Interpreting Results of Benefit/Cost
There are four issues in interpreting the results of a cost-benefit model.
First, while the model is simple, it is no easy task to obtain appropriate measures. Almost always in public sector applications, the measures of program benefits are poor estimates of something that does not easily lend itself to measurement. The measurement error introduced
by this estimation process could, in some cases, reverse the conclusions
to be drawn; it certainly clouds the issue in most cases.
Second, it is important to compare
only roughly comparable programs. The mathematics of the model
will not warn you if you are comparing programs that have
nothing in common. Feed a computer garbage, it will merrily give
garbage back to you. The problem is that the interesting questions
frequently involve programs which are not comparable. Morris
Hill's article (1968) is particularly instructive in this matter.
Third, the analyst should expect
to be frustrated by the inability to obtain quickly the necessary
data. It would be nice if you had the leisure to examine programs
in detail; usually the decision-maker needs the answer yesterday.
Some quantitative analytical tools are designed to use secondary
data, data which is already on the shelf, gathered by the census
bureau or the demographer's office. Benefit/cost analysis
does not lend itself to that approach; each analysis is unique.
This makes time for data collection all the more precious.
Finally, the analyst should realize
that what is offered here is a general model. It will probably
need to be expanded and modified each time to suit the specific
setting. This was alluded to in the discussion of discounting;
but it is applicable to all elements of the analysis. As long
as the user loads and then removes the template disk, the model
in memory can be freely modified with no damage to the original
template. The modified templates can even be saved (preferably
on a different disk and with a different name) for future consultation.
© 1996 A.J.Filipovitch
Revised 21 September 96