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Introduction to Benefit Cost Analysis

Crawford School of Public Policy | Executive course
Policy Essentials

Summary

This series will develop your skills to confidently undertake a basic cost-benefit analysis or a project or policy, capably review reports prepared by consultants, and prepare regulatory impact statements.

A combination of essential concepts, case studies and practical exercises is used, without the use of mathematics. The series is suitable for both beginners and as a refresher for those with an economics background.

See related course: Methods for estimating benefits.

Course date: 
9.30am–4.30pm 24 August 2020
Venue: 
#132 Crawford Building, Lennox Crossing, ANU
Cost: 

Before 6 July 2020: $1,195

After 7 July 2020: $1,495

OR $2,195 for enrolment in the Series (saving $195 off the price of purchasing each day separately).

Group discounts available.

Course overview

A key feature of this course is an introduction to investment analysis using practical exercises such as the purchase of a house. Costs and revenues (benefits) are adjusted for inflation, for the time value of money (using discounting), for different project periods (using equivalent annual values), and for risk (using expected values, decision trees, and Monte Carlo analysis, which is increasingly used by commercial entities). Participants will conduct simple arithmetic calculations in shared learning experiences, and should bring a simple hand-held electronic calculator.

Session structure:

Basic investment analysis (a calculator is essential for practical exercises)

Timelines, flows of costs and benefits (revenues) Nominal and real values: adjusting for inflation Time value of money: compounding and discounting Discounting: adjusting for time Net present value

Basic investment analysis (continued)

  • Real versus nominal values in analysis
  • Using present value tables
  • Annuities
  • Comparing projects of different duration
  • Perpetuities

Basic investment analysis (continued)

  • Threshold analysis: Case Study
  • Types of discount rates
  • Adjusting costs and benefits for probability of incidence (risk)
  • Expected value and decision-tree analysis

Introduction to underlying principles of benefit-cost analysis

  • The Pareto and Kaldor-Hicks principles
  • Standing
  • Benefits, opportunity cost, transfer payments
  • Financial analysis versus benefit-cost analysis
  • Key steps in benefit-cost analysis

Methodology:

A combination of essential concepts, case studies and practical exercises is used, without the use of mathematics. The schedule is subject to alteration to suit participants’ particular interests.

Learning outcomes include:

  • Confidently undertake a basic benefit-cost analysis of a project or policy
  • Competently review reports prepared by consultants
  • Prepare regulatory impact statements

Who should attend?

This course is suitable for both beginners and as a refresher for those with an economics background.Simple mathematics of addition, subtraction, multiplication, and area of triangle (0.5 times the base and the height) will be used.

Course presenter(s)

Dr Kaliappa Kalirajan

Dr Kaliappa Kalirajan is an applied economist and policy analyst. He received his Master’s in Mathematical Economics from Madurai University (1970), Master of Letters in Econometrics from Madurai University (1973) and Doctor of Philosophy in Economics from the Australian National University (1979). Before joining the Crawford School, he was a Professor of International Economics at the Foundation for Advanced Studies on International Development (FASID) and the National Graduate Institute for Policy Studies (GRIPS) in Tokyo. Before joining FASID and GRIPS, he was Deputy Executive Director to Executive Director, in the Australia South Asia Research Centre at The Australian National University (1994-2000).His areas of major interests include macroeconomic and trade policies and reform, poverty reduction, and sources of growth. His work on the stochastic frontier production function methodology has given him international recognition. He has several research publications in these areas in reputed academic and policy-oriented journals. He received a special commendation award from the Indian Econometric Society for his outstanding work in frontier production function analyses in December 1994. He has authored, co-authored, or edited a dozen books published by reputed international publishers.

Updated:  16 August 2020/Responsible Officer:  Crawford Engagement/Page Contact:  CAP Web Team