. An Analysis of Alternative is required along with estimates (actually by several layers of organizations). The other source to look at would be the Federal Acquisition Regulations (FAR). This policy drives use of CBA for certain purchases. So you could estimate off of this policy! jdd John D Driessnack, PMP, CCE/A Professor, Defense Acquisition University PMT-250/352, DAU Risk/Tools Subject Matter Expert DAWIA PM, Acq Logi, FM Level III NE-Capital Campus, Faculty Department Program Management and Leadership 9820 Belvoir Rd, Building 205, Room 115B Ft Belvoir, VA 22060-5565 703-805-4655 (DSN-655) [EMAIL PROTECTED] FAX 703-805-3728 -Original Message-From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]] Sent: Tuesday, February 11, 2003 11:16 PMTo: [EMAIL PROTECTED]Subject: Cost benefit analysis Does anyone know how often CBA is actually used in making policy? What percent of the federal budget (or state or local) has been determined by CBA?Cyril Morong
Re: Cost benefit analysis
If I were teaching intermediate micro, I think I would begin by asking students why they consume less of x when its price rises. Presumably most would say that they would switch to other products. Then I would ask them to consider a world with only ONE good. Obviously with only one good, price does not work via substitution. Why then does consumption decline in the latter case? Because higher prices make you poorer, making you tend to buy less overall. Then I'd explain that as the number of goods rises, the latter income effect tends to matter less and less. I probably wouldn't go through the whole textbook discussion (unless the students were largely going to grad school), but I think the point is worth half a class. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
RE: Cost benefit analysis
On Thu, 13 Feb 2003 15:52:43 -0500, William Dickens [EMAIL PROTECTED] said: Any CBA is better than no CBA - - even a badly skewed one. Its the same argument for formalizing theory in economics. It makes clear what your assumptions and logic are and makes it easy to identify areas of agreement and disagreements between opponents on an issue. - - Bill Dickens Did I just read what I think I read? So here is the scenario - a *badly skewed* CBA is used by misguided (do-gooder) policy makers to influence legislation by defeating a more reasonable (logical) argument. This CBA had more traction (the bad science environmentalists had a well funded propaganda campaign) and the resultant legislation ended up killing millions of people (refrigerators in third world countries no longer able to keep food cold or pesticides no longer available to kill mosquitos which carried disease). I find it hard to agree that any CBA is better than no CBA. -Fred Childress [EMAIL PROTECTED] 02/13/03 01:57PM One problem with applying CBA to policy formulation is ensuring reliability and objectivity. Too often, CBA is manipulated for predetermined policy positions. EPA once produced a Regulatory Impact Analysis that contended that benefits from the phaseout of CFCs are $8 trillion to $32 trillion. In such cases, CBA does more to confound, rather than illuminate, rational policy formulation. Is there a practical way for policy makers to assess the reliability and objectivity of CBA? Walt Warnick -Original Message- From: Driessnack, John [mailto:[EMAIL PROTECTED]] Sent: Thursday, February 13, 2003 9:56 AM To: [EMAIL PROTECTED] Cc: [EMAIL PROTECTED] Subject: RE: Cost benefit analysis In defense you can say that almost all of the weapons related spending (Procurement and RDTE budget - almost half of the budget when you consider the spare purchases) is accomplished having gone through some CBA in the process of deciding the approach to develop, procure, and then maintain the equipment. An Analysis of Alternative is required along with estimates (actually by several layers of organizations). The other source to look at would be the Federal Acquisition Regulations (FAR). This policy drives use of CBA for certain purchases. So you could estimate off of this policy! jdd John D Driessnack, PMP, CCE/A Professor, Defense Acquisition University PMT-250/352, DAU Risk/Tools Subject Matter Expert DAWIA PM, Acq Logi, FM Level III NE-Capital Campus, Faculty Department Program Management and Leadership 9820 Belvoir Rd, Building 205, Room 115B Ft Belvoir, VA 22060-5565 703-805-4655 (DSN-655) [EMAIL PROTECTED] FAX 703-805-3728 -Original Message- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]] Sent: Tuesday, February 11, 2003 11:16 PM To: [EMAIL PROTECTED] Subject: Cost benefit analysis Does anyone know how often CBA is actually used in making policy? What percent of the federal budget (or state or local) has been determined by CBA? Cyril Morong Yours in Liberty, Fred Childress LNC Region 5 Alt Representative - http://www.LP.org Even if you're on the right track, you'll get run over if you just sit there. -Will Rogers
