One of the tools for appraisal of initiatives is economic evaluation. This involves the use of numerous technical elements, many of which are complex and sometimes confusing. This paper addresses two of them. The first issue is that the method for calculating the benefits of an initiative can be articulated in a number of different ways. The paper discusses five ways of describing the benefits of an initiative, and demonstrates that they all result in the same benefit. The consequence is a need for analysts to select the method that is appropriate for their application and to be clear and systematic in their use of it. The second is the general use in Australia of the benefit-cost ratio as the premier, and generally sole, indicator of the result of an economic evaluation of an initiative. As it is a ratio, the definition of changes associated with an initiative as a cost or a benefit will alter the benefit-cost ratio even though the underlying features of the initiative and its counterfactual base case are unchanged. This issue is examined and practical ways forward identified. (a) For the covering entry of this conference, please see ITRD abstract no. E216058.
Abstract