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Acclaim for first edition:`The author succeeds in bringing together many interesting real-life applications of CBA in various areas (including among others health, environment and transportation). The examples are well chosen to illustrate the basic issues and show clearly the crucial importance of theoretical and methodological assumptions. Moreover, they are presented in an accessible and attractive way. For those who know already the principles of CBA, these applications are stimulating and enjoyable reading.'- Erik Schokkaert, Tijdschrift voor Economie en ManagementThis fully updated new edition continues in the vein of its predecessor by viewing cost-benefit analysis as applied welfare economics, while at the same time building on the earlier framework by extending the theory and providing further applications in each chapter.New for this edition are analyses of theory related applications in mental health, condom social marketing programs, female primary education as a means of preventing HIV/AIDS and the pricing of natural gas. Presented in an integrated manner, the theoretical concepts are constructed around the main building blocks of CBA, such as shadow pricing, distribution weights, the social discount rate and the marginal cost of public funds.This edition will cement the book's place as a major and accessible text in the field and will be of great interest to graduate and undergraduate students of welfare economics and microeconomic theory, as well as government economists involved with any area of public policy.
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APPLIED COST–BENEFIT ANALYSIS, SECOND EDITION
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To Elizabeth, Adam and Matthew, Nancy and Carisa, and Austin
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Applied Cost–Benefit Analysis, Second Edition
Robert J. Brent Professor of Economics, Fordham University, USA
Edward Elgar Cheltenham, UK • Northampton, MA, USA
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© Robert J. Brent 2006 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited Glensanda House Montpellier Parade Cheltenham Glos GL50 1UA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA
A catalogue record for this book is available from the British Library Library of Congress Cataloguing in Publication Data Brent, Robert J., 1946– Applied cost–benefit analysis / by Robert J. Brent.—2nd ed. p. cm. Includes bibliographical references and index. 1. Cost effectiveness. I. Title. HD47.4.B74 2007 658.15'54—dc22 2006011733
ISBN-13: ISBN-10:
978 1 84376 891 3 (cased) 1 84376 891 7 (cased)
Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall
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Contents
ix xiii xv xvii xix
List of tables List of abbreviations Preface to the first edition Preface to the second edition Acknowledgements PART I 1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8
Introduction to CBA Introduction The particular cost–benefit model Discounting and cost–benefit analysis CBA versus ‘rational ignorance’ Applications: health-care evaluations Overview of the book Final comments Appendix
3 3 6 10 13 14 24 27 29
PART II 2 2.1 2.2 2.3 2.4 2.5 2.6 2.7
Compensation tests Introduction Compensation tests and the distribution of income Uncompensated losers and the numbers effect Compensation tests and distribution neutrality Applications Final comments Appendix
3 3.1 3.2 3.3 3.4 3.5 3.6
Consumer surplus Introduction