DO YOU HEAR YOUR POLITICIAN SHOUTING OUT AGAINST PRIVATE COST BENEFIT ANALYSIS IN PUBLIC POLICY-WRITING? NOT WHEN NEO-LIBERALS HAVE CORPORATIONS WRITING ALL OF PUBLIC POLICY! THIS IS THE #2 ISSUE FOR DEMOCRATIC LABOR AND JUSTICE FOLLOWING REINSTATING RULE OF LAW!
RAISE YOUR HAND IF YOU UNDERSTAND THAT INTRODUCING COST BENEFIT ANALYSIS AT THE SAME TIME EMBRACING NEO-LIBERALISM WOULD LEAD TO ALL LAWS WRITTEN FOR THE BENEFIT OF PROFIT OVER PUBLIC INTEREST------
EVERYONE UNDERSTANDS THAT!
The democratic party platform states the opposite as regards policy stance. So, having neo-liberals in control of the democratic party is counter to the very platform on which they run.
'In social cost benefit analysis, not only profit but also other effects like how will it affect life of others are considered. Whereas, in private cost benefit analysis, the focus of the analysis is on maximizing profits'.
Importance of Social Cost Benefit Analysis
Social cost benefit analysis is a process in which the social impact of a project or a policy is assessed and evaluated by the government before approving a project contract.
Social cost benefit analysis is a part of calculating the merits of a project or a government policy. As the name suggests, social cost-benefit analysis of anything is associated with its social impact. This means that how a project or a policy will affect people is analyzed. Only after calculating the opportunity cost of a project, it is approved.
The scope of social cost benefits can be applied to public investment and also to private investment. In case of public investment, it plays a major role in the economic development of a developing country. And, in case of private investments social cost benefit analysis is important as investments are to be sanctioned and are monitored by the government. There are two aspects of calculating the cost benefit analysis of any project. One is the private cost-benefit analysis and the other is social cost-benefit analysis. Though, social cost-benefit analysis is usually undertaken by the government.
Social cost is often in contrast with private cost. Major differences between social cost benefit analysis and private cost benefit analysis are as follows:
1. In social cost benefit analysis, not only profit but also other effects like how will it affect life of others are considered. Whereas, in private cost benefit analysis, the focus of the analysis is on maximizing profits.
2. For calculating social cost benefit, market prices for the factors to be considered cannot exist. Therefore, market price is not the main factor taken into consideration while calculating social cost benefit. Whereas, for private cost benefit analysis market price forms the base of the analysis and the key factor that determines if a project is viable.
Social Cost = Negative Impact
Social Benefit = Positive Impact
Social cost benefit analysis has been introduced to develop systematic ways of analyzing cost and benefits of factors which do not have market prices, like effect on environment and traffic. Social cost-benefit calculates non-monetized benefits/ losses. It is normally used for large fund projects like constructing a dam, a road. Such projects have higher social cost-benefits and also affects the price level to an extent.
Example: If a bridge is to be constructed then how much will it benefit the people who live in that particular area, is to be analyzed. Therefore, how many people are willing to use the bridge, how much traffic will be reduced and what is the increase in cost of traveling, will have to be assessed as a whole to come to a conclusion. Suppose, if people are not willing to use the bridge if the cost of traveling from the bridge is $5 and if $7 has to be charged per vehicle to make this project feasible, then the government may consider dropping the project out.
On the other hand, if people are willing to travel using the bridge, being indifferent to the toll price-difference of $2, and the traffic is reduced by a good amount, then the government will sanction the project. Therefore, it is beneficial to take up a project if its total benefits (B) are more than its total costs (C).
It can be put up as, a project should be undertaken if, B/C > 1 or even when B=C. That is, when the cost-benefit ratio exceeds unity or when benefit derived and the cost of the project is equal. Before sanctioning a project, cost and benefit of alternative projects are assessed too. For example, the opportunity cost of setting up a hospital instead of a school.
Importance of Social Cost Benefit Analysis
The importance has been explained with the help of the following factors that affect the general masses as a whole.
Market Failure
Market failure when a big project is not affecting everyone but only a few. A private firm would only look at profitability and related market prices to take up a deal but the government has to look at other factors. To determine the social cost in case of market failure and when market prices are unable to define them. These social costs are known as shadow prices.
Savings & Investment
Impact of the project on general savings and investment level. A project that induces more savings are investment in an economy and not the other way round.
Distribution & Redistribution of Income
The project should not lead to accumulating income in the hands of a few but, it should equally distribute the income.
Employment and Standard of Living
How a project affects employment and standard of living will be taken into account as well. The deal should lead to increase in employment and standard of living.
Externalities
Externalities are impacts of a project which can be both harmful and beneficial. Therefore, both the effects are to be assessed before sanctioning a deal. Positive-externalities could be in the form improvement in technology and negative-externalities could be in the form of increase in pollution and destruction of ecology.
Taxes and Subsidies
In a general cost benefit calculation, taxes and subsidies are considered as expenses and income respectively. Though in case of social-cost benefit analysis, taxes and subsidies are considered as transfer payments.
Social cost benefit analysis enables the government to take up new developments which will benefit everyone and not just a few. Also, it helps in bringing about an overall development in an economy and can help make decisions that will increase employment, investments, saving and consumption, thus, improving the economic activities in an economy.
Read more at Buzzle: http://www.buzzle.com/articles/importance-of-social-cost-benefit-analysis.html
________________________________________________
Consider that the same time Cost Benefit Analysis (CBA) of government policy-making was coming to the forefront in the Reagan/Clinton years, so too was neo-liberalism. So, you have the political philosophy of limited regulation and global expansion tied to Cost Benefit Analysis and you see that the social costs and benefits are out of the door. Social Benefit Analysis cuts into profit-maximization and will not be apart of neo-liberal public policy.
