UNCC Public Policy Final Exam Study Guide

Why is the proper data important? What is the difference between measures of central tendency and dispersion and how would they be used?

it gives us the context and tools for evaluating complex information

it is essential for public policy research that helps to improve our lives

Measures of central tendency: a central value of the data set, refers to the central location of the dataset

Dispersion: how far a set of observations is spread out from the midpoint

they would be used for measuring and describing the dispersion of a distribution

Why are correlation and causation different? What happens when you mistake them?

Correlation: is a measure of the degree to which two variables are associated with one another; variation in one is associated with variation in the other, positively or negatively

Causation: variation in one variable causes variation in the other

If you confuse the two, it can cause someone to think there is an association when there is none, or someone may think there is no association when there actually is one

What is normal distribution and why is it significant?

a probability distribution that is symmetrical on both sides of the mean, represents a bell curve

they have an important feature: roughly 68.0% percent of the observations in the distribution lie between one standard deviation above the mean and one standard deviation below the mean

Different types of data sets

Cross-Sectional- are made up of observations for a set of individuals, countries, or some other unit of observation at a particular time

Longitudinal ( also called time series data)- consists of observations for some unit of analysis at multiple times

Panel- are a combination of cross-sectional and longitudinal, comprises observations on a set of individuals, countries, or other units of observation at multiple points in time

natural experiments- occur when circumstances create a situation that approximates a controlled experiment

Why is cost benefit analysis an important tool of public policy analysis? How do we compare among different units or variables?

its an important tool because it ranks policies based on their costs for achieving some defined objective

it also provides an objective tool for analyzing how society should best deploy its scarce resources

it provides decision makers with a clear indication of the most efficient alternative, that is, the alternative that generates the largest net benefits to society

allows policy analysts to choose the most efficient way to achieve the stated objective

What is the time value of money? Why do policy analysts use it?

when you have to account for the fact that overtime, the value of money changes, and this must be taken into account when doing budgeting for projects

ex: would you rather have $100 today or in 10 years?

- you would prefer to have the money today because it would have more purchasing power today, there is also a level of uncertainty that makes future payment less valuable

ex: if a construction crew was starting a project, they would have to account for the fact that the price of concrete may go up, thus increasing the cost of the project

Policy analysts use it in order to compare dollar values at different times, they use growth related formulas to calculate the value of a quantity that is growing or shrinking at some steady rate over time that could be used to determine the present value of a monetary sum that will be received in the future

How do analysts incorporate uncertainty into their analysts?

by weighing the cost or benefit by our best estimate of the probability that it will occur

ex: a construction project involves building a bridge across a river, the contractor assumes the cost of building the pylons will be $2 million, however once the drilling has began, there is a 10% percent chance that the foundation will be softer than expected and the drilling will have to go deeper which would require an extra $3 million

How does opportunity cost affect CBA?

it affects cost benefit analysis because it values an input or output using its opportunity cost, since it is a reflection of what an individual or society must give up as the result of some course of action

How can analysts measure both economic and non-economic values?

Economic cost or benefit: is a direct pecuniary gain or loss

ex of an economic benefit: a college scholarship program may raise the future wages of the participants

ex of an economic cost: a substance abuse treatment program for prison inmates would reduce the costs associated with future recidivism

non-economic cost or benefit: is an intangible gain or loss

ex of an non-economic benefit: art, or in the case of the college scholarship would provide the recipient with a greater range of career choices

ex of an non-economic cost:

How to determine WTP?

willingness to pay, principle argues that the most accurate measure of the value of any good or service for a particular individual is what he or she is willing to give up in order to get it

ex: a consumer who is willing to pay $78 for a pair of tennis shoes must forgo $78 of other consumption, meaning the purchase price represents the true opportunity cost of the good

What did the Copenhagen consensus find using CBA? What did they do with this information?

they were able to identify four proposals where the benefits outweighed the costs, based off this information, they were able to address four different programs:

1. a combination of measures for controlling HIV/ AIDS

2. combating malnutrition by using targeted food supplements

3. action by developed nations to reduce trade barriers and eliminate agricultural subsidies

What are two factors policy makers need to analyze with discretion?

standing: which parties should be considered in the analysis or who should be involved, would also include which geographic or political entities have a standing in the cost benefit analysis

