Teaching Benefit-Cost Analysis
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Teaching Benefit-Cost Analysis

Tools of the Trade

Edited by Scott Farrow

Teaching Benefit-Cost Analysis provides detail and inspiration that extends and clarifies standard textbooks. Each short, self-contained module includes guidance to additional sources while many also provide class exercises. Classes for advanced undergraduates, practitioners, or Masters students could especially apply these tools of the trade.
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Chapter 12: On defining and valuing the benefits of health policy interventions: How and why CEA in health morphed into CU(B)A and “back-door” BCA

David Salkever

Abstract

For the past five decades, the literature on economic evaluations of health programs or policies has consisted largely of cost-effectiveness analysis (CEA) rather than benefit-cost analysis (BCA). One factor contributing to this orientation was the view that we could not obtain valid estimates of consumers’ monetary valuations (that is, willingness-to-pay figures) for the benefits provided by these programs or policies. As interest in CEA methods in health expanded, and the limits of simple effectiveness measures in CEA became clearer, further refinements in effectiveness measurement have: (1) brought us closer and closer to actually conducting BCAs for heath programs and (2) generated important new insights into defining and valuing program benefits in willingness-to-pay (WTP) terms. This chapter traces these developments in the convergence of the CEA and BCA literatures in health. A simple example is presented to highlight the major challenges to obtaining valid WTP valuations for benefits of health programs, and to compare major strategies used for generating monetary WTP benefit valuation figures.

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