Examples of public health interventions with characteristics of public goods include the Chapter 4Cost–benefit analysis: methodological challenges of evaluating .. including economic, social, political, and physical and biological factors. quality targets, the definition of waste management strategies and the regulation of a hazardous cost-benefit analysis in relation to environmental regulation, the definitions have been chosen to Compost. Exit of biological treatment plant. The cost benefit principle or cost benefit relationship states that the cost of providing financial information in the financial statements must not outweigh the.
For instance, Trueman and Anokye 53 evaluated the costs and consequences of exercise referral schemes. Benefits were estimated at an additional people becoming active, 51 avoided cases of coronary heart disease, 16 avoided cases of stroke and 86 avoided cases of diabetes. Policy-makers must decide how exercise referral schemes compare with other physical activity interventions, which may have different health outcomes. Unlike CCAs, CBAs synthesise all costs and benefits of an intervention by valuing all costs and benefits in monetary units.
In principle, this approach is more attractive, as all outcomes and inputs are valued in the same units, making comparisons more straightforward. When the calculation of all of the values of costs and benefits are carefully justified and made explicit, CBAs can lead to more transparent decision-making. Academics have, therefore, argued that more attention should be placed on the CBA framework when evaluating large-scale public policy interventions. Often, in practice, the included costs and benefits are limited to those that are measurable, which has potential to bias decision-making.
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Choosing the time frame of an economic evaluation can also be challenging. Large-scale public policies which address some of the more structural or upstream determinants of health may take many years to achieve benefits and some critics have suggested that too much focus is often placed on short-term outcomes.
As a general framework, economic evaluations have also been criticised for failing to consider issues around equity. In addition to these general critiques of economic evaluations, critiques specific to evaluations of large-scale policies and interventions have focused on three main areas: Costs of interventions Although determining the costs of interventions is necessary in any economic evaluation, costing large-scale public health interventions can have particular challenges.
Costs of large-scale public health interventions may be incurred by a range of agencies, making estimates of total costs tricky. For example, the costs of introducing free bus travel for young people in London, an intervention with many potential public health implications, 5758 were incurred by two different agencies. The costs of manufacturing and posting bus passes to young people were incurred by Transport for London i.
The costs of providing increased bus capacity were incurred by the bus network operators within London i. The marginal cost of an additional concessionary journey can be estimated using a variety of methods, which can lead to different results, further complicating cost estimation. In addition to having costs shared by multiple agencies, large-scale public health interventions may also shift costs for instance, from public service authorities to individual households making total cost calculations even more problematic.
Large-scale interventions can also affect non-health outcomes 47 and conceptual decisions need to be made about whether or not these outcomes are included in the scope of the analyses. Identifying the wider health effects and non-health effects if they are to be included of large-scale policies is not straightforward. Causal pathways are complex and often unknown.
Large-scale interventions can occur at the same time as other changes, making it difficult to assess which specific changes in health outcomes result from the intervention.
Randomised controlled trial RCT designs are often not feasible or necessarily appropriate in evaluations of large-scale policies and so evaluations may need to rely on robust observational methods to attribute health and wider effects of policies.
Monetising the effects of interventions Valuing large-scale public health interventions also begets a number of methodological concerns. There are two main ways of valuing the benefits of interventions: Revealed preference techniques use market information to place a monetary value on particular benefits. However, there are a number of fundamental challenges in identifying the trade-offs that individuals make particularly the difficulty of controlling for other influences on decisions.
Revealed preference techniques are very rarely used in monetising interventions of public goods: Therefore, research aiming to monetise benefits of large-scale public health interventions tends to concentrate on stated preference techniques. Stated preference techniques ask individuals to place a value on changes in their health and welfare, usually through a process called contingent valuation.
Broadly, contingent valuation processes ask individuals hypothetically about the maximum amount of money they would be willing to pay for the benefits associated with the introduction of a service, or about the minimum amount of money they would be willing to accept as compensation for the removal of a service. Although contingent valuation methods are the dominant valuation techniques used in public health, they involve a number of methodological choices which may impact on their validity and reliability.