This is why we have a nation in the state it is today. Criminal, corrupt, predatory in its push to enrich a few and control the social damage.
COST BENEFIT ANALYSIS (CBA) IS NOT A BAD TOOL. WE NEED TO CONSIDER WHETHER POLICY IS EFFECTIVE. IT IS A BAD TOOL WHEN THE POLS USING IT ARE ONLY LOOKING AT HOW PUBLIC POLICY CAN ENHANCE WEALTH AND PROFIT.
Think about the state of Mexico's society today to see where neglecting the costs to society over the benefits to profit will take the US if Trans Pacific Trade Pact (TPP) is enacted. TPP does to the US what NAFTA did to Mexico. While Americans suffered under NAFTA, TPP will take the US to third world standards as all US law protecting the public will be eliminated.
Mexican farmers were left with no livelihood and turned to drug dealing; US manufacturing created sweat shops that impoverished people; the environment was destroyed and food distribution systems distorted. Rule of Law disappeared as corporate fraud and government corruption infused the Mexican society-----SOUND FAMILIAR????
THAT'S NEO-LIBERALS FOR YOU----WEALTH AND PROFIT OVER PUBLIC INTEREST! SHAKE THE NEO-LIBERAL BUGS FROM THE DEMOCRATIC PARTY BY RUNNING AND VOTING FOR LABOR AND JUSTICE IN ALL PRIMARIES!
Disadvantages of NAFTA
By Kimberly Amadeo
U.S. Wages Were Suppressed:
Not all companies in these industries moved to Mexico. The ones that used the threat of moving during union organizing drives. When it became a choice between joining the union or losing the factory, workers chose the factory. Without union support, the workers had little bargaining power. This suppressed wage growth. Between 1993 and 1995, 50% of all companies in the industries that were moving to Mexico used the threat of closing the factory. By 1999, that rate had grown to 65%.
Mexico's Farmers Were Put Out of Business:
Thanks to NAFTA, Mexico lost 1.3 million farm jobs. The 2002 Farm Bill subsidized U.S. agribusiness by as much as 40% of net farm income. When NAFTA removed tariffs, corn and other grains were exported to Mexico below cost. Rural Mexican farmers could not compete. At the same time, Mexico reduced its subsidies to farmers from 33.2% of total farm income in 1990 to 13.2% in 2001. Most of those subsidies went to Mexico's large farms, anyway.(Source: International Forum on Globalization, Exposing the Myth of Free Trade, February 25, 2003; The Economist, Tariffs and Tortillas, January 24, 2008)
Maquiladora Workers Were Exploited:
NAFTA expanded the maquiladora program, in which U.S.-owned companies employed Mexican workers near the border to cheaply assemble products for export to the U.S. This grew to 30% of Mexico's labor force. These workers have "no labor rights or health protections, workdays stretch out 12 hours or more, and if you are a woman, you could be forced to take a pregnancy test when applying for a job," according to Continental Social Alliance. (Source: Worldpress.org, Lessons of NAFTA, April 20, 2001)
Mexico's Environment Deteriorated:
In response to NAFTA competitive pressure, Mexico agribusiness used more fertilizers and other chemicals, costing $36 billion per year in pollution. Rural farmers expanded into more marginal land, resulting in deforestation at a rate of 630,000 hectares per year. (Source: Carnegie Endowment, NAFTA's Promise and Reality, 2004)
NAFTA Called for Free Access for Mexican Trucks:
Another agreement within NAFTA has not been implemented. NAFTA would have allowed trucks from Mexico to travel within the United States beyond the current 20-mile commercial zone limit. A demonstration project by the Department of Transportation (DoT) was set up to review the practicality of this. In 2008, the House of Representatives terminated this project, and prohibited the DoT from allowing this provision of NAFTA to ever be implemented without Congressional approval.Congress was concerned that Mexican trucks would have presented a road hazard. They are not subject to the same safety standards as U.S. trucks. In addition, this portion of NAFTA was opposed by the U.S. truckers' organizations and companies, who would have lost business. Currently, Mexican trucks must stop at the 20-mile limit and have their goods transferred to U.S. trucks.
There was also a question of reciprocity. The NAFTA agreement would also have allowed unlimited access for U.S. trucks throughout Mexico. A similar agreement works well between the other NAFTA partner, Canada. However, U.S. trucks are larger and carry heavier loads. This violates size and weight restrictions imposed by the Mexican government. (Article updated August 26, 2013)
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When we listen to neo-liberals speak of the high costs of health care, they are not talking about costs for the public, they are talking about costs for corporations. Cost Benefit Analysis would look at how health corporations can maximize profits while limiting the costs to public programs because government revenue will continually decline as corporations and the rich pay no taxes. This is why, given that the costs of US health care are driven by health industry fraud and profiteering, the ACA focuses on ending corporate health plan costs and gutting entitlement spending and actually increase the conditions for fraud and profiteering. People are seeing that none of these health policies are written in the public interest.
THAT'S PRIVATE COST BENEFIT ANALYSIS FOR YOU!
Below you see the private CBA reasoning behind ACA.....the coming baby boomer health needs would tap the Trusts that are now empty with no plans to replenish with corporate taxation/fraud recovery. This is the demographic shift. Inflation in health care has been allowed to reach triple digits and ACA does not address this, but recognizes corporations will not pay for this hyper-inflation in the health industry. You see corporations paying for 1/2 of health expenditures via wage and benefit packages. Workers gave up wage increases in exchange for these health plans. Private CBA won't have this. Placing health technology as the next global market strategy means costs/profiteering rise and access becomes even more limited.
