Goeller scorecard example

Question 1

Explain two of the six criteria for policy prescription, (a) effectiveness, (b) efficiency, (c) adequacy, (d) equity, (e) responsiveness, and (f) appropriateness. Then, describe a real or hypothetical public policy issue and select which of the two criteria you believe would be the most beneficial to use in deciding a policy. Provide at least two reasons for your selection.

Debate It: Take a position for or against the following statement: Rational choice is not possible. Discuss how different types of rationality are related to different criteria for prescription. Provide at least two reasons and two examples to support your response

Question 2

Saving Lives by Prescribing Policies" Please respond to the following:

From the case studies, Case 1.1 and Case 5.1, explain two of the major issues. Then, analyze the assumptions that govern safe driving and discuss whether some assumptions are more reasonable than others. Support your position with at least two reasons and one example.

From the case studies, Case 1.1 and Case 5.1, recommend the best ways to estimate the value of time and the cost of a gallon of gasoline. Support your position with at least two reasons and one example.

CASE 1.1 E GOELLER SCORECARD—MONITORING AND FORECASTING TECHNOLOGICAL IMPACTS

When advanced technologies are used to achieve policy goals, sociotechnical systems of considerable complexity is created. Although it is analytically tempting to prepare a comprehensive economic analysis of the costs and benefits of such policies, most practicing analysts do not have the time or the resources to do so. Given the time constraints of policy making, many analyses are completed in a period of several days to a month, and in most cases policy analyses do not involve the collection and analysis of new data. Early on in a project, policy makers and their staffs typically want an overview of the problem situation and the potential impacts of alternative policies. Under these circumstances, the scorecard is appropriate.

The Goeller scorecard, named after Bruce Goeller of the RAN D Corporation, is appropriate for this purpose. Table C1.1 shows the impacts of alternative transportation systems. Some of the impacts involve transportation services used by members of the community, whereas others involve impacts on low-income groups. In this case, as Quade observes, the large number of diverse impacts are difficult to value in dollar terms, making a benefit-cost analysis impractical and even impossible.50 Other impacts involve financial and economic questions such as investments, jobs created, sales, and tax revenues. Other impacts are distributional because they involve the differential effects of transportation. ■

Case 5.1

CASE 5.1 OPPORTUNITY COSTS OF SAVING LIVES-THE 55 MPH SPEED LIMIT 41

Conducting a benefit-cost analysis is not only a technical matter of economic analysis. It is also a matter of identifying, and if necessary challenging, the assumptions on which benefit-cost analysis is based. This can be seen if we examine the case of the National Maximum Speed Limit of 1974.

Table 5.11 describes steps in conducting a benefit-cost analysis and a critique of the assumptions underlying the analysis. The case shows, among other things, that all steps in conducting a benefit-cost are sensitive to these assumptions. ■

TABLE 5.11

Measuring the Costs and Benefits of the 55 mph Speed Limit: A Critical Appraisal

Steps

Critique

Costs

1. The major cost of the National Maximum Speed Law (NMSL) was the additional time spent driving as a result of slower speeds. To calculate the number of hours spent driving in 1973, divide the total number of vehicle miles traveled on interstate highways by the average highway speed (65 mph) and then multiply by the average occupancy rate per vehicle, which is approximately 1.77 persons.

Why use 1973 mileage without any adjustment? The average growth rate in travel before 1973 was 4 percent. Therefore, the formula should be

Next, find the number of hours spent driving in 1974 by dividing total vehicle miles traveled on interstate highways by the average highway speed in 1974 (58 mph). The NMSL caused some people to cancel trips and others to find alternative modes of transportation; as a result, time calculations based on 1974 mileage would be an underestimate. Therefore, we should use the 1973 mileage of 525 million miles.

Using the following formula, where VM is vehicle miles, S is average speed, R is average occupancy rate, and H is the number of hours lost,

The number of hours lost driving in 1974, based on this equation, is estimated to be 1.72 billion.

Using the above formula, the estimated number of hours lost should be 1.95 billion—not 1.72 billion.

2. To estimate the value of this time, begin with the average wage rate for all members of the labor force in 1974—$5.05. The value of one hour’s travel is not $5.05 per hour because very few persons would pay this sum to avoid an hour of travel. We estimate that the people will pay up to 33 percent of their average hourly wage rate to avoid an hour of commuting. The value of time spent traveling is therefore about $1.68 per hour.

Why take a percentage of the $5.05 figure based on what commuters would pay to avoid an hour of travel? We should avoid reducing the value of people’s time for two reasons. First, the value of time in cost to society is equal to what society will pay for productive use of that time. Time’s value is not what a commuter will pay to avoid commuting because commuting has other benefits, such as solitude for thinking or the advantages of suburban living. Second, the value of time spent driving for a trucker is many times the industrial wage rate. Discounting would greatly underestimate the value of commercial drivers.

3. Application of the cost figure ($1.68) to the time lost figure (1.72 billion hours) results in an estimated travel cost of $2.89 billion.

Applying the value of one hour’s time to the hours lost as calculated above (1.95 billion) results in an estimated travel cost of $9.85 billion.

4. The NMSL also has some enforcement costs. Total enforcement costs for signs, advertising, and patrolling are about $810,000.

Total enforcement cost should be about $12 million-not $810,000.