RE: Cost benefit analysis
Fred, You completely misunderstand my point. If a cost benefit analysis is presented it makes very clear what the assumptions are that lead to the policy conclusions. Thus any debate of the question is going to be much better informed and much more closely focused on the issues that matter. Its going to be more logical. I am not saying that a bad CBA trumps a good verbal argument in deciding an issue. I'm saying that as a starting point for a debate a bad CBA is still a good point of departure because it spells out the assumptions and logic that the person presenting it is making. - - Bill Dickens [EMAIL PROTECTED] 02/13/03 05:37PM On Thu, 13 Feb 2003 15:52:43 -0500, William Dickens [EMAIL PROTECTED] said: Any CBA is better than no CBA - - even a badly skewed one. Its the same argument for formalizing theory in economics. It makes clear what your assumptions and logic are and makes it easy to identify areas of agreement and disagreements between opponents on an issue. - - Bill Dickens Did I just read what I think I read? So here is the scenario - a *badly skewed* CBA is used by misguided (do-gooder) policy makers to influence legislation by defeating a more reasonable (logical) argument. This CBA had more traction (the bad science environmentalists had a well funded propaganda campaign) and the resultant legislation ended up killing millions of people (refrigerators in third world countries no longer able to keep food cold or pesticides no longer available to kill mosquitos which carried disease). I find it hard to agree that any CBA is better than no CBA. -Fred Childress [EMAIL PROTECTED] 02/13/03 01:57PM One problem with applying CBA to policy formulation is ensuring reliability and objectivity. Too often, CBA is manipulated for predetermined policy positions. EPA once produced a Regulatory Impact Analysis that contended that benefits from the phaseout of CFCs are $8 trillion to $32 trillion. In such cases, CBA does more to confound, rather than illuminate, rational policy formulation. Is there a practical way for policy makers to assess the reliability and objectivity of CBA? Walt Warnick -Original Message- From: Driessnack, John [mailto:[EMAIL PROTECTED]] Sent: Thursday, February 13, 2003 9:56 AM To: [EMAIL PROTECTED] Cc: [EMAIL PROTECTED] Subject: RE: Cost benefit analysis In defense you can say that almost all of the weapons related spending (Procurement and RDTE budget - almost half of the budget when you consider the spare purchases) is accomplished having gone through some CBA in the process of deciding the approach to develop, procure, and then maintain the equipment. An Analysis of Alternative is required along with estimates (actually by several layers of organizations). The other source to look at would be the Federal Acquisition Regulations (FAR). This policy drives use of CBA for certain purchases. So you could estimate off of this policy! jdd John D Driessnack, PMP, CCE/A Professor, Defense Acquisition University PMT-250/352, DAU Risk/Tools Subject Matter Expert DAWIA PM, Acq Logi, FM Level III NE-Capital Campus, Faculty Department Program Management and Leadership 9820 Belvoir Rd, Building 205, Room 115B Ft Belvoir, VA 22060-5565 703-805-4655 (DSN-655) [EMAIL PROTECTED] FAX 703-805-3728 -Original Message- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]] Sent: Tuesday, February 11, 2003 11:16 PM To: [EMAIL PROTECTED] Subject: Cost benefit analysis Does anyone know how often CBA is actually used in making policy? What percent of the federal budget (or state or local) has been determined by CBA? Cyril Morong Yours in Liberty, Fred Childress LNC Region 5 Alt Representative - http://www.LP.org Even if you're on the right track, you'll get run over if you just sit there. -Will Rogers
Re: Cost benefit analysis
From: William Dickens Fred, You completely misunderstand my point. If a cost benefit analysis is presented it makes very clear what the assumptions are that lead to the policy conclusions. Bill, I don't think I completely misunderstood. I do apologize, however, as I allow myself to gravitate from your purely academic response back into the real world. Your point is well taken, but my mind was on the earlier question. Is there a practical way for policy makers to assess the reliability and objectivity of CBA? I thought this was an excellent question. How many policy makers do you know that are actually able to understand the necessary variables to arrive at a meaningful assumption in order to evaluate the analysis? I work in government. CBA is seldom used. I would like to see it used more often, but data are relatively sparse