Then you look at the local social benefit analysis and you see all of the social CBA is eliminated by the private CBA.
'At a local level, health care spending growth is more likely to be viewed as beneficial. It creates health care jobs, increases wages for health care workers, expands local tax revenues, and increases demand for related goods and services'.
Effects of Health Care Spending on the U.S. Economy
This report is available on the Internet at:
http://aspe.hhs.gov/health/costgrowth
Introduction In recent years, considerable attention has focused on aggregate health care spending increases. Emphasis has been given to identifying and examining the factors that have contributed to spending growth, and proposing policy solutions to reduce spending growth. Factors that contribute to spending growth encompass changes in health care utilization, population demographics, price inflation, and advances in medical technology.[1]
This background paper focuses on a somewhat broader topic—how health care spending impacts the economy of the United States. The relationship between health care spending growth and the U.S. economy is inherently complex and multidimensional.
At an aggregate level, economists have cautioned that rising health care spending could lower economic growth and employment.[2]. A December 2004 survey of CEOs found that employee health care costs are the foremost cost concern in the minds of America’s business leaders (Figure 1).[3] Further, rising health care spending has a significant impact on the federal budget.[4] Many employers are seeking to limit their exposure to rising health care costs by requiring their employees to increase their contributions or by providing different forms of coverage, potentially reducing household available income finances as more costs are shifted from employers to employees.
Some economists note that rising health care spending has important benefits, often outweighing the increased costs.[5] When adjusted for improvements in quality, these economists found that the cost of medical care is in fact in decreasing. In this view, increased health care spending improves increases access to new technologies — providing both new options of treatment (substitution) and treatment for a greater number of individuals (expansion).
“Technology often leads to more spending, but outcomes improve by even more.” [6] At a local level, health care spending growth is more likely to be viewed as beneficial. It creates health care jobs, increases wages for health care workers, expands local tax revenues, and increases demand for related goods and services.
Source: Business Roundtable December 2004 CEO Survey.
The remainder of this paper is organized into five sections. The next section contains a brief overview of trends in health care spending. This is followed by four sections that contain discussions of the impacts of health care spending on 1) the overall economy, 2) employers, 3) employees, and 4) households.
Trends in Health Care Spending Total Spending In the latest year for which data is available (2003) total national spending on health rose to $1.7 trillion, or $5,670 per person (Table 1). By 2013, national health expenditures are projected to reach $3.4 trillion, or $10,709 per person. As a share of GDP, health spending is projected to reach 18.4 percent by 2013, up from its 2003 level of 15.3 percent.
Table 1.
National Health Expenditures 1960 1985 2003 Total $27 billion $427 billion $1,678.9 billion Per capita $143 $1,765 $5,670 Share of GDP 5.1% 10.1% 15.3% Source: National Health Expenditures, Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group; U.S. Department of Commerce, Bureau of Economic Analysis; and U.S. Bureau of the Census. Spending on outpatient hospital services and prescription drugs continued to outpace the rate of growth in overall health care spending as services move out of the hospital and into ambulatory settings. Since 1998, health care spending has increased at faster rate of growth than has gross domestic product (GDP), inflation, and population.[7]
Data Source: National Health Expenditures 2002.
Centers for Medicare & Medicaid Services. NHE Tables.
Although the recently passed Medicare prescription drug benefit is not expected to have a large impact on overall national health spending, it is expected to cause sizable shifts in payment sources.[8] These shifts include from individuals and private payers to Medicare and from Medicaid to Medicare.
Sectoral Spending
In 2003, the private sector accounted for over half of national health expenditures, with private health insurance contributing the largest share ($600.6 billion or 36 percent) (Figure 3). Individual out-of-pocket payments, part of private sector spending, accounted for $230.5 billion (or 14 percent of expenditures) in 2003.
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Below you see how social benefit loses every time with private CBA. What is the CBA of global warming? Look to the UK and its cap and trade enactment and you see the entire program is engulfed in fraud and corruption---neo-liberalism will not allow any social CBA
GET RID OF NEO-LIBERALS SO WE CAN GET BACK TO SOCIAL COST BENEFIT ANALYSIS!
Waxman-Markey Cost-Benefit Analysis
by Jim Manzi
05/19/09
Filed under:Climate Change
Costs vs. Benefits of Waxman-Markey
Let’s start with the costs. The Environmental Protection Agency (EPA) has done the first cost estimate for Waxman-Markey. It finds (page 17) that by 2020 Waxman-Markey would cause a typical U.S. household to consume about $160 less per year than it otherwise would, and about $1,100 less per year by 2050 (before any potential benefits from avoiding warming). That doesn’t sound like the end of the world, but this cost estimate is based on a number of assumptions that seem pretty unrealistic, to put it mildly.
First, it assumes that every dollar collected by selling the right to emit carbon dioxide will be returned to taxpayers through rebates or lowered taxes. Waxman-Markey establishes this intention but doesn’t (as of the time I’m writing this) describe how it would be achieved, which reflects the political difficulty of achieving it. Second, it assumes no costs for enforcement and other compliance measures, which would be awfully nice. Third, it assumes that large numbers of foreign offsets will be available for purchase; without these, costs would be far higher. Fourth, it assumes that the rest of the world will begin similar carbon-reduction programs. Lack of such foreign action would either increase U.S. costs or risk a trade war if we tried to compensate for lack of international cooperation with targeted tariffs. Fifth, it assumes that there will be no exemptions or other side deals—that is, no economic drag created by the kind of complexity that has attached to every large, long-term revenue-collection program in history. And so on.
