ECON 110 – Cost-Benefit Analysis

Fall 2017

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Instructor Information

Instructor: J. T. Kelly

Office:Benicia Hall 1011
Office Hours:MW1:45–2:45p.m.andbyappointment
Office Telephone:278-3576 (during office hours only)
E-mail:

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General Information

Lectures: Hall/Room Alpine Hall 138

Schedule: Section 02 – MW 3:00–4:15 pm

Course Description

The course covers the everyday mechanics of cost-benefit analysis (often shortened to CBA), from the conceptual framework and basic analytical approach of cost-benefit analyses to common measurement issues, problems and errors in current cost-benefit analyses. Students will be given the opportunity to solve quantitative and qualitative problems; to explain essential economics concepts of efficiency and apply them to current issues; to learn how to compare costs across time periods; to identify biases or problems in the cost-benefit analyses of others; to understand the use and limits of surveys as a means of estimation; to see cost-benefit analysis as a way of thinking rather than as a path to a predetermined outcome; and using the CBA tools learned in class to writeand present a cost-benefit project(Contingent Valuation). You will also learn how to use the textbook as a guide and reference for CBA. Prerequisite: Econ 1B.

Textbook & Course Materials

Required Text – Cost-Benefit Analysis: Concepts and Practice 4e, Boardman, Greenberg,

et al., Prentice Hall, 2011. Available at Hornet Bookstore.

Required Research Project Training: Students must take a free 3-hour online NIH training course for the protection of human research before beginning the contingent valuation surveyand pass with a score of 80% or better: Students create a profile and password so they can complete the training course at their own pace. A certificate of completion must be printed and provided to the instructor before beginning the CV survey and included in the CV project.

Reading Assignments: Chapters as indicated on Course Outline, plus othersources as assigned. The instructor will indicate if certain text passages are to be skipped. The schedule will be reassessed continuously and adjusted to better meet student understanding and topic coverage.

Homework:End-of-chapter problems may be assigned.Special projects will be assigned periodically, often due at the beginning of the next class meeting. Some special homeworkprojects may be assigned to CV groups. An absence is not an excuse for missing an assignment.

Cost-Benefit Analysis: You will prepare a true Contingent Valuation project (not the same as a term paper) on a current issue that I will announce in class. It will require familiarity with and use of EXCEL! Your grade will be influenced by the quality of the report, its analysis, and presentation of the results in class.Revealing confidential data will result in failing the CV project!

Graded Course Activities

Homework Assignments, pop quizzes10%

2 Mid-term exams20% each

Final Exam 20%

CBA CV Paper 30%

Extra Credit up to 3 pointson final grade for superior class participation

Letter Grade Assignment

Letter Grade / Percentage / Performance
As (A,A-) / 91.5-100% / Excellent Work
Bs (B+,B,B-) / 88.5-89.4% / Very Good to Mostly Good Work
Cs (C+,C,C-) / 78.5-79.4% / Above Average to Mostly Average Work
Ds (D+,D,D-) / 68.5-69.4% / Below Average to Poor Work
F / 0-59.4% / Failing Work

Course Structure

In the Classroom —

The nature of the course will be face-to-face lecture andPowerPoint slides augmented with whiteboard explanations. It may be helpful to bring the text to class, as I may refer to it. Limited class time will be allocated to project discussion and presentations as needed.

Announcements —

Announcements will be made during lectures, but sometimes also sent by email using SacCT. Be sure that your email on file with the University is correct, that my e-mail is not SPAMand that your inbox is not full.

Responsibilities —

I will come to class well prepared; respond to and encourage questions and other appropriate class participation; grade your quizzes, exams, term papers and any other assignments fairly and in as timely a fashion as possible; be available during office hours and for scheduled appointments; let you know as soon as any changes are made to the schedule, course or class meetings; and do my best to stimulate your appreciation, interest and enthusiasm for economics.

I expect you to read the syllabus thoroughly and understand the ground rules; attend and actively participate in lectures; complete all the assigned readings in a timely manner; complete all assignments on time; ask questions when you are lost or confused; ask questions even if you fear they might be “dumb” or that you’re the only one who doesn’t get a point (believe me, you are not alone); seriously think about the material and study for and complete all homework, quizzes, midterms and a comprehensive final examination. I also expect that you will refrain from asking me to make special exceptions to the requirements laid out in this syllabus just for you.

