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Research School of Economics ANU College of Business and Economics Building 26C The Australian National University ACT 0200 School Office 02 6125 3590 College Reception International: +61 2 6125 3807 Within Australia: 1300 732 120 (local call cost only)

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Course Outline
ECON2133 Cost-benefit Analysis Semester 2, 2011
STUDENTS: Course details change from semester to semester. Please check that you are reading the Course Outline for the correct semester. Course Description Cost-benefit analysis (CBA) provides an analytical framework for evaluating public policy options. More precisely, CBA attempts to measure and compare the economic efficiency of policy options. This type of analysis has become standard for evaluating public projects such as transportation, healthcare, water resources, urban infrastructure, or environmental projects. The following topics will be covered in the course: Foundations of CBA CBA in primary markets CBA in secondary markets Non-market valuations CBA under uncertainty CBA over time CBA with distributional concerns.

This Course Outline was updated on 06 August 2011 for use in Semester 2, 2011.

Contacts
Role Office address Email Telephone Consultation Times Tuesday 16:0017:00 or by appointment.

Course Convenor and lecturer (Course Authority) Cagri S. Kumru Tutor/s Hugh Green Maria Tatarow, School Administrator. Finola Wijnberg, Student Administrator. Terry Embling, Course Administrator

Room 2031 HW Arndt Bldg.

cagri.kumru@anu.edu.au

6125 6126

Room 2018 HW Arndt Bldg. Room 1014 HW Arndt Bldg. Room1013 HW Arndt Bldg. Room1013 HW Arndt Bldg.

hugh.green@anu.edu.au

6125 7321

TBD

maria.tatarow@anu.edu.au

6125 3590

09:00 17:00

finola.wijnberg@anu.edu.au

6125 5636

09:00 17:00

terry.embling@anu.edu.au

5124 0384

09:00 17:00

Communication
Email If necessary, the lecturers and tutors for this course will contact students on their official ANU student email address. Information about your enrolment and fees from the Registrar and Student Services' office will also be sent to this email address. Announcements Students are expected to check the Wattle site for announcements about this course, e.g. changes to timetables or notifications of cancellations. Notifications of emergency cancellations of lectures or tutorials will be posted on the door of the relevant room. Course URLs More information about this course may be found on: Study @ ANU, the College of Business and Economics website, and Wattle, the University's online learning environment. Log on to Wattle using your student number and your ISIS password.

Course Information
Learning Outcomes Upon successful completion of the requirements for this course, students will be able to: 1. determine when a CBA may be performed in a meaningful way; 2. perform the CBA as completely as possible under relevant modelling assumptions or approximations; 3. identify the elements that may compromise the validity of the CBA such as limitations in modelling assumptions, limitations in data, and political concerns; 4. effectively communicate the results of the CBA to the relevant parties.

Requisites Completion of or concurrent enrolment in ECON2101/2111 Microeconomics 2 (P or H). Workload Students taking this course are expected to commit at least 10 hours a week to completing the work. This will include: 2 hours a week lecture 1 hour a week tutorial private study Wattle

Course delivery The Pass component of ECON2133 CBA consists of two lectures (one hour each) and one tutorial (one hour) per week (see the timetable for details on dates, times, and locations). Tutorial meetings start in week 2 (see tutorial registration details below). Lectures: It is expected that students attend lectures whenever possible and come prepared to them. The handouts will be uploaded to WATTLE before the lectures. I will provide a detailed reading list in Week 2. Tutorials: It is expected that students prepare for tutorial in advance and come ready to answer questions about the problems assigned for each weeks tutorial.

Co-teaching Students enrolled in ECON8018 CBA follow the lectures and tutorials of ECON2133 CBA. In addition, there will be separate classes for them from the third week of lectures until the end of semester. These students should read the additional course outline for ECON8018 for more detail. Attendance requirements There are no marks allocated for attendance but participation in lectures and tutorials is encouraged. Please note that preparing for lectures and tutorials in advance will considerably enhance your performance in this course. Tutorial Registration Enrolment in tutorials will be completed online using the Electronic Teaching Assistant (ETA). To enrol, follow these instructions: 1. Go to http://eta.fec.anu.edu.au. 2. You will see the Student Login page. To log into the system, enter your University ID (your student number) and password (your ISIS password) in the appropriate fields and hit the Login button. 3. Read any news items or announcements. 4. Select "Sign Up!" from the left-hand navigation bar. 5. Select your courses from the list. To select multiple courses, hold down the control key. On PCs, this is the Ctrl key; on Macs, it is the key. Hold this key down while selecting courses with the mouse. Once courses are selected, hit the SUBMIT button.

6. A confirmation of class enrolments will be displayed. In addition, an email confirmation of class enrolments will be sent to your student account. 7. For security purposes, please ensure that you click the LOGOUT link on the confirmation page, or close the browser window when you have finished your selections. 8. If you experience any difficulties, please contact the School Office (see page 1 for contact details).

Prescribed text
Boardman, Anthony A., David H. Greenberg, Aidan R. Vining, and David L. Weimer. Costth Benefit Analysis: Concepts and Practice, 4 edition (Pearson series in Economics, 2011). Hereafter, I will refer it as BGVW.