The EPA forecast is something like an estimate of the pure loss in economic productivity from replacing some fossil fuels with less economically efficient fuels or conservation in a laboratory setting; in the real world, expected costs are far above 0.8 percent of economic consumption by 2050. The EPA does not forecast costs beyond 2050.
Remember that the U.S. should not expect any net economic damage from global warming before 2100. That is, the bill’s benefits would accrue to U.S. consumers—who are also bearing its costs—sometime in the next century. The EPA underestimate has costs rising from zero to 0.8 percent of consumption between now and 2050, and offers no projection beyond that year; but to what level would costs rise over the more than 50 years between 2050 and the point in 22nd century when we might actually expect some net economic losses from global warming? The answer is likely to be much higher.
Now consider the benefits. Climatologist Chip Knappenberger has applied standard climate models to project that, under the scenario for global economic and population growth referenced above (A1B), Waxman-Markey’s emissions reductions would have the net effect of lowering global temperatures by about 0.1°C by 2100. Remember that the estimated cost of a 4°C increase in temperature (40 times this amount) is about 3 percent of global economic output. Assume for the moment that global warming has the same impact on the U.S. as a percentage of GDP as it does on the world as a whole (an assumption that almost certainly exaggerates the impact on the U.S.). A crude estimate of the U.S. economic costs that Waxman-Markey would avoid sometime later than 2100 would then be about one-fortieth of 3 percent, or about 0.08 percent of economic output. This number is one-tenth of 0.8 percent, the EPA’s estimate of consumption loss from Waxman-Markey by 2050. To repeat: The costs would be more than ten times the benefits, even under extremely unrealistic assumptions of low costs and high benefits. More realistic assumptions would make for a comparison far less favorable to the bill.
I’ve had to rely on informal studies and back-of-envelope calculations to do this cost/benefit analysis. Why haven’t advocates and sponsors of the proposal done their own? Why are they urging Congress to make an incredible commitment of resources without even cursory analysis of the net economic consequences? The answer should be obvious: This is a terrible deal for American taxpayers.
Two Potential Objections
One potential objection to my analysis is that the bill is part of a global drive for all countries to reduce emissions, and that the U.S. needs to “show leadership.” By this logic, we should ascribe much larger benefits to the Waxman-Markey bill—specifically, the benefits to American consumers of the whole world’s engaging in similar programs. There are two obvious problems with this argument, however. First, ascribing all of the benefits of a global deal to reduce emissions to a specific bill that does not create such a commitment on the part of any other countries is loading the dice. The benefit we should ascribe to the bill is rather that of an increase in the odds of such a global deal. But would Waxman-Markey actually increase them, or would it decrease them instead? Whenever one nation sacrifices economic growth in order to reduce emissions, the whole world can expect to benefit, because future temperature should decrease for the entire globe. Every nation’s incentive, therefore, is to free ride on everybody else. Our most obvious leverage with other emitting nations would be to offer to reduce our emissions if they reduced theirs. Giving up this leverage and hoping that our unilateral reductions would put moral pressure on China, Russia, Brazil, and similar countries to reduce their emissions reveals a touchingly sunny view of human nature, but it strikes me as a poor negotiating strategy. Second and more fundamentally, even if the whole world were to enact similar restraints on emissions, the cost / benefit economics would still not be compelling, for the reasons outlined at the beginning of this post.
A second and more serious potential objection to my analysis is that while Waxman-Markey may not create benefits if the projections I offered above turn out to be accurate, climate science is highly inexact, and the bill is an insurance policy against higher-than-expected costs. Now, climate and economics modelers aren’t idiots, so it’s not as though this hadn’t occurred to them. Competent modelers don’t assume only the most likely case, but build probability distributions for levels of warming and associated economic impacts (e.g., there is a 5 percent chance of 4.5°C warming, a 10 percent chance of 4.0°C warming, and so on). The economic calculations that compose, for example, the analysis by William Nordhaus that I cited earlier are executed in just this manner. So the possibility of “worse than expected” impacts means, more precisely, the possibility of “impacts worse than those derived from our current probability distribution.” That is, we are concerned here with the inherently unquantifiable possibility that our entire probability distribution is wrong.
This concept has been called, somewhat grandiosely, the “Precautionary Principle.” Once you get past all the table-pounding, this is the crux of the argument for emissions abatement. It is an emotionally appealing political position, as it easy to argue that we should reduce some consumption now to head off even a low-odds possibility of disaster. The most compelling version of this argument, by far, has been presented by Martin Weitzman. You can read my detailed response here (note that this was to a slightly earlier edition of the paper). The essence of my response is that in order to drive a decision, Weitzman must take his argument from the conceptual idea of a “fat-tailed distribution” of danger to a numerical estimate of risk. He recognizes that the logic of his argument entails this. In his article, he ends up having to do the kind of armchair climate science that has been the bane of the “global warming is all a hoax” set. He uses a couple of ice bore studies to develop his own probability distribution for potential warming that calls for a 1% chance of 22.6C or more of warming by 2100. To put this in perspective, a 22.6C increase in the earth’s temperature would mean that the average global year-round temperature would be the same as summertime Death Valley is today. If you could convince me that there was a reliably-quantified 1% chance of this happening, you wouldn’t need all of the mathematical formalism of Weitzman’s paper – I’d be the biggest emissions mitigation proponent on earth. The problem is that the IPCC has already built a distribution of potential temperature changes (see Figure 10.28, page 808) that looks nothing like this. If you don’t want to believe me, read Cass Sunstein’s book about why the Precautionary Principle, even in sophisticated form, is a very bad decision rule.
