But obviously there are complications. First, it is not always easy to measure benefits and costs, and it turns out that tools of microeconomics can be very helpful here. Second, benefits and costs can occur at different times, and you have to adjust for that problem. Third, benefits and costs are received and borne by different people, and both the economics and the politics of dealing with distributional issues can get tricky. Fourth, there are many different types of programs for which a public servant might want to do a benefit-cost analysis. This list goes on, and it would easily fill a semester for us to cover it thoroughly.
Instead, we have only four weeks to do it, and we will therefore have to compress the material somewhat in order to cover the most important issues. However, given a choice between a cursory treatment of a large number of techniques and examples and a more in depth treatment of the fundamental topics in benefit-cost, I will opt for the latter. My goal is that you will leave the course with a thorough understanding of both what benefit-cost analysis can do and what it cannot do. I would like you to learn both the remarkable power of the techniques when they are used properly, but also their limitations, and with that in mind we will take the time to look carefully at the economic underpinnings of the tools of analysis used in benefit-cost.
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