Year 2011-12

Economic Assessment of Public Projects (21708)

Degree / Qualification: Political Science and Administration
Year: 3rd/4th
Term: 1st
Number of ECTS credits: 4  
Hours of student dedication: 100 hours
Teaching language: Catalan
Teacher: David Elvira i Martínez

 

1. Introduction to the course

The is an optional course offered to third and fourth year students on the Political Science and Administration undergraduate, it is part of the second cycle of education. The approach taken is more theoretical than empirical, but for each topic ample empirical examples are provided. However the technical aspects mathematics and econometric concepts used is reduced so that no prior knowledge other than elementary algebraic operations and basic statistics is necessary. The main objective of the course is to apply the methodology of economic evaluation to public policy programs:  from processes to minimize cost to the cost-benefit analysis, including cost-effectiveness or cost-utility analysis. From a theoretical perspective, the aim is to introduce students to the methodology of economic evaluation applied to political action. Our goal is to offer students a number of conceptual tools and analytical models that enable them to better understand the dynamics of economic evaluation and its contribution to public decision making. This course is oriented towards public decision-making incorporating concepts and methods related to the analysis of economic efficiency and equity.  The course aims to enable students to learn models and methods of economic evaluation that are useful to strengthen their ability to carry out economic analysis.  This is done through the framework of hypothetical application in professional environments in the field of public policy. With the use of theoretical models, and incorporating case studies and practical exercises for applying the methods of economic evaluation, we want students to strengthen their capacity to analyze and understand situations in which there are dilemmas of efficiency and equity production and provision of collective goods and services of public agencies. In this sense, the course aims to strengthen and stimulate the analytical capacity to understand the mechanisms of collective decision making from an economic perspective.

2. Competences to be achieved

Ø  Generic competences:

 

-       Instrumental:

 

§  Cognitive Skills

®    Deduction

®    Abstraction

§  Information management

®    Research sources

®    Critical evaluation of data

®    Selection of relevant data

§  Oral and written in own language

®    Presentation of work in public

®    Formal presentation of texts

 

-       Systemic:

  

§  Design and Project Management (phases and orientation to the goal)

§  Understanding and analysis of situations

§  Results-Oriented Research Skills (Application of basic methodological principles)

§  Ability to apply theory to practice

-       Interpersonal

  

§  Team work

§  Ability to criticise and take criticism.

 

Ø  Specific

 

§  Consolidate basic concepts of  economic assessment

§  Identify costs/benefits of public projects and programmes.

§  Usage of methods of updating economic flows

§  Application of the methodology of economic evaluation to making collective decisions (efficiency and equity)

3. Contents

Topic 1: The basics of economic evaluation

 

1. Resource allocation and individual decisions.

2. Individual preferences.

3. Individual and social preferences: health.

 

Topic 2: Discount

 

1. Discount and individual decisions

2. Discount and social decisions

3. Inflation

4. Changes in relative prices

 

Topic 3: Decision Rules

 

1. Index decision.

 

a. The net present value (NPV)

b. The internal rate of return (IRR)

 

2. Type of decision.

 

a. Accept / reject projects

b. Sort projects

c. Problems with IRR and NPV

 

3. Decision

 

a. Limitations of the pareto approach

b. Inferring Values

c. Consistency

d. Equity

 

Topic 4: Measures of Welfare (1): monetary valuation.

 

1. Introduction.

2. Type of benefit and cost.

 

a. Real

b. Pecuniary

 

3. Methods for estimating the monetary value of a benefit.

 

a. Market Prices

b. Methods of implicit evaluation (revealed preference): hedonic price and travel cost

c. methods of revealed preference: contingent evaluation and multicharacteritic assessment

 

4. The applications of evaluating intangibles: the value of human life

5. Case: a new pharmaceutical for atopic dermatitis

 

Topic 5: Measures for Welfare (2): relative assessing and years of Life Adjusted for quality.