In the end, clarity about costs and benefits is the enemy of Waxman Markey. It is hard to get around the conclusion that it can not be justified rationally based on the avoidance of climate change damages.
RAISE YOUR HAND IF YOU UNDERSTAND THAT INTRODUCING COST BENEFIT ANALYSIS AT THE SAME TIME EMBRACING NEO-LIBERALISM WOULD LEAD TO ALL LAWS WRITTEN FOR THE BENEFIT OF PROFIT OVER PUBLIC INTEREST------
EVERYONE UNDERSTANDS THAT!
The democratic party platform states the opposite as regards policy stance. So, having neo-liberals in control of the democratic party is counter to the very platform on which they run.
'In social cost benefit analysis, not only profit but also other effects like how will it affect life of others are considered. Whereas, in private cost benefit analysis, the focus of the analysis is on maximizing profits'.
Importance of Social Cost Benefit Analysis
Social cost benefit analysis is a process in which the social impact of a project or a policy is assessed and evaluated by the government before approving a project contract.
Social cost benefit analysis is a part of calculating the merits of a project or a government policy. As the name suggests, social cost-benefit analysis of anything is associated with its social impact. This means that how a project or a policy will affect people is analyzed. Only after calculating the opportunity cost of a project, it is approved.
The scope of social cost benefits can be applied to public investment and also to private investment. In case of public investment, it plays a major role in the economic development of a developing country. And, in case of private investments social cost benefit analysis is important as investments are to be sanctioned and are monitored by the government. There are two aspects of calculating the cost benefit analysis of any project. One is the private cost-benefit analysis and the other is social cost-benefit analysis. Though, social cost-benefit analysis is usually undertaken by the government.
Social cost is often in contrast with private cost. Major differences between social cost benefit analysis and private cost benefit analysis are as follows:
1. In social cost benefit analysis, not only profit but also other effects like how will it affect life of others are considered. Whereas, in private cost benefit analysis, the focus of the analysis is on maximizing profits.
2. For calculating social cost benefit, market prices for the factors to be considered cannot exist. Therefore, market price is not the main factor taken into consideration while calculating social cost benefit. Whereas, for private cost benefit analysis market price forms the base of the analysis and the key factor that determines if a project is viable.
Social Cost = Negative Impact
Social Benefit = Positive Impact
Social cost benefit analysis has been introduced to develop systematic ways of analyzing cost and benefits of factors which do not have market prices, like effect on environment and traffic. Social cost-benefit calculates non-monetized benefits/ losses. It is normally used for large fund projects like constructing a dam, a road. Such projects have higher social cost-benefits and also affects the price level to an extent.
Example: If a bridge is to be constructed then how much will it benefit the people who live in that particular area, is to be analyzed. Therefore, how many people are willing to use the bridge, how much traffic will be reduced and what is the increase in cost of traveling, will have to be assessed as a whole to come to a conclusion. Suppose, if people are not willing to use the bridge if the cost of traveling from the bridge is $5 and if $7 has to be charged per vehicle to make this project feasible, then the government may consider dropping the project out.
On the other hand, if people are willing to travel using the bridge, being indifferent to the toll price-difference of $2, and the traffic is reduced by a good amount, then the government will sanction the project. Therefore, it is beneficial to take up a project if its total benefits (B) are more than its total costs (C).
It can be put up as, a project should be undertaken if, B/C > 1 or even when B=C. That is, when the cost-benefit ratio exceeds unity or when benefit derived and the cost of the project is equal. Before sanctioning a project, cost and benefit of alternative projects are assessed too. For example, the opportunity cost of setting up a hospital instead of a school.
Importance of Social Cost Benefit Analysis
The importance has been explained with the help of the following factors that affect the general masses as a whole.
Market Failure
Market failure when a big project is not affecting everyone but only a few. A private firm would only look at profitability and related market prices to take up a deal but the government has to look at other factors. To determine the social cost in case of market failure and when market prices are unable to define them. These social costs are known as shadow prices.
Savings & Investment
Impact of the project on general savings and investment level. A project that induces more savings are investment in an economy and not the other way round.
Distribution & Redistribution of Income
The project should not lead to accumulating income in the hands of a few but, it should equally distribute the income.
Employment and Standard of Living
How a project affects employment and standard of living will be taken into account as well. The deal should lead to increase in employment and standard of living.
Externalities
Externalities are impacts of a project which can be both harmful and beneficial. Therefore, both the effects are to be assessed before sanctioning a deal. Positive-externalities could be in the form improvement in technology and negative-externalities could be in the form of increase in pollution and destruction of ecology.
Taxes and Subsidies
In a general cost benefit calculation, taxes and subsidies are considered as expenses and income respectively. Though in case of social-cost benefit analysis, taxes and subsidies are considered as transfer payments.
Social cost benefit analysis enables the government to take up new developments which will benefit everyone and not just a few. Also, it helps in bringing about an overall development in an economy and can help make decisions that will increase employment, investments, saving and consumption, thus, improving the economic activities in an economy.
Read more at Buzzle: http://www.buzzle.com/articles/importance-of-social-cost-benefit-analysis.html
________________________________________________
Consider that the same time Cost Benefit Analysis (CBA) of government policy-making was coming to the forefront in the Reagan/Clinton years, so too was neo-liberalism. So, you have the political philosophy of limited regulation and global expansion tied to Cost Benefit Analysis and you see that the social costs and benefits are out of the door. Social Benefit Analysis cuts into profit-maximization and will not be apart of neo-liberal public policy.
