1 / 32

Economic Analysis

Economic Analysis. March 2004 Maine. Economic Principles. Types of Economic Analysis. With/Without Benefit Cost Analysis Cost Effective Analysis Partial Budget Marginal Analysis Enterprise Budgets Net Worth Statement. Future With and Future Without.

reese-fletcher
Télécharger la présentation

Economic Analysis

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Economic Analysis March 2004 Maine Economic Principles

  2. Types of Economic Analysis • With/Without • Benefit Cost Analysis • Cost Effective Analysis • Partial Budget • Marginal Analysis • Enterprise Budgets • Net Worth Statement

  3. Future With and Future Without • Compare future with conservation to the future without it • Benefits of conservation determined by the difference between with and with out • Always have the effects of “do nothing” compared to effects with conservation installed

  4. Sediment Damage

  5. Benefit Cost Analysis • Total benefits compared to total costs – usually expressed as a ratio (such as $1.10 to $1) • >$1/$1, GOOD! • <$1/$1, NOT AS GOOD • Used mostly for area-wide projects and national programs • Required by law for certain programs

  6. Benefit Cost Analyses of Conservation Programs

  7. Economics of CRP National benefits/costs +Increased net farm income $2.1 to $6.3 billion +Value of future timber $3.3 billion +Preservation of soil productivity $0.6 to $1.7 billion +Improved surface water quality $1.3 to $4.2 billion +Reduced windblown dust $.3 to $.9 billion +Enhanced small game hunting $1.9 to $3.1 billion $9.5 to $19.5 billion -Higher food cost to consumers $2.9 to $7.8 billion -Veg. Cover establishment $2.4 billion -USDA tech. Asst. $.1 billion $5.4 to $10.3 billion Net Value = $4.1 to $9.2 billion Source: Osborn and Konyar (1990)

  8. Kenduskeag Watershed Project Economic Benefits Adapted from Watershed Plan – EA, Kenduskeag Stream Watershed, November, 1988

  9. Monetary vs. Non-Monetary Benefits • Market goods lumber, grain, cars, pencils, etc. • Non-market goods clean water, scenic farmland, wetland functions/values, wildlife

  10. Non-monetary Benefits How to put a $ value on goods/services not traded in the market? • Contingent valuation • Travel cost method • Hedonic Studies ?

  11. Hedonic Studies Property Price ($) Environmental Quality Pollution Level

  12. Maine Lakes • willingness of users to pay for water quality: $2 to $6 million per year • >200,000 Mainers spend ~$100 million per year in recreation associated with lakes • 1 meter reduction in summertime water clarity: 3 - 5% reduction in lakefront property value Source: 2000 National Water Quality Inventory Report, EPA, p. 64. www.epa.gov/305b

  13. Cost Effectiveness • A tool to measure the effectiveness of a practice or plan relative to its cost • Used to obtain a set objective at the least cost, OR • To obtain the best results at a set cost

  14. Cost Effectiveness • Best Buy • What is the better deal when comparing the amount of physical effects and the cost to get it • 1 fish per 50 mile trip or 3 fish per 100 mile trip???

  15. Two hypothetical questions that cost-effectiveness would try to answer: • If we have $1 million, how can we get the most conservation possible? Constant cost • If we want to reduce pollution by 40 percent, what is the cheapest way to do that? Constant effects

  16. Cost-effectiveness (cont.) • Costs are associated with a particular unit reduction or increase (the effect) • Lbs of N prevented from reaching streams • Tons of soil saved • Acres of habitat created • Number of life-years saved • Ducks made happy (?)

  17. C-E Example 1: Constant Effects

  18. C-E Example 2: Constant Cost

  19. C-E Example 3: Costs & Effects Vary

  20. Cost-effectiveness in Ranking Systems

  21. Partial Budgeting • A planning and decision-making framework used to compare the costs and benefits of alternatives faced by a farm business.

  22. Partial Budgeting • Systematically displays the positive and negative effects of a change • Only those factors that change are considered • Useful tool for analyzing almost any type of change

  23. Situations where a farm might use partial budgets • Substituting one crop for another • Adding a few head to a livestock enterprise • Taking advantage of an early payment discount on a fertilizer bill • Adopting a new production practice • Participating in a government program

  24. Partial Budget Elements Added Income • Reduced Costs ______________ Total Positive Effects Added Costs • Reduced Income _______________ Total Negative Effects

  25. Partial Budget • ____________________________ • ____________________________ • ____________________________ • ____________________________ • ____________________________ • ____________________________ • ____________________________ • ____________________________ • ____________________________ • ____________________________ • ____________________________ • ____________________________ Total + ________ Total - ________

  26. Marginal Analysis • Think at the margin - we look at the last increment • Trying to find the most economical input level • Marginal Benefit equal to or greater than Marginal Cost • Common sense to have the income or value of the product greater than the cost

  27. WHERE DO WE WANT TO BE? WHERE MVP >=MC

More Related