 

1. Types of outcome

2. The cost-effectiveness plane

 

a. Problems

b. About a case

 

3. Combinations of outputs (the case of health)

 

a. What is a health benefit?

b. Measures of health

 

4. Methods for obtaining utility

 

a. The compensation of time

b. Calculating the benefit of medical treatment

c. Alternatives to QALYs

 

Topic 6: Costs

 

1. Cost of opportunity

2. Depreciation

3. Measuring costs

4. Average and marginal costs

5. Examples

 

Topic 7: Uncertainty

 

1. Introduction

2. Sensitiveness Analysis

3. Risk Modelling

 

a. Distribution functions

b. The expected value

c. Award of the risk discount rate

 

4. Example: vocational training

 

  

4. Assessment

The competences are evaluated using two procedures:

a) a final exam on a set date and
b) participation in seminars, completion of exercises and the active involvement in group sessions.

The mark of the course is divided. 75% of the final grade will be based on the final exam, and the remaining 25% will be based on the average of the grades awarded for the seminars. To pass the course, students must obtain at more than a 3 (out of 10), and the average mark for the seminars must be greater than 3 (out of 10).

For seminars and exercises the assessment will be based on attendance and participation in group sessions and preparation the preparation of the exercises and activities set.  This will be divided as follows: 80% of the mark will be based on the marks obtained for the exercises set and 20% based on participation in the sessions.

Marking criteria for the final exam:

The format of the final exam is a written exam based on related questions and applied exercises related to the seminar contents. In marking exams the following will be taken into consideration:

a) theoretical knowledge on the subject (this covers that presented in class and the one included in lectures and seminars)
b) the ability to present ideas clearly and synthetically and use them adequately
c) the ability to make relationships among key concepts and relate this to general knowledge of the discipline

Criteria for marking exercises and seminars:

a) use of theory and concepts
b) ability to create original work, and to develop an own discourse (reflection on theory, specific contributions).
c) application of techniques seen in class

Criteria for assessing participation:

a) attendance
b) presentation of preliminary work
c) reading and understanding of the discussion papers
d) interventions during the sessions

5. Bibliography and other resources

1. Basic bibliography

HB846.2 .R87 2008

Análisis coste-beneficio : evaluación económica de políticas y proyectos de inversión

Rus, Ginés de

Barcelona : Ariel, 2008

3a ed.

5.2. Complementary bibliography

RA410 .A56 2003

Análisis coste-beneficio en la salud : métodos de valoración y aplicaciones

Barcelona [etc.] : Masson, cop. 2003

 

HB846.2 .A43 1989

Introducción al análisis coste-beneficio / Emilio Albi Ibáñez

Albi Ibáñez, Emilio 

Ministerio de Economía y Hacienda. Instituto de Estudios Fiscales, 1989

5.3. Other resources

AC- Herber - UCLA: http://www.econ.ucla.edu/harberger/

Center for reviews and dissemination (U. York): http://www.york.ac.uk/inst/crd/index.htm

Hacienda Pública Española: http://ideas.repec.org/s/hpe/journl.html

 

6. Methodology

The course covers various learning activities for students:

1. attending lectures.  This will include activities such as:

- Attendance
- Reading the above texts
- Monitoring the course website
- Participating in sessions

2. completion of a paper on a topic related to the subject, including the following:

- Attending a specialized seminar
- Preparing presentations for the seminar
- resolving applied exercises

The aim of this structure is for students to be able to apply the theoretical knowledge developed during the lectures to case studies. In the practical sessions students are guided through the technical application of evaluation methods.  In seminars students will be able to work on cases more creatively and independently.

 

The strength of lectures is relatively weakened as opposed to seminars in the new syllabus (there will be only 22 hours of lectures), and instead more time is dedicated to working on applied exercises and participation in seminars (8 hours for each activity).

 ® Lectures (class preparation)

Lectures will be used to present the topics of the course. They will be 2 hour long sessions held once a week.  Powerpoint presentations will be used in each lecture that have been specifically designed to cover the content of each topic.  The powerpoints will be made available through the Aula Global.  The Aula Global will also be used for additional information, links to related webpages.  Students will also have at their disposal a series of readings that will be talked about in the lectures.  Students must read the relevant bibliography throughout the course.

 ® Practice sessions for the whole group:

Throughout the course, about 10 hours of applied practical sessions for the entire group will be offered (about one hour per week). They are designed specifically for the development of technical and methodological skills applied to economic evaluation.