This is why we have a nation in the state it is today. Criminal, corrupt, predatory in its push to enrich a few and control the social damage.
COST BENEFIT ANALYSIS (CBA) IS NOT A BAD TOOL. WE NEED TO CONSIDER WHETHER POLICY IS EFFECTIVE. IT IS A BAD TOOL WHEN THE POLS USING IT ARE ONLY LOOKING AT HOW PUBLIC POLICY CAN ENHANCE WEALTH AND PROFIT.
Think about the state of Mexico's society today to see where neglecting the costs to society over the benefits to profit will take the US if Trans Pacific Trade Pact (TPP) is enacted. TPP does to the US what NAFTA did to Mexico. While Americans suffered under NAFTA, TPP will take the US to third world standards as all US law protecting the public will be eliminated.
Mexican farmers were left with no livelihood and turned to drug dealing; US manufacturing created sweat shops that impoverished people; the environment was destroyed and food distribution systems distorted. Rule of Law disappeared as corporate fraud and government corruption infused the Mexican society-----SOUND FAMILIAR????
THAT'S NEO-LIBERALS FOR YOU----WEALTH AND PROFIT OVER PUBLIC INTEREST! SHAKE THE NEO-LIBERAL BUGS FROM THE DEMOCRATIC PARTY BY RUNNING AND VOTING FOR LABOR AND JUSTICE IN ALL PRIMARIES!
Disadvantages of NAFTA
By Kimberly Amadeo
U.S. Wages Were Suppressed:
Not all companies in these industries moved to Mexico. The ones that used the threat of moving during union organizing drives. When it became a choice between joining the union or losing the factory, workers chose the factory. Without union support, the workers had little bargaining power. This suppressed wage growth. Between 1993 and 1995, 50% of all companies in the industries that were moving to Mexico used the threat of closing the factory. By 1999, that rate had grown to 65%.
Mexico's Farmers Were Put Out of Business:
Thanks to NAFTA, Mexico lost 1.3 million farm jobs. The 2002 Farm Bill subsidized U.S. agribusiness by as much as 40% of net farm income. When NAFTA removed tariffs, corn and other grains were exported to Mexico below cost. Rural Mexican farmers could not compete. At the same time, Mexico reduced its subsidies to farmers from 33.2% of total farm income in 1990 to 13.2% in 2001. Most of those subsidies went to Mexico's large farms, anyway.(Source: International Forum on Globalization, Exposing the Myth of Free Trade, February 25, 2003; The Economist, Tariffs and Tortillas, January 24, 2008)
Maquiladora Workers Were Exploited:
NAFTA expanded the maquiladora program, in which U.S.-owned companies employed Mexican workers near the border to cheaply assemble products for export to the U.S. This grew to 30% of Mexico's labor force. These workers have "no labor rights or health protections, workdays stretch out 12 hours or more, and if you are a woman, you could be forced to take a pregnancy test when applying for a job," according to Continental Social Alliance. (Source: Worldpress.org, Lessons of NAFTA, April 20, 2001)
Mexico's Environment Deteriorated:
In response to NAFTA competitive pressure, Mexico agribusiness used more fertilizers and other chemicals, costing $36 billion per year in pollution. Rural farmers expanded into more marginal land, resulting in deforestation at a rate of 630,000 hectares per year. (Source: Carnegie Endowment, NAFTA's Promise and Reality, 2004)
NAFTA Called for Free Access for Mexican Trucks:
Another agreement within NAFTA has not been implemented. NAFTA would have allowed trucks from Mexico to travel within the United States beyond the current 20-mile commercial zone limit. A demonstration project by the Department of Transportation (DoT) was set up to review the practicality of this. In 2008, the House of Representatives terminated this project, and prohibited the DoT from allowing this provision of NAFTA to ever be implemented without Congressional approval.Congress was concerned that Mexican trucks would have presented a road hazard. They are not subject to the same safety standards as U.S. trucks. In addition, this portion of NAFTA was opposed by the U.S. truckers' organizations and companies, who would have lost business. Currently, Mexican trucks must stop at the 20-mile limit and have their goods transferred to U.S. trucks.
There was also a question of reciprocity. The NAFTA agreement would also have allowed unlimited access for U.S. trucks throughout Mexico. A similar agreement works well between the other NAFTA partner, Canada. However, U.S. trucks are larger and carry heavier loads. This violates size and weight restrictions imposed by the Mexican government. (Article updated August 26, 2013)
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When we listen to neo-liberals speak of the high costs of health care, they are not talking about costs for the public, they are talking about costs for corporations. Cost Benefit Analysis would look at how health corporations can maximize profits while limiting the costs to public programs because government revenue will continually decline as corporations and the rich pay no taxes. This is why, given that the costs of US health care are driven by health industry fraud and profiteering, the ACA focuses on ending corporate health plan costs and gutting entitlement spending and actually increase the conditions for fraud and profiteering. People are seeing that none of these health policies are written in the public interest.
THAT'S PRIVATE COST BENEFIT ANALYSIS FOR YOU!
Below you see the private CBA reasoning behind ACA.....the coming baby boomer health needs would tap the Trusts that are now empty with no plans to replenish with corporate taxation/fraud recovery. This is the demographic shift. Inflation in health care has been allowed to reach triple digits and ACA does not address this, but recognizes corporations will not pay for this hyper-inflation in the health industry. You see corporations paying for 1/2 of health expenditures via wage and benefit packages. Workers gave up wage increases in exchange for these health plans. Private CBA won't have this. Placing health technology as the next global market strategy means costs/profiteering rise and access becomes even more limited.
Then you look at the local social benefit analysis and you see all of the social CBA is eliminated by the private CBA.