Tentative Study Schedule The following outline is a guide for you to know the order in which materials will be presented throughout the semester.

Week

Subjects

Readings

Overview of Decision Rules in Cost-Benefit Analysis

*BGVW Ch.1 & 2

Microeconomic Foundations of CBA

*BGVW Ch. 3

Valuing Benefits and Costs in Primary Markets

*BGVW Ch. 4 Posner, Richard A. 2005. Intellectual Property: The Law and Economics Approach JEP 19. Varian, Hal R. 2005. Copying and Copyright JEP 19.

Valuing Benefits and Costs in Secondary Markets

*BGVW Ch. 5 Morrison, et al. 1999. Fundamental Flaws of Social Regulation: The Case of Airplane Noise JLE 42. *BGVW Ch.13 & 14 Hahn, R. W., et al. 2000. Should You Be Allowed to Use Your Cellular Phone While Driving? Regulation 23 (3).

Non-market Valuation: Revealed Preference Method

Non-market Valuation: Stated Preference Method

*BGVW Ch. 15 Hanh, R. W. & S. Wallsten. 2003. Is Granny Worth $2.3 Million or $6.1 Million? AEI-Brookings Joint Center. Ashenfelter, Orley. 2006. Measuring the Value of a Statistical Life: Problems and Prospects NBER Working Paper.

Shadow Prices

*BGVW Ch. 16 &17

Taking Account of Uncertainty in CBA

*BGVW Ch.7 Advanced Information on the Nobel Prize in Economic Sciences. 2005. Robert Aumanns and Thomas Schellings Contributions to Game Theory: Analysis of Conflict and Cooperation.

Option Price and Option Value

*BGVW Ch.8

Required readings are denoted by *.

This Course Outline was updated on 06 August 2011 for use in Semester 2, 2011.

Week

Subjects

Readings

10

Discounting in CBA

*BGVW Ch. 6 & 10 Bazelon, Coleman & Kent Smetters. 1999. Discounting Inside the Washington, D. C. Beltway. JEL 13(4).

11

Cost-Effectiveness Analysis

*BGVW Ch.18

12

Distributionally Weighted CBA

*BGVW Ch.19 Harberger, Arnold C. 1978. Basic Needs Versus Distributional Weights in Social Cost-Benefit Analysis.

13

Overview

Other relevant information Handouts will be uploaded to WATLLE before the relevant lectures. Students should note that the handouts are to be regarded as a brief summary of lecture and relevant rereading materials. Therefore, reading handouts only cannot substitute following lectures and reading required and recommended materials. A copy of the textbook is placed on the Reserve Collection (2-hour loan). The lecturers e-mail is only to be used when you need to contact him about administrative or personal matters. It is not to be used for instructional purposes. When you have a question regarding with the course material, please consult your tutor or lecturer in person.

Assessment
Proposed Assessment Schedule Details about assessment may change during the first two weeks of semester. Please ensure that you check with your lecturer or tutor about any changes. Changes to the assessment schedule will be posted to the Wattle site.

Assessment item

Description and detail of assignment Problems and short-essay questions Problems and short-essay questions Problems and short-essay questions Problems and short-essay questions

Examinable Material

Due Date

Weighting (%)

Homework Assignment 1

TBA

Week 4

Homework Assignment 2

TBA

Week 7

Homework Assignment 3

TBA

Week 10

Homework Assignment 4

TBA

Week 13

Assessment item

Description and detail of assignment Problems and short-essay questions Problems and short-essay questions

Examinable Material

Due Date

Weighting (%)

Mid-semester exam

TBA

Week 7

30

Final exam

TBA

Final examination period

50

Information about assignments and examinations Assignments: Students must hand their work in the box next to the school office. No late submission is allowed. In each assignment there will be 4 or 5 questions. In order to receive any marks ALL QUESTIONS should be answered. Students who answer all questions will receive 20 out of 100 marks while others will receive zero marks. The remaining 80 marks will depend on your performance in the RANDOMLY SELECTED question. It is important to note once again that you will not get any marks unless you attempt to solve ALL QUESTIONS. Mid-semester exam: No supplementary mid-semester examinations will be offered. Students who do not attend and do not have an adequate reason will be awarded a mark of zero. Documentary evidence for an absence (e.g. medical certificate) must be provided to the Lecturer. If approved, the student will have their final mark re-weighted according to the weight of the mid-semester exam. Further details regarding with exams will be announced in lectures and posted on Wattle. Learning Outcomes-Assessment How well have you achieved the learning outcomes for this course? Your lecturer makes this judgement based on your assignments and examination papers. Each piece of assessment addresses to some extent all learning outcomes. Scaling Your final mark for the course will be based on the raw marks allocated for each assignment or examination. However, your final mark may not be the same number as produced by that formula, as marks may be scaled. Any scaling applied will preserve the rank order of raw marks (i.e. if your raw mark exceeds that of another student, then your scaled mark will exceed the scaled mark of that student), and may be either up or down.

General Information for all Students

Information about the policies, procedures and rules that relate to assessment, as well as information about the support services provided by the College of Business and Economics, and the ANU more generally, are posted at: http://cbe.anu.edu.au/Current_Students/general_info/student_info.asp