due to the disjointed accounting systems and other road blocks (E.g. - collective bargaining agreements). Seldom does a cost center actually represent the work being performed. -Fred Childress - Original Message - From: William Dickens [EMAIL PROTECTED] To: [EMAIL PROTECTED] Sent: Thursday, February 13, 2003 9:33 PM Subject: RE: Cost benefit analysis Fred, You completely misunderstand my point. If a cost benefit analysis is presented it makes very clear what the assumptions are that lead to the policy conclusions. Thus any debate of the question is going to be much better informed and much more closely focused on the issues that matter. Its going to be more logical. I am not saying that a bad CBA trumps a good verbal argument in deciding an issue. I'm saying that as a starting point for a debate a bad CBA is still a good point of departure because it spells out the assumptions and logic that the person presenting it is making. - - Bill Dickens [EMAIL PROTECTED] 02/13/03 05:37PM On Thu, 13 Feb 2003 15:52:43 -0500, William Dickens [EMAIL PROTECTED] said: Any CBA is better than no CBA - - even a badly skewed one. Its the same argument for formalizing theory in economics. It makes clear what your assumptions and logic are and makes it easy to identify areas of agreement and disagreements between opponents on an issue. - - Bill Dickens Did I just read what I think I read? So here is the scenario - a *badly skewed* CBA is used by misguided (do-gooder) policy makers to influence legislation by defeating a more reasonable (logical) argument. This CBA had more traction (the bad science environmentalists had a well funded propaganda campaign) and the resultant legislation ended up killing millions of people (refrigerators in third world countries no longer able to keep food cold or pesticides no longer available to kill mosquitos which carried disease). I find it hard to agree that any CBA is better than no CBA. -Fred Childress [EMAIL PROTECTED] 02/13/03 01:57PM One problem with applying CBA to policy formulation is ensuring reliability and objectivity. Too often, CBA is manipulated for predetermined policy positions. EPA once produced a Regulatory Impact Analysis that contended that benefits from the phaseout of CFCs are $8 trillion to $32 trillion. In such cases, CBA does more to confound, rather than illuminate, rational policy formulation. Is there a practical way for policy makers to assess the reliability and objectivity of CBA? Walt Warnick -Original Message- From: Driessnack, John [mailto:[EMAIL PROTECTED]] Sent: Thursday, February 13, 2003 9:56 AM To: [EMAIL PROTECTED] Cc: [EMAIL PROTECTED] Subject: RE: Cost benefit analysis In defense you can say that almost all of the weapons related spending (Procurement and RDTE budget - almost half of the budget when you consider the spare purchases) is accomplished having gone through some CBA in the process of deciding the approach to develop, procure, and then maintain the equipment. An Analysis of Alternative is required along with estimates (actually by several layers of organizations). The other source to look at would be the Federal Acquisition Regulations (FAR). This policy drives use of CBA for certain purchases. So you could estimate off of this policy! jdd John D Driessnack, PMP, CCE/A Professor, Defense Acquisition University PMT-250/352, DAU Risk/Tools Subject Matter Expert DAWIA PM, Acq Logi, FM Level III NE-Capital Campus, Faculty Department Program Management and Leadership 9820 Belvoir Rd, Building 205, Room 115B Ft Belvoir, VA 22060-5565 703-805-4655 (DSN-655) [EMAIL PROTECTED] FAX 703-805-3728 -Original Message- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]] Sent: Tuesday, February 11, 2003 11:16 PM To: [EMAIL PROTECTED] Subject: Cost benefit analysis Does anyone know how often CBA is actually used in making policy? What percent
Re: Cost benefit analysis
Depends on what you mean by used in making policy. As far as I know there are no decisions which are based solely on cost-benefit analysis. Budgeting is done by legislatures so if CBA plays any role there it is in influencing the decisions of legislators. CBA is most commonly used in making regulatory decisions. Even there it is seldom the only criteria, but it is common for regulators and those contesting NPRMs (notice of proposed rule making) to present CBAs. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens [EMAIL PROTECTED] 02/11/03 11:15PM Does anyone know how often CBA is actually used in making policy? What percent of the federal budget (or state or local) has been determined by CBA? Cyril Morong
Cost benefit analysis
Does anyone know how often CBA is actually used in making policy? What percent of the federal budget (or state or local) has been determined by CBA? Cyril Morong