Caveat Emptor –Economics is a discipline that is built up cumulatively, brick by brick, so is not a subject that you should let slide until the last minute, fall behind on readings or fail to ask questions as soon as you realize you don’t understand something. Ask classmates, an economics student assistant or me. Forming study groups is also a good way to learn the material. Many students have found that using their term paper group as their study group is very helpful, but you can always do both. Even if you are the best student in a group, you will still learn through your efforts to explain the material to others. If at any point during the semester you are having difficulty, PLEASE come see me sooner rather than later. If you do keep up with the material, most of you can do well in the course.

Course OutlineEstimated Schedule

Week 1/2:Text Chapter 15: Contingent Valuation: Using Surveys
You say you’ll do it, but will you really?
Week 2: Monday: Labor Day observed, CAMPUS CLOSED
Why Government?
Topics: Opportunity cost, efficiency and markets, market failure, consumer and producer surplus, standing
Week 2/3:Introduction and review of the “basic model”
Text Chapter 1: Introduction to Cost-Benefit Analysis
Week 4: Efficiency and CBA
Text Chapter 2: Conceptual Foundations of CBA
Week 4/5:Which is better? Use producer/consumer surplus to see
Text Chapter 3: Microeconomic Foundations
Appendix 3A
Week 5/6:Valuing Cs & Bs in Primary and Secondary Markets
Willingness to pay
Market Failures and social values
Text Chapters4 & 5
Week 6/7:Review and MidtermExam #1
Week 7/8Return/Discuss Exam #1
Cost-Effectiveness Analysis
Text Chapter 18
Technical Components (Guts) of Classical CBA
Topics: Net Present Value, discount rate, price and value, real and nominal values, economic “justice”, multi-project questions, sensitivity analyses, uncertainty
Week 9: What’s it worth today? tomorrow?
Text Chapter 6: Discounting Bs & Cs
Uncertainty ruins CBA, right? Wrong!
Text Chapter 7: Dealing with Uncertainty
Week 10/11: Can mere existence of an unused thing cause value?
Text Chapter 9: Existence Value
Social values now and again
Text Chapter 10: Social Discount Rates
Week 11: Review and MidtermExam #2
Week 12: Return/Discuss Exam #2
Week 13: CV Project Papers Due 11/20 (w PPTs & FDs)
Week 14: Present/discuss papers
Week 15: Present/discuss papers/Catchup
Week 16: FINAL EXAM WEEK
If there is time:
Measurement Issues and Non-Market Problems
Possible Topics: Value of life, shadow prices, surveys
Prediction is very difficult, especially about the future
Text Chapter 11: Predicting and Monetizing Impacts
Indirect measurement methods
Text Chapter 14: Valuing Impacts from Observation
How much is a life worth? Yours? WWALS?
Text Chapter 16: Shadow Prices
CBA accuracy and relying on the kindness of strangers
Text Chapter20: How Accurate is CBA?

