Economic Valuation Methods and Cost-Benefit Analysis

Course content

The many services provided by the environment contribute to human wellbeing directly as well as indirectly by supporting productive activities. However, the characteristics of environmental benefits imply that they cannot usually be traded in markets. The absence of economic incentives in terms of prices means that political intervention is required to guarantee a socially optimal supply of environmental services. Economic valuation methods and cost-benefit analysis provide tools to assess the benefits and cost of environmental policies and projects. The primary purpose is to support environmental policy making.

The core components of the course are:
- Markets and Pareto optimality
- Utility, preferences and welfare measures
- Goods characteristics and value concepts
- Principles for valuing human life and health
- Revealed preference approaches including Travel Cost Methods and Hedonic Value Methods
- Stated preference methods including Contingent Valuation and Choice Modelling
- Benefit transfer
- Cost-benefit analysis
- Standard conversion factor and tax dead-weight loss
- Discounting and risk
- Relevant case studies to illustrate the application of valuation methods and cost-benefit analysis in practice.

Education

MSc Programme in Environmental and Natural Resource Economics
MSc Programme in Agricultural Economics
MSc Programme in Agriculture

Learning outcome

The central themes of the course are the methodologies and techniques applied in economic valuation and cost-benefit analyses and the underlying economic theory. Economic valuation and cost-benefit analysis are being increasingly applied as support for environmental policy decisions. Health policy-making is another important field of application. The skills and competencies acquired in this course are relevant for employment in private companies, public administrations, research, consultancies and non-governmental organisations.

Having successfully completed the course the participant is expected to be able to:

Knowledge:
- Explain the welfare economic principles underlying economic valuation methods and cost-benefit analysis
- Reflect on the validity and limitations of welfare economic theory in political and ethical contexts
- Describe the different economic valuation methods and the analytical approaches to cost-benefit analysis
- Reflect on the relevance and limitations of valuation methods and cost-benefit analysis in relation to various environmental goods and services, human life, etc.

Skills:
- Identify relevant approaches to economic valuation studies and cost-benefit analyses in specific analytical settings
- Carry out valuation exercises and cost-benefit analyses using adequate statistical and quantitative techniques
- Evaluate the validity of the quantitative results obtained in valuation studies and cost-benefit analyses.

Competences:
- Explain the relevance and limitations of economic valuation methods and cost-benefit analysis in different policy settings
- Discuss scientific and political disagreements in relation to economic valuation and cost-benefit analysis.

Teaching is in the form of lectures and exercises, theoretical as well as practical (computer laboratory). Lectures present the essential elements of the curriculum. In the exercises the participants will have the opportunity to apply the methodologies and techniques introduced and to analyse environmental policy problems. Students are expected to participate actively, e.g. in class discussions and in group work.

Basic textbooks used in the course are:
- Bateman, Ian J. et al.: Economic Valuation with Stated Preference Techniques: A Manual, Edward Elgar, 2002.
- Pearce, D., Atkinson, G. and Mourato S.: Cost-benefit analysis and the environment: Recent developments, OECD 2006
- Freeman, A. M.: The Measurement of Environmental and Resource Values, 2nd Edition, Resources for the Future, 2003.

Furthermore, a number of journal articles and selected book chapters will be made available during the course.

It is highly recommended to have taken the BSc course in Environmental and Natural Resource Economics (LOJA10288) or similar courses.

Furthermore, it is recommended that students have acquired basic competences in micro economics (e.g. LOJB10259 or LLEF10218 or similar courses) as well as econometrics (e.g. LOJK10272 or similar courses)

ECTS
7,5 ECTS
Type of assessment
Oral examination
The exam will take approximately 40 minutes per student. First, a random exam question is drawn from a pool of questions. The student will then have 20 minutes alone with all aids available to prepare an answer to the exam question. The student will then present his/her answer to the examinators for about 8-10 minutes and the examinators will ask additional questions for another 10-12 minutes. After that, a grade is given based on the oral exam.
Aid
Written aids allowed
Marking scale
7-point grading scale
Censorship form
No external censorship
One internal examiner
Criteria for exam assessment

The assessment will be based on the student's ability to show in the oral exam that the learning outcomes described above have been acheived.

Single subject courses (day)

  • Category
  • Hours
  • Lectures
  • 42
  • Theory exercises
  • 14
  • Practical exercises
  • 14
  • Exam
  • 4
  • Preparation
  • 132
  • English
  • 206