Valuing Benefits in Benefit-Cost Studies of Social Programs [book]

Lynn Karoly
Preface Benefit-cost analysis (BCA) has garnered increased interest among both publicand private-sector decisionmakers who seek to make choices between social programs that aim to improve the lives of children, youth, and families. However, application of the benefit-cost approach for evaluating social programs has yet to reach maturity. One important challenge for analysts is to devise appropriate "shadow prices," or dollar valuations, for the various program benefits-in other words, the
more » ... ic values to attach to the short-and longterm outcomes that may be affected by a given social program. This study assesses the state of the art with respect to the measurement and use of shadow prices in the application of BCA to social program evaluation. The study provides a review and synthesis of the social programs for which highquality evaluations have been conducted and the subset for which BCAs have been performed. The short-and long-term outcomes that were affected and the outcomes for which shadow prices have been generated are documented for the programs with favorable effects. The resulting review classifies outcomes in three broad groups: (a) outcomes where there is a more-established methodology for generating economic values; (b) outcomes where economic values have been generated but the literature has not reached consensus on the appropriate methodology for deriving them; and (c) outcomes for which economic values are rarely, if ever, calculated. This classification suggests directions for future methodological work to advance the use of BCA in evaluating social programs. The study was funded through a grant from the John D. and Catherine T. MacArthur Foundation as part of its initiative called The Power of Measuring Social Benefits. The report should be of interest to decisionmakers in the public and private sectors and to researchers and practitioners who seek to use BCA to assess the economic returns from investing in social programs. This research was undertaken within RAND Labor and Population, a division of the RAND Corporation. RAND Labor and Population has built an international reputation for conducting objective, high-quality, empirical research to support and improve policies and organizations around the world. Its work focuses on labor markets, social welfare policy, demographic behavior, immigration, international development, and issues related to aging and retirement, with a iv common aim of understanding how policy and social and economic forces affect individual decisionmaking and the well-being of children, adults, and families. For more information on RAND Labor and Population, contact
doi:10.7249/tr643 fatcat:ecddd3j6avfupit4e3x55utkeq