Unit 4: Trade Off Analysis: Lesson and Learning Objectives

Question 1

How do we value human life and health

Answer 1

VSL
Wage Risk
Contingent Valuation

Question 2

What is the Goal of Cost Benefit Analysis

Answer 2

Economic Efficiency

Question 3

What is the Time Value of Money

Answer 3

Money can be invested today and earn a positive rate of return-worth more tomorrow

Question 4

What affects the Time Value of Money

Answer 4

-Opportunity Cost
-Interest/ Inflation

Question 5

What is Pure Time Preference

Answer 5

Humans prefer instant gratification

Question 6

How does Pure Time Preference affect Cost Benefit Analysis

Answer 6

1) The further out the CBA occurs = greater depreciation
2)Enviro projects incur upfront costs and future benefits

Question 7

How is a Social Discount Rate chosen

Answer 7

-Gvt cost of borrowing
-opportunity cost of capital (if there is no project how much interest would the funds accrue
-Social rate time preference

Question 8

Who sets Canada’s Discount Rate

Answer 8

Treasury Board Secretariat

Question 9

What are 4 Limitations of Cost-Benefit Analysis

Answer 9

Uncertainty
Assumes Weak Sustainability
Ignores Distribution (equity)
Ignores marginal utility of money (money valued different across different income groups)

Question 10

What are 6 alternatives to Cost Benefit Analysis

Answer 10

1) Cost-Effective Analysis
2) Uncertainty Analysis
3) Precautionary Principle
4) Enviro Impact Assessment
5) Multi-Attribute Tradeoff Analysis
6) Energy-economy modeling