Large-scale interventions that involve characteristics of public goods present even greater challenges for stated preference valuations. We use street lighting as a case study to illustrate some of the complexities of CBA of large-scale public health interventions with public good characteristics.
Street lighting can be experienced by all residents and visitors of a particular area simultaneously and without exclusion. Many local authorities in England and Wales are considering reducing, or have reduced, some street lighting provision at night with the aim of reducing costs, but also with considerations of contributing towards climate change mitigation and reducing environmental light pollution.
Public concerns about these proposals have centred on crime, public perceptions of safety, and road safety. Costs of intervention In England and Wales, street lighting is delivered by different agencies depending on the location of the street. The Highways Authority is responsible for providing street lighting on motorways. For the most part, local authorities deliver street lighting on roads within their boundaries.
Interventions to reduce street lighting have taken a number of forms. Some local authorities have introduced part-night lighting, where street lights are turned off between certain hours of the night typically between 12 a. Other local authorities have introduced dimming, where lights stay on all night but emit a reduced amount of light. Trimming, where street lights are switched on slightly later and switched off slightly earlier, is another popular intervention.
Finally, local authorities have also switched to different usually more energy efficient types of lighting. Many local authorities introduce multiple interventions involving the same street light. If we take a societal perspective in the CBA framework, calculating the costs of these different interventions to different agencies poses a number of problems.
Local authorities incur four major costs associated with street lighting reduction interventions, energy costs, maintenance costs, lighting adaptation costs and consultation costs, each of which may be difficult to tease out. Not all local authorities consult residents about changes to street lighting provision; among those that do, consultations on reduced street lighting can take place within a broader discussion of local issues, which means making some assumptions when attributing costs to the street lighting intervention in particular.
In terms of energy costs, energy tariffs differ not only by company but by time of day, and energy companies have sometimes changed their prices in response to reduced street lighting.
Maintenance costs are also problematic. Reduced street lighting is often part of a larger programme of works to update street lighting generally, so, again, some assumptions need to be made to attribute part of these costs to the street lighting intervention.
For instance, one theory suggests that reduced street lighting will lead to poorer visibility on the streets at night. This decrease in visibility will, in turn, lead to an increase in road traffic collisions and particular types of crime. Reduced mobility may lead to a decrease in the number of crimes and road traffic injuries that take place in affected areas.
In addition, there are a number of non-health related outcomes that may be affected by street light interventions. For example, if reduced visibility leads individuals to travel more slowly or to avoid particular areas then this has implications for the cost of travel.
A reduction in mobility due to the reduced street lighting schemes may also have implications for the night-time economy near affected areas. Conceptual decisions need to be made about whether or not to include these non-health outcomes. In a real-world context, it may be difficult to attribute any change in health outcomes to the street lighting intervention. It may be difficult to identify matching comparison areas, there are a number of potential confounders, and other changes in the streets may have occurred around the same time e.
For instance, in response to concerns about crime, policing policies may have changed to increase presence of police in those areas affected by the interventions. Additionally, companies or individuals may have invested privately in their own lighting in response to the intervention, which may mitigate any effects of the intervention. Depending on the scope of an economic evaluation these private investments may need to be considered in the costs of the intervention.
Difficult valuation issues Street lighting reduction offers a complex case for stated preference approaches to valuation for a number of reasons. Research into the value of introducing street lighting has identified a few technical challenges. First, in a context where there is a lack of transparency in local government spending, 62 the public may lack trust in the agency responsible for street lighting provision. Using repeated valuations may anger and surprise the respondent as a result of expectations about the first valuation representing actual cost of the intervention; respondents may wish to send a message about keeping prices low to the untrusted authority; and values may be contingent on other changes in local taxes that have occurred recently.
Broadly, these include questionnaires or consultations with key stakeholders to inform cost calculations, conceptual modelling and quasi-experimental methods to elucidate the wider benefits of an intervention, and utilising guidance and literature from a range of disciplines on valuation.