'At a local level, health care spending growth is more likely to be viewed as beneficial. It creates health care jobs, increases wages for health care workers, expands local tax revenues, and increases demand for related goods and services'.
Effects of Health Care Spending on the U.S. Economy
This report is available on the Internet at:
http://aspe.hhs.gov/health/costgrowth
Introduction In recent years, considerable attention has focused on aggregate health care spending increases. Emphasis has been given to identifying and examining the factors that have contributed to spending growth, and proposing policy solutions to reduce spending growth. Factors that contribute to spending growth encompass changes in health care utilization, population demographics, price inflation, and advances in medical technology.[1]
This background paper focuses on a somewhat broader topic—how health care spending impacts the economy of the United States. The relationship between health care spending growth and the U.S. economy is inherently complex and multidimensional.
At an aggregate level, economists have cautioned that rising health care spending could lower economic growth and employment.[2]. A December 2004 survey of CEOs found that employee health care costs are the foremost cost concern in the minds of America’s business leaders (Figure 1).[3] Further, rising health care spending has a significant impact on the federal budget.[4] Many employers are seeking to limit their exposure to rising health care costs by requiring their employees to increase their contributions or by providing different forms of coverage, potentially reducing household available income finances as more costs are shifted from employers to employees.
Some economists note that rising health care spending has important benefits, often outweighing the increased costs.[5] When adjusted for improvements in quality, these economists found that the cost of medical care is in fact in decreasing. In this view, increased health care spending improves increases access to new technologies — providing both new options of treatment (substitution) and treatment for a greater number of individuals (expansion).
“Technology often leads to more spending, but outcomes improve by even more.” [6] At a local level, health care spending growth is more likely to be viewed as beneficial. It creates health care jobs, increases wages for health care workers, expands local tax revenues, and increases demand for related goods and services.
Source: Business Roundtable December 2004 CEO Survey.
The remainder of this paper is organized into five sections. The next section contains a brief overview of trends in health care spending. This is followed by four sections that contain discussions of the impacts of health care spending on 1) the overall economy, 2) employers, 3) employees, and 4) households.
Trends in Health Care Spending Total Spending In the latest year for which data is available (2003) total national spending on health rose to $1.7 trillion, or $5,670 per person (Table 1). By 2013, national health expenditures are projected to reach $3.4 trillion, or $10,709 per person. As a share of GDP, health spending is projected to reach 18.4 percent by 2013, up from its 2003 level of 15.3 percent.
Table 1.
National Health Expenditures 1960 1985 2003 Total $27 billion $427 billion $1,678.9 billion Per capita $143 $1,765 $5,670 Share of GDP 5.1% 10.1% 15.3% Source: National Health Expenditures, Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group; U.S. Department of Commerce, Bureau of Economic Analysis; and U.S. Bureau of the Census. Spending on outpatient hospital services and prescription drugs continued to outpace the rate of growth in overall health care spending as services move out of the hospital and into ambulatory settings. Since 1998, health care spending has increased at faster rate of growth than has gross domestic product (GDP), inflation, and population.[7]
Data Source: National Health Expenditures 2002.
Centers for Medicare & Medicaid Services. NHE Tables.
Although the recently passed Medicare prescription drug benefit is not expected to have a large impact on overall national health spending, it is expected to cause sizable shifts in payment sources.[8] These shifts include from individuals and private payers to Medicare and from Medicaid to Medicare.
Sectoral Spending
In 2003, the private sector accounted for over half of national health expenditures, with private health insurance contributing the largest share ($600.6 billion or 36 percent) (Figure 3). Individual out-of-pocket payments, part of private sector spending, accounted for $230.5 billion (or 14 percent of expenditures) in 2003.
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Below you see how social benefit loses every time with private CBA. What is the CBA of global warming? Look to the UK and its cap and trade enactment and you see the entire program is engulfed in fraud and corruption---neo-liberalism will not allow any social CBA
GET RID OF NEO-LIBERALS SO WE CAN GET BACK TO SOCIAL COST BENEFIT ANALYSIS!
Waxman-Markey Cost-Benefit Analysis
by Jim Manzi
05/19/09
Filed under:Climate Change
Costs vs. Benefits of Waxman-Markey
Let’s start with the costs. The Environmental Protection Agency (EPA) has done the first cost estimate for Waxman-Markey. It finds (page 17) that by 2020 Waxman-Markey would cause a typical U.S. household to consume about $160 less per year than it otherwise would, and about $1,100 less per year by 2050 (before any potential benefits from avoiding warming). That doesn’t sound like the end of the world, but this cost estimate is based on a number of assumptions that seem pretty unrealistic, to put it mildly.
First, it assumes that every dollar collected by selling the right to emit carbon dioxide will be returned to taxpayers through rebates or lowered taxes. Waxman-Markey establishes this intention but doesn’t (as of the time I’m writing this) describe how it would be achieved, which reflects the political difficulty of achieving it. Second, it assumes no costs for enforcement and other compliance measures, which would be awfully nice. Third, it assumes that large numbers of foreign offsets will be available for purchase; without these, costs would be far higher. Fourth, it assumes that the rest of the world will begin similar carbon-reduction programs. Lack of such foreign action would either increase U.S. costs or risk a trade war if we tried to compensate for lack of international cooperation with targeted tariffs. Fifth, it assumes that there will be no exemptions or other side deals—that is, no economic drag created by the kind of complexity that has attached to every large, long-term revenue-collection program in history. And so on.
The EPA forecast is something like an estimate of the pure loss in economic productivity from replacing some fossil fuels with less economically efficient fuels or conservation in a laboratory setting; in the real world, expected costs are far above 0.8 percent of economic consumption by 2050. The EPA does not forecast costs beyond 2050.
