The present deliverable describes the economic assessment of counter measures. Cost-effectiveness analysis and cost-utility analysis are compared to cost-benefit analysis. Cost-effectiveness analysis helps to estimate the costs per prevented fatality or injury. To evaluate the effectiveness in terms of different levels of severity jointly, one has to conduct a cost-utility analysis, where fatality reduction and injury reduction are brought together on a joint scale: quality adjusted live years (QALY) saved. QALYs represent the years of life lost due to fatalities and the quality of life loss resulting from injuries.
Cost-benefit analysis also allows the joint evaluation of measures’ effectiveness in reducing crashes of different severity. Moreover it provides information on the socio-economic return of counter measures, and in principle allows to include side-effects into the analysis. The valuation of other possible impacts of road safety measures is beyond the scope of SafetyCube, but presentation in terms of cost-benefit ratios allows for the post hoc inclusion of other impacts if DSS users have estimates of these. In the discussion of decision criteria within cost-benefit analysis it is demonstrated that measures with a high cost-benefit ratio (benefits/costs) do not necessarily have a large net-effect (benefits – costs). The net-present value will favour measures with large benefits even if they come at a relatively large cost, while the cost benefit ratio will favour measures with the best value for money, even if their actual benefits are relatively small (e.g., because they are targeted at a small group of crashes).
The meaning of costs in the framework of economic welfare theory (the basis of cost-benefit analysis) is not necessarily the same as in everyday language. In this context concepts like opportunity costs and discounting are discussed. Opportunity costs (the value of things you could have done with the money or resources otherwise) are usually approximated by the market price. The exception are costs that are payed from tax-money, which are brought into cost benefit analysis at a higher rate. Discounting is used to bring costs made at different points in time to the same present value. There is a relation between the discount rate and a preference for short-term vs. long term projects.
For the estimation of the cost of measures, different components and data sources for these costs are discussed with examples from infrastructure and vehicle measures. Furthermore, the report presents an overview and classification of crash costs components and estimation methods. One of the biggest components are the human costs. These are an indication of how much the prevention of crashes is worth for us (the people), which is measured by the willingness to pay method. Other costs are estimated by the restitution method (what are the costs to compensate the damage done) and the human capital approach (how much benefit would the victim have produced).
The information on economic efficiency assessment will be integrated into the SafetyCube Decision support system by means of a cost-benefit calculator that is based on the costs of measures collected in the analysis work packages (WP4, 5, 6) and costs of crashes collected in WP3.