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In this module, the following topics are covered: 1) the challenges of policy evaluation when costs and benefits accrue over time, 2) features of cost-benefit analysis, and 3) criteria for policy evaluation.

Learning objectives

After reading this module, students should be able to

  • know five important features of how economists think about costs
  • understand why discounting is both important and controversial, and be able to calculate the net present value of a project or policy
  • know what cost-benefit analysis is, and be aware of some of its limitations
  • think about four criteria for evaluating a project that are not captured in a basic cost-benefit analysis


Environmental valuation methods help analysts to evaluate the benefits society would gain from policies or cleanup and restoration projects that improve environmental quality or better steward our natural resources. Another set of tools can yield information about the costs of such actions (a brief description is below). But even if we have plausible estimates of the costs and benefits of something, more work needs to be done to put all that information together and make some rational choices about public policy and investments. This module discusses the challenges of policy evaluation when costs and benefits accrue over time, outlines the main features of cost-benefit analysis, and presents several other criteria for policy evaluation.

Net present value, discounting, and cost-benefit analysis

Cost estimation has not generated the same amount of scholarly research as benefit valuation because the process of estimating the costs of environmental improvement is usually more straightforward than the process of estimating the benefits. Economists do think differently about costs than engineers or other physical scientists, and several key insights about the economics of cost evaluation are important for policy analysis. Viewed through an inverse lens, all these ideas are important for benefit estimation as well.

Opportunity cost

Not all costs involve actual outlays of money. An opportunity cost is the foregone benefit of something that we choose (or are forced) not to do. The opportunity cost    of a year of graduate school is the money you could have made if you had instead gotten a full-time job right after college. Endangered species protection has many opportunity costs: timber in old-growth forests can’t be cut and sold; critical habitat in urban areas can’t be developed into housing and sold to people who want to live in the area. Opportunity costs do not appear on firms’ or governments’ accounting sheets and are thus often overlooked in estimates of the costs of a policy. Studies of U.S. expenditures on endangered species’ recoveries have used only information about costs like direct government expenditures because opportunity costs are so challenging to measure (e.g. Dawson and Shogren, 2001 ).

Redwoods in Muir Woods
A Redwood Forest in California Forests can’t both be cut down and preserved for habitat. The dollar cost of lumber is straightforward to quantify, but it is more difficult to quantify the value of ecosystems. Cutting down the forest therefore has an opportunity cost that is hard to measure, and this can bias people and governments towards resource extraction. Source: Photo by Michael Barera

Questions & Answers

what is Nano technology ?
Bob Reply
write examples of Nano molecule?
The nanotechnology is as new science, to scale nanometric
nanotechnology is the study, desing, synthesis, manipulation and application of materials and functional systems through control of matter at nanoscale
Is there any normative that regulates the use of silver nanoparticles?
Damian Reply
what king of growth are you checking .?
What fields keep nano created devices from performing or assimulating ? Magnetic fields ? Are do they assimilate ?
Stoney Reply
why we need to study biomolecules, molecular biology in nanotechnology?
Adin Reply
yes I'm doing my masters in nanotechnology, we are being studying all these domains as well..
what school?
biomolecules are e building blocks of every organics and inorganic materials.
anyone know any internet site where one can find nanotechnology papers?
Damian Reply
sciencedirect big data base
Introduction about quantum dots in nanotechnology
Praveena Reply
what does nano mean?
Anassong Reply
nano basically means 10^(-9). nanometer is a unit to measure length.
do you think it's worthwhile in the long term to study the effects and possibilities of nanotechnology on viral treatment?
Damian Reply
absolutely yes
how to know photocatalytic properties of tio2 nanoparticles...what to do now
Akash Reply
it is a goid question and i want to know the answer as well
characteristics of micro business
for teaching engĺish at school how nano technology help us
Do somebody tell me a best nano engineering book for beginners?
s. Reply
there is no specific books for beginners but there is book called principle of nanotechnology
what is fullerene does it is used to make bukky balls
Devang Reply
are you nano engineer ?
fullerene is a bucky ball aka Carbon 60 molecule. It was name by the architect Fuller. He design the geodesic dome. it resembles a soccer ball.
what is the actual application of fullerenes nowadays?
That is a great question Damian. best way to answer that question is to Google it. there are hundreds of applications for buck minister fullerenes, from medical to aerospace. you can also find plenty of research papers that will give you great detail on the potential applications of fullerenes.
what is the Synthesis, properties,and applications of carbon nano chemistry
Abhijith Reply
Mostly, they use nano carbon for electronics and for materials to be strengthened.
is Bucky paper clear?
carbon nanotubes has various application in fuel cells membrane, current research on cancer drug,and in electronics MEMS and NEMS etc
so some one know about replacing silicon atom with phosphorous in semiconductors device?
s. Reply
Yeah, it is a pain to say the least. You basically have to heat the substarte up to around 1000 degrees celcius then pass phosphene gas over top of it, which is explosive and toxic by the way, under very low pressure.
Do you know which machine is used to that process?
how to fabricate graphene ink ?
for screen printed electrodes ?
What is lattice structure?
s. Reply
of graphene you mean?
or in general
in general
Graphene has a hexagonal structure
On having this app for quite a bit time, Haven't realised there's a chat room in it.
how did you get the value of 2000N.What calculations are needed to arrive at it
Smarajit Reply
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Source:  OpenStax, Sustainability: a comprehensive foundation. OpenStax CNX. Nov 11, 2013 Download for free at http://legacy.cnx.org/content/col11325/1.43
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