The sessions will have the following contents:

- Strengthening the foundations of microeconomics
- Application of the concept of "discount rate"
- Application of the concepts of IRR and NPV
- Methods for estimating intangible benefits
- Reinforcement of the concept of cost (average and marginal) and their application in economic evaluation public projects
- Practical applications in economic evaluation
- Application of risk in economic evaluation

 ®Organization of seminars:

The seminars are designed to consolidation the theoretical concepts.  This may involve a little research and discussion of basic theoretical concepts, applying them to a specific problem which student must analyze in the framework of the different cases studied in the seminar. The structure of the seminar sessions is as follows:

Session 1

· Presentation.

· Overview of cases

Session 2

· Review of relevant readings.

· Assigning commentators for each cases (maximum of 3 per groups):

- Case 1: TED - Copenhagen Consensus
- Case 2: ACB motorway rescue
- Case 3: Air pollution and the Copenhagen Consensus
- Case 4: Residential Solutions for the elderly

 

Session 3

· Case 1: presentation.

• The group speaker will summarize the case and establish a critical matrix: strengths, weaknesses and limitations, new lines of progress and improvement.

Session 4

· Case 1: Discussion.

. The rest of the group will argue their position on the critical matrix, provide new evidence or new arguments.

Session 5

· Case 2: presentation.

• The group speaker will summarize the case and establish a critical matrix: strengths, weaknesses and limitations, new lines of progress and improvement.

Session 6

· Case 2: discussion.

. The rest of the group will argue their position on the critical matrix, provide new evidence or new arguments.

Session 7

· Case 3: presentation.

• The group speaker will summarize the case and establish a critical matrix: strengths, weaknesses and limitations, new lines of progress and improvement..

Session 8

· Case 3: discussion.

. The rest of the group will argue their position on the critical matrix, provide new evidence or new arguments.

Session 9

· Case 4: presentation.

• The group speaker will summarize the case and establish a critical matrix: strengths, weaknesses and limitations, new lines of progress and improvement.

 

Session 10

· Case 4: discussion.

The rest of the group will argue their position on the critical matrix, provide new evidence or new arguments.

 

  

7.- Programme of Activities

Group 1.1 (for group 1.2 seminars will alternate from the third week)

 

	Content	H. Teach	Learning activities	H. Student	Specific Competences
1	Program Topic 1	1 h 2 h	Attendance Content revision Attendance	1 h 2 h 2 h	Consolidating concepts
2	Topic 1 Practice session  1	3 h 1 h	Content revision Practical exercise Attendance	4 h 2 h 4 h	Consolidating concepts Applying method
3	Topic 2 Practice session 2 Seminar Case 1	2 h 1 h 2 h	Content revision Practical exercise   Attendance Seminar Preparation	4 h 2 h 4 h 6 h	Consolidating concepts Applying method
4	Topic 3 Practice session 3	2 h 1 h	Content revision Practical exercise   Attendance	4 h 2 h 3 h	Consolidating concepts Applying method
5	Topic 4 Practice session 4 Seminar Case 2	2 h 1 h 2 h	Content revision Practical exercise   Attendance Seminar preparation	4 h 2 h 4 h 6 h	Consolidating concepts Applying method
6	Topic 4 Practice session 5	2 h 1 h	Content revision Practical exercise   Attendance	4 h 2 h 3 h	Consolidating concepts Applying method
7	Topic 5 Practice session 6 Seminar Case 3	2 h 1 h 2 h	Content revision Practical exercise   Attendance Seminar preparation	4 h 2 h 4 h 6 h	Consolidating concepts Applying method
8	Topic 6 Practice session 7	2 h 1 h	Content revision Practical exercise   Attendance	4 h 2 h 3 h	Consolidating concepts Applying method
9	Topic 7 Practice session 8 Seminar Case 4	2 h 1 h 2 h	Content revision Practical exercise   Attendance Seminar preparation	4 h 2 h 4 h 6 h	Consolidating concepts Applying method
10	'Wrap up'	4 h	Content revision Practical exercise   Attendance	3 h 10 h 1 h	Consolidating concepts