Ex: building a new mall, officials would only consider the costs and benefits that accrue to the citizens of that town, and although the citizens of the neighboring town would be affected they would not be included in the standing

distributional effects: how the costs are spread out across society, CBA would compare the total benefits to the total social costs without any regard for which members of society accrue those costs and benefits

ex: eliminating subsidies for home heating oil would generate positive net social benefits since it makes better use of societies finite resources, however, the cost of this policy would fall on low-income citizens since they spend the larger proportion of their income on home heating oil, in turn policy makers may reject the policy on equity grounds if they deem the distribution of costs and benefits rather than the net total unacceptable

Analysts struggle to figure out the costs for resources with no obvious market price. What are the ways analysts use to do this?

shadow pricing

analysts also use contingent valuation, revealed preferences and hedonic market analysis

Why is is important to have value of statistical life?

since many public policy proposals are likely to save lives or to cause additional deaths

thus, it is important to use data to project the most likely impact in terms of overall lives lost or saved

when human lives are a cost or benefit, policy makers must assign a monetary value to each life

Economists use different social discount rates ( or the discount rate) to analyze costs and benefits. Why is it important to know the discount rate used?

It is important to know the discount rate used because comparing costs and benefits that occur at different points in time is more difficult in part because they may accrue only to different people, but to different generations

the rate selected can have a profound impact on cost benefit analysis, particularly when costs or benefits occur in the distant future

There is a lot of debate between economists on what that discount rate should be. Know the pros and the cons of each side of this debate

some believe that discount rate should be zero while others believe there should be a non-zero discount rate

Pros of a zero discount rate: this line of thinking values $1 of consumption today exactly the same as $1 of consumption at any point in the future

- if a policy will impose $200 billion in damages on a future generation then that harm should not be discounted

-it might be ethically awkward to discount the value of lives lost in the future

- it is ethically indefensible to give future generations less weight than the current

Cons to adopting a social discount rate of zero

-a social discount rate of zero can produce nearly meaningless results and leave policy makers without any intellectual traction on important issues

-the social benefits of a cost will eventually exceed the social costs

-those living in the future are likely to be richer than those alive today

9/11 Special Master Case

after the 9/11 attacks, Kenneth Feinberg was appointed as the special master and his job was to compensate families who had lost loved ones in the attack, Feinberg's team was required to convert the death of a person into dollars and cents

-Some families got more compensation than others did because some of those who died were high income earners so their families received more money

the families would be compensated for their economic losses which would include the loss of earnings or other benefits related to employment, medical expense loss, replacement service loss, loss due to death, burial costs and loss of business or employment opportunity

2 components the awards were based off:

1. the economic loss caused by the attack, this would mean that the families

What are the different types of program evaluation (PE)?

the treatment effect

confounding factors

distinguishing causation from correlation

dropout effect

evaluator or participant bias

randomized experiment

natural experiments

nonequivalent control group

time series analysis

multiple time series

discontinuity studies

multivariate analysis

What are the different steps for PE?

the treatment effect

confounding factors

distinguishing causation from correlation

dropout effect

evaluator or participant bias

randomized experiment

What are some issues for PE and how are they alleviated?

ie- treatments effects, confounding factors, eval strategies

the treatment effect: no two participants in the study are the same (ie: we are unable to compare the outcome for an individual who participates in a program with the outcome for an identical person who did not participate, in some cases, we have no comparison group because you cannot observe the counterfactual

confounding factors: such as self selection bias, it occurs when the participants in some treatment are significantly different in some important respect from the non participants to whom they are being compared

Distinguishing causation from correlation: there might be omitted variables or it may just be a coincidence

evaluator or participant bias: in some situations, the person or persons doing

Why are institutions so important to public policy? Who creates them?

Why can't governments act like businesses?

What do institutions do?

If you were a policy analyst how/why would you do institutional analysis?

Attributes of effective institutions

How are the attributes of effective institutions both similar and different from Douglas North's 4 things we need to understand about good institutions?

Why are some countries successful and others are not?

How does the government seek to change citizens's behavior?

What is stakeholder analysis?

Understand the policy process and how public policy is made

Approaches used to derive the value of a statistical life

Contingent valuation

revealed preferences

hedonic market prices