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Instructors: Prof. Dr. Moritz Alexander Drupp
Event type:
Interactive class
Displayed in timetable as:
Hours per week:
3
Credits:
6,0
Language of instruction:
English
Min. | Max. participants:
- | 45
Comments/contents:
Society regularly stands to decide on investing public money in a range of potential projects or policies, such as building new roads, increasing the number of teachers, improving air quality, mitigating climate change or protecting endangered species. Which measuring rod should guide these investment flows? Economic theory provides a simple answer: Those projects should be invested in that yield the highest net improvements in social welfare. Answering such questions in practice, however, poses monumental challenges, not least because many projects have effects on goods and services that are not traded on markets. For instance, what is the benefit of improving inner-city air quality? Policy appraisal therefore has to determine the value of such goods and services by means of special techniques to be able to strike well-informed trade-offs. On a more fundamental level, what constitutes social welfare is an ethical question or policy choice. Project appraisal therefore has to explicitly deal with distributional effects arising from the costs and benefits associated with potential projects. The long-term nature on many public policies also calls for a careful treatment of the inherent risks and uncertainties.
This course will introduce students to the general method and use of cost-benefit analysis (CBA) and it will deal with a number of crucial aspects of policy appraisal in depths. We will furthermore consider CBA case studies and assess the state of governmental guidelines on CBA in Germany as well as in other countries. The goal of the course is to equip students with the necessary background to critically assess the validity of practical CBAs and to be able to formulate how current CBA guidelines might be improved based on the latest economic research. Ultimately, the course shall prepare students to better evaluate which policies are likely to yield the highest welfare improvements.
The course will consist of a lecture block that provides an overview and introduces students to key concepts. This will be followed by group presentations on selected crucial aspects of CBA. The interactive lecture will close with a debate on a specific CBA case study.
There will be no exam; instead students will present on a selected aspect of CBA as part of a small group and actively participate in class (50%) and write a seminar paper based on the topic of the group presentation (50%). Additionally, a grade bonus can be achieved by improving the state of knowledge on CBA and its crucial aspects as currently presented on Wikipedia in a documented fashion.
Literature:
Please consider the following resources as background literature:
Atkinson, G., & Mourato, S. (2008). Environmental cost-benefit analysis. Annual Review of Environment and Resources, 33, 317-344.
Boardman, A. E., Greenberg, D. H., Vining, A. R., & Weimer, D. L. (2017). Cost-benefit analysis: concepts and practice. Cambridge University Press.
OECD (2018), Cost-Benefit Analysis and the Environment: Further Developments and Policy Use, OECD Publishing, Paris, https://doi.org/10.1787/9789264085169-en. Available for online reading at:
https://read.oecd-ilibrary.org/environment/cost-benefit-analysis-and-the-environment_9789264085169-en#page1
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