Policies

  • Homework will be completed on time. “The dog ate my computer”, “I eloped that weekend”, “My (fill in relationship – dog, friend, dealer, car etc.) (fill in catastrophe – left me, didn’t leave me, borrowed my computer, broke down, etc.) ”, or other problems are no excuse for missing assignments or exams.
  • I will sometimes take some class time to examine and discuss articles appearing in the media.
  • This course is crammed with readings, homework and a cost benefit analysis project, so the only Extra Credit available to you is class participation. Extra credit for above-average class participation is very difficult to achieve if you are not in class.
  • I often take roll, typically at or near the beginning of the lecture, so punctuality matters, but I also sometimes take roll later.
  • No late homework. Due dates for all homework assignments will be clearly conveyed in class in advance. It is not possible to extend time for assignments after the due date. If you add the course late in the semester, you cannot makeup work you have missed.
  • Give yourself ample time to complete assignments. These assignments are challenging and important both for your homework grade and your performance in the class. I encourage you to spend time working through them carefully and to seek out help from a classmate, an economics tutor, or me when you encounter problems.
  • Please ask me questions if you do not understand a part of the lecture or the readings. And please ask your questions either in class or during office hours. I believe that it is particularly important that you ask your questions during the class so that other students will be able to learn from them, too. You may fear that you are the only one lost and that your questions will betray ignorance, but nothing could be farther from the truth: many, if not most, students will have the same questions but hope that they will figure it out somehow on their own. Also, the moment may pass and you’ll forget the question or the material itself. Thus it is important not to give in to the temptation to hold the question until class is just over, when everyone else and I will be departing for the next class and another professor will be coming in.
  • Pop quizzes typically are given approximately 2-3 times per month. They often contain T/F, M/C, and/or one short discussion question concerning either recent lectures to show how you are “getting” the covered material, or an assignment made for that day.
  • Mid-term exams are closed book and given in class. All Mid-term exams are comprised of written response, true/false, true/false/explain, multiple-choice and/or discussion questions, requiring a large Blue Book and Scantron 882-E form. Please use a pen and onlyfacing pages for the written questions and a No. 2 pencil for the T/F-MC questions.
  • The Final Exam may be similar to the Mid-term exam style, may include analysis of a CBA study or may be a take-home exam. I will provide more information as the semester progresses and the final exam nears.
  • As there are no exam make-ups, these dates are announced in advance so that you can arrange to be here.
  • If your grades are sufficiently high, such as “A”s and “A+”s, you may be able to exempt the final exam.
  • Free peer tutoring for reviewing basic 1B economics concepts used in this class is available in the Department of Economics. Tutoring hours are posted in the Department office during the first week of classes and at
  • As a student in this course (and at this university) you are expected to maintain high degrees of professionalism, commitment to active learning and participation in this class and also integrity in your behavior in and out of the classroom. Academic honesty is expected. Students suspected of cheating will be reported to Judicial Affairs.
  • There will be no makeup quizzes or examinations. Exam weeks are given in the course outline. This is to avoid any potential conflicts. Attendance is both expected and highly recommended. If you miss a class, be sure to check with your fellow classmates, to see what material you missed; I recommend finding at least one “study buddy” or join a study group to facilitate information flow for exams or in case of an absence. Come to class on time; you will not be given extra time if you are late for a pop quiz or an exam.
  • If you decide to withdraw from this class, make sure you do so with the registrar. If you withdraw without permission, you will be assigned a failing grade. Once a student submits work for a grade, he/she will not be assigned a grade of “WU” under any circumstances. Keep mobile devices off during class, including laptops. If you wish to use your laptop during class, please come speak with me. You may not use your phone/MP3 player as a calculator on exams. You may use a calculator without programming capabilities.
  • No phones, please!
  • Keep all your exams and quizzes and problem sets until after receiving your final grade, for your future reference.
  • I will be available by phone during office hours, so if you have questions and cannot get to my office then, please phone them in. remember, though, I already may have students in the office.
  • A person with a documented illness for missing one midterm exam will have the weight of his/her midterm added to their final exam, so that their final exam will be 40% of the grade. Failure to provide the required documentation within one week from the date of the exam will result to a grade of zero for the exam.
  • If you have a learning disability or a physical disability that requires accommodation, please let me know as soon as possible. It is the student’s responsibility to provide documentation to the Office of Services to Students with Disabilities (SSWD) and meet with a SSWD counselor to request special accommodation before classes start. SSWD is located in Lassen Hall 1008 and can be contacted at (916) 278-6955 (Voice), (916) 278-7239 (TDD only) or .
  • All Services to Students with Disabilities needs will be accommodated.

Life Lessons

If you find that you have any trouble keeping up with assignments or other aspects of the course, make sure you let me know as early as possible. As you will find in life, building rapport and effective relationships are keys to becoming an effective professional. Make sure that you are proactive in informing your instructors when difficulties arise during the semester so that they can help you find a solution.

Understand When You May Drop This Course

It is the student’s responsibility to understand when they need to consider dis-enrolling from a course. Refer to the Sac State Course Schedule for dates and deadlines for registration. After this period, a serious and compelling reason is required to drop from the course. Serious and compelling reasons includes: (1) documented and significant change in work hours, leaving student unable to attend class, or (2) documented and severe physical/mental illness/injury to the student or student’s family.

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