Lecture

Cost-Benefit Analysis: Decision Making Insights

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In course

ENV-724: Climate economics

The course introduces non economists to the economic analysis of climate change: economic activity and climate change, estimation of climate impacts, optimal mitigation and adaptation, national and international climate policy, instruments for climate poli ...

Description

This lecture delves into the intricacies of cost-benefit analysis, exploring how individuals and public authorities make decisions based on weighing costs and benefits. The instructor discusses scenarios where decisions are made without this weighing process, the role of uncertainty, and the ethical considerations behind cost-benefit analysis. The lecture also touches on decision-making strategies such as following cues, habit, and deferred decision-making. Furthermore, the discussion extends to the limitations of cost-benefit analysis, including the challenges of valuing non-replaceable resources and the complexities of nonlinear systems.

Instructors (5)

Philippe Thalmann

Philippe Thalmann was born in Lausanne in 1963. He graduated in Economics from the University of Lausanne in 1984, where he earned a postgraduate diploma in Economics in 1986. Mr. Thalmann entered the doctoral program in Economics of Harvard University (Cambridge, U.S.A.) in 1986, which he completed with a Ph.D. in 1990. His dissertation is entitled: "Essays in the Economics of Government Revenues and Spending". Returning to Switzerland, he was hired as an assistant professor first at the University of Geneva (teachings in Public Economics), then at the University of Lausanne (teachings in Econometrics and Introductory Economics). Since 1994, Mr. Thalmann is associate professor of Economics as the Swiss Federal Institute of Technology at Lausanne.

Marc Vielle

Marc Vielle has obtained a PhD degree in economics from the University Panthéon-Sorbonne (Paris). He worked as an economic researcher at the Laboratoire ERASME of Ecole Centrale de Paris and Université de Paris I (1987-1992), where he developed and managed the macroeconomic model HERMES-France. In 1991 he joined the Commissariat à lEnergie Atomique (CEA) as senior economist where he participated to the development of two models (GEM-E3 and PRIMES) funded by the European Commission. In 1996 he joined the Institut dEconomie Industrielle of Toulouse directed by Jean-Jacques Laffont. In 2003 he joined the Laboratoire dEconomie des Ressources Naturelles directed by Michel Moreaux. Since 2007, Marc works at EPFL. He is member of the GEMINI-E3 team and participates to the development of the world general equilibrium model GEMINI-E3. Marc has a strong experience in economic modeling (especially CGE modeling), quantitative analysis, energy and climate change policies. He has contributed to several research projects funded by national governments, European Commission and private companies. Skype 'Skype Me!' buttonhttp://www.skype.com/go/skypebuttons

Frank Vöhringer

Expertise Climate economicsEnvironmental economicsEnergy economicsComputable general equilibrium modeling Teaching & PhD Past EPFL PhD Students as codirector Sophie Maire, Takafumi Usui Courses Models for applied environmental economics ENV-723 Mainly based on the discussion of peer reviewed academic papers, the course introduces non economists to the main types of applied models used in environmental economic analysis: linear programming, partial and general equilibrium, game theory, and ag

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Related concepts (14)

Cost–benefit analysis

Cost–benefit analysis (CBA), sometimes also called benefit–cost analysis, is a systematic approach to estimating the strengths and weaknesses of alternatives. It is used to determine options which provide the best approach to achieving benefits while preserving savings in, for example, transactions, activities, and functional business requirements. A CBA may be used to compare completed or potential courses of action, and to estimate or evaluate the value against the cost of a decision, project, or policy.

Decision-making

In psychology, decision-making (also spelled decision making and decisionmaking) is regarded as the cognitive process resulting in the selection of a belief or a course of action among several possible alternative options. It could be either rational or irrational. The decision-making process is a reasoning process based on assumptions of values, preferences and beliefs of the decision-maker. Every decision-making process produces a final choice, which may or may not prompt action.

Cost-effectiveness analysis

Cost-effectiveness analysis (CEA) is a form of economic analysis that compares the relative costs and outcomes (effects) of different courses of action. Cost-effectiveness analysis is distinct from cost–benefit analysis, which assigns a monetary value to the measure of effect. Cost-effectiveness analysis is often used in the field of health services, where it may be inappropriate to monetize health effect.

Cost–utility analysis

Cost–utility analysis (CUA) is a form of economic analysis used to guide procurement decisions. The most common and well-known application of this analysis is in pharmacoeconomics, especially health technology assessment (HTA). In health economics, the purpose of CUA is to estimate the ratio between the cost of a health-related intervention and the benefit it produces in terms of the number of years lived in full health by the beneficiaries. Hence it can be considered a special case of cost-effectiveness analysis, and the two terms are often used interchangeably.

Measurement uncertainty

In metrology, measurement uncertainty is the expression of the statistical dispersion of the values attributed to a measured quantity. All measurements are subject to uncertainty and a measurement result is complete only when it is accompanied by a statement of the associated uncertainty, such as the standard deviation. By international agreement, this uncertainty has a probabilistic basis and reflects incomplete knowledge of the quantity value. It is a non-negative parameter.

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