Remember that the U.S. should not expect any net economic damage from global warming before 2100. That is, the bill’s benefits would accrue to U.S. consumers—who are also bearing its costs—sometime in the next century. The EPA underestimate has costs rising from zero to 0.8 percent of consumption between now and 2050, and offers no projection beyond that year; but to what level would costs rise over the more than 50 years between 2050 and the point in 22nd century when we might actually expect some net economic losses from global warming? The answer is likely to be much higher.
Now consider the benefits. Climatologist Chip Knappenberger has applied standard climate models to project that, under the scenario for global economic and population growth referenced above (A1B), Waxman-Markey’s emissions reductions would have the net effect of lowering global temperatures by about 0.1°C by 2100. Remember that the estimated cost of a 4°C increase in temperature (40 times this amount) is about 3 percent of global economic output. Assume for the moment that global warming has the same impact on the U.S. as a percentage of GDP as it does on the world as a whole (an assumption that almost certainly exaggerates the impact on the U.S.). A crude estimate of the U.S. economic costs that Waxman-Markey would avoid sometime later than 2100 would then be about one-fortieth of 3 percent, or about 0.08 percent of economic output. This number is one-tenth of 0.8 percent, the EPA’s estimate of consumption loss from Waxman-Markey by 2050. To repeat: The costs would be more than ten times the benefits, even under extremely unrealistic assumptions of low costs and high benefits. More realistic assumptions would make for a comparison far less favorable to the bill.
I’ve had to rely on informal studies and back-of-envelope calculations to do this cost/benefit analysis. Why haven’t advocates and sponsors of the proposal done their own? Why are they urging Congress to make an incredible commitment of resources without even cursory analysis of the net economic consequences? The answer should be obvious: This is a terrible deal for American taxpayers.
Two Potential Objections
One potential objection to my analysis is that the bill is part of a global drive for all countries to reduce emissions, and that the U.S. needs to “show leadership.” By this logic, we should ascribe much larger benefits to the Waxman-Markey bill—specifically, the benefits to American consumers of the whole world’s engaging in similar programs. There are two obvious problems with this argument, however. First, ascribing all of the benefits of a global deal to reduce emissions to a specific bill that does not create such a commitment on the part of any other countries is loading the dice. The benefit we should ascribe to the bill is rather that of an increase in the odds of such a global deal. But would Waxman-Markey actually increase them, or would it decrease them instead? Whenever one nation sacrifices economic growth in order to reduce emissions, the whole world can expect to benefit, because future temperature should decrease for the entire globe. Every nation’s incentive, therefore, is to free ride on everybody else. Our most obvious leverage with other emitting nations would be to offer to reduce our emissions if they reduced theirs. Giving up this leverage and hoping that our unilateral reductions would put moral pressure on China, Russia, Brazil, and similar countries to reduce their emissions reveals a touchingly sunny view of human nature, but it strikes me as a poor negotiating strategy. Second and more fundamentally, even if the whole world were to enact similar restraints on emissions, the cost / benefit economics would still not be compelling, for the reasons outlined at the beginning of this post.
A second and more serious potential objection to my analysis is that while Waxman-Markey may not create benefits if the projections I offered above turn out to be accurate, climate science is highly inexact, and the bill is an insurance policy against higher-than-expected costs. Now, climate and economics modelers aren’t idiots, so it’s not as though this hadn’t occurred to them. Competent modelers don’t assume only the most likely case, but build probability distributions for levels of warming and associated economic impacts (e.g., there is a 5 percent chance of 4.5°C warming, a 10 percent chance of 4.0°C warming, and so on). The economic calculations that compose, for example, the analysis by William Nordhaus that I cited earlier are executed in just this manner. So the possibility of “worse than expected” impacts means, more precisely, the possibility of “impacts worse than those derived from our current probability distribution.” That is, we are concerned here with the inherently unquantifiable possibility that our entire probability distribution is wrong.
This concept has been called, somewhat grandiosely, the “Precautionary Principle.” Once you get past all the table-pounding, this is the crux of the argument for emissions abatement. It is an emotionally appealing political position, as it easy to argue that we should reduce some consumption now to head off even a low-odds possibility of disaster. The most compelling version of this argument, by far, has been presented by Martin Weitzman. You can read my detailed response here (note that this was to a slightly earlier edition of the paper). The essence of my response is that in order to drive a decision, Weitzman must take his argument from the conceptual idea of a “fat-tailed distribution” of danger to a numerical estimate of risk. He recognizes that the logic of his argument entails this. In his article, he ends up having to do the kind of armchair climate science that has been the bane of the “global warming is all a hoax” set. He uses a couple of ice bore studies to develop his own probability distribution for potential warming that calls for a 1% chance of 22.6C or more of warming by 2100. To put this in perspective, a 22.6C increase in the earth’s temperature would mean that the average global year-round temperature would be the same as summertime Death Valley is today. If you could convince me that there was a reliably-quantified 1% chance of this happening, you wouldn’t need all of the mathematical formalism of Weitzman’s paper – I’d be the biggest emissions mitigation proponent on earth. The problem is that the IPCC has already built a distribution of potential temperature changes (see Figure 10.28, page 808) that looks nothing like this. If you don’t want to believe me, read Cass Sunstein’s book about why the Precautionary Principle, even in sophisticated form, is a very bad decision rule.
In the end, clarity about costs and benefits is the enemy of Waxman Markey. It is hard to get around the conclusion that it can not be justified rationally based on the avoidance of climate change damages.
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