Costs of interventions There are a number of different approaches to collecting costs of interventions. Macro-costing has a number of disadvantages for large-scale public policy interventions: For instance, in the case of reduced street lighting ingredients would include public consultations, any changes to lighting infrastructure and energy costs.Cost Benefit Analysis - Simply Explained (Khan Academy Talent Search)
Micro-costing methods are able to include indirect costs and costs to multiple agencies, though some work is required in identifying these types of costs. Alternatively, studies have relied on more informal consultations with key stakeholders to help to estimate costs of different ingredients.
Logic models are widely used in public health to present theoretical understandings of relationships between interventions and health outcomes.
Developing a logic model linking large-scale interventions with wider outcomes that is able to include complexities such as feedback loops and emergent properties requires a systematic and iterative approach. Recent guidance has suggested embarking on conceptual modelling as a first step in understanding the ways that policies can shape the health of the population. Guidance suggests assessing the intervention of interest at a variety of different analytic levels, including economic, social, political, and physical and biological factors.
Once an initial model has been drafted, researchers can review the literature across a range of related disciplines to further explore elements of the model and refine and develop understandings of relationships and mechanisms. RCTs are the gold-standard method for attribution of effects and should be adopted for large-scale policies whenever possible and appropriate.
Studies have used a number of quasi-experimental designs to attribute outcomes to large-scale policies. For instance, controlled interrupted time series methods have been used to quantify the effects of large-scale policies such as speed zones 42 and policies that limit the availability of alcohol. An alternative method of valuation involves summing up stated preference estimates of the individual and wider benefits attributable to the intervention.
The advantage of this method is that there are often valuations of particular benefits available in the economics or related discipline literature. In the reduced street lighting example, for instance, there are well-used willingness-to-pay valuations for the prevention of crimes 70 and road traffic injuries. In the street lighting example, there is some work estimating willingness to pay to reduce fear of crime and for improvements to the night sky.
Although promising, this method faces some methodological challenges. Statistical murder Another controversy is valuing the environment, which in the 21st century is typically assessed by valuing ecosystem services to humans, such as air and water quality and pollution.
Time and discounting[ edit ] CBA generally attempts to put all relevant costs and benefits on a common temporal footing using time value of money calculations. This is often done by converting the future expected streams of costs and benefits into a present value amount using a discount rate. The selection of a discount rate for this calculation is subjective.
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A smaller rate values future generations equally with the current generation. Empirical studies suggest that people discount future benefits in a way similar to that described in these calculations. One example of this issue is the equity premium puzzlewhich suggests that long-term returns on equities may be higher than they should be, after controlling for risk and uncertainty. If so, market rates of return should not be used to determine the discount rate, as this would have the effect of undervaluing the distant future e.
This can be factored into the discount rate to have uncertainty increasing over timebut is usually considered separately. Particular consideration is often given to agents' risk aversion — preferring a situation with less uncertainty to one with higher uncertainty, even if the latter has a higher expected return.
In such a context, expected return calculations provide biased estimates of cost-benefits for a project, as they fail to account for differences in the degree of uncertainty. Alternatively a more formal risk analysis can be undertaken using Monte Carlo simulations. History[ edit ] The French engineer and economist Jules Dupuitcredited with the creation of cost—benefit analysis. Over the s, CBA was applied in the US for water quality,  recreation travel,  and land conservation.
Government guidebooks for the application of CBA to public policies include the Canadian guide for regulatory analysis,  Australian guide for regulation and finance,  US guide for health care programs,  and US guide for emergency management programs. This presented cost—benefit results and detailed environmental impact assessments in a balanced way.
NATA was first applied to national road schemes in the Roads Review but subsequently rolled out to all transport modes. As ofit was a cornerstone of transport appraisal in the UK, and it is maintained and developed by the Department for Transport. Shortly thereafter, in the s, academic and institutional critiques of CBA started to emerge. The three main criticisms were: Debates on the merits of cost and benefit comparisons can be used to sidestep political or philosophical goals, rules and regulations.
That CBA is inherently anti-regulatory, and therefore not a neutral analysis tool. This is an ethical argument: That the length of time necessary to complete CBA can create significant delays, which can impede policy regulations. These criticisms continued through the s under the Clinton administration.