Appraising Policies, Programmes and Projects

Course Overview

Course Quick Facts Course Facts


Each Module One Day



Summary Summary

This programme consists of three 'Masters-level' modules. Participants will gain a detailed knowledge of the theory and application of economic appraisal. Leading academics cover topics in welfare economics, valuation, uncertainty and discounting, as well as techniques for dealing with goods or impacts that cannot be quantified.

Delegates may elect to complete all modules or take individual modules.

Each module Duration: One Day

Location Location


Course Details Info

This module covers:
Cost benefit Analysis Welfare and Well-being

  • Introduction to the microeconomic foundations of CBA (partial equilibrium representation of social costs and benefits).
  • Individual welfare functions
  • Social welfare functions and wellbeing
  • Marginal utility of income
  • CBA and General Equilibrium
  • Compensation criteria, Hicks-Kaldor, Scitovsky paradox
  • Compensating and equivalent variations
  • Cost-effectiveness / cost-utility
  • Real individuals behaviour Vs the rational economic ideal the insights offered by behavioural economics
  • Valuation of Social Costs and Benefits
  • Opportunity cost and market prices
  • Revealed Preference and close markets
  • Stated preferences (willingness to pay and willingness to accept)
  • Subjective well-being
  • Whole life costing and sustainability
  • Valuation of human health and life (quality, avoidance of fatality)
  • Ecosystems and environmental valuation
  • Option value
  • Relative pricing
  • Exclusion of transfer payments
  • Valuation of parts and the whole of systems

This module covers:
Multi-criteria Analysis

  • Unquantifiable effects and the role of MCA
  • Avoiding biased design in MCA
  • Applying MCA to add transparency
  • Stakeholder engagement and MCA
  • Option identification and MCA
  • Deriving relative values from MCA and supplementing CBA

This module covers:
Risk, Uncertainty and Optimism Bias

  • Different types of endogenous and exogenous risk.
  • uncertainty
  • systematic risk
  • optimism bias
  • catastrophe risk
  • Identifying and Accounting for risk and uncertainty
  • Optimism Bias adjustments
  • Valuing risks
  • Certainty equivalent risks
  • Appraisal risks which are systematically linked to economic performance
  • Long term certainty equivalence declining discounts linked to uncertainty
  • Monte-Carlo analysis

Use of scenarios testing for robustness and switching values to explore best and worst case and to test robustness

Inter-temporal Issues and Discounting

  • Individual time preference and Net Present Value
  • Market discount rate
    • Financial economics literature
    • equity premium
  • Cost of capital
  • Social time preference and the Ramsey formula,
    • pure time preference,
    • increasing wealth effects and the marginal utility of consumption,
    • endogenous (catastrophe) risk
  • Treatment of risk in CBA and social discounting (i.e. explicit identification and inclusion of endogenous risk costs and the exclusion of endogenous risk from the discount rate)
  • The Green Book discount rate and appraisal
  • Derivation of the 3.5% social time preference rate
  • Discounting the in the long term,
  • "Apparently Irrational" choices short/long term (e.g. Obesity the Challenge of Affluence) Hyperbolic discounting.
  • Uncertainty and certainty equivalents, the value of certainty.
  • Derivation of the declining long-term discount rate
  • Inter-generational equity
  • International equity
  • Sustainability

Distributional Analysis and Adjustment

  • Theory of distributional adjustment (arguments for / against)
  • Calculation of adjustment factors
  • How and when to apply adjustment factors