CALIFORNIA STATE UNIVERSITY, SACRAMENTO DEPARTMENT OF ECONOMICS ECON 110 – Cost-Benefit Analysis Spring 2014 ________________________________________________________________________________________________________________________________________________________________________ Instructor Information Instructor: J. T. Kelly Office: Benecia Hall 1011 Office Hours: TR 2:15 – 2:45 p.m. and by appointment Office Telephone: 278-3576 (during office hours only) E-mail: t.kelly@saclink.csus.edu Teaching Assistant (TA): Brandon Kleine TA Tutoring MW 2:30 – 3:30 pm in Econ Dept. Tutor Room ______________________________________________________________________________________________________________________________________________________ General Information Lectures: Room Amador 217 Schedule: Section 01 – TR Noon - 1:15 pm Course Description The course covers the everyday mechanics of cost-benefit analysis (often shortened to CBA), from the conceptual framework and basic analytical approach of cost-benefit analyses to common measurement issues, problems and errors in current cost-benefit analyses. Students will be given the opportunity to solve quantitative and qualitative problems; to explain essential economics concepts of efficiency and apply them to current issues; to learn how to compare costs across time periods; to identify biases or problems in the cost-benefit analyses of others; to understand the use and limits of surveys as a means of estimation; to see cost-benefit analysis as a way of thinking rather than as a path to a predetermined outcome; and using the CBA tools learned in class to write and present a cost-benefit project (not the same as a term paper) as part of a team. You will also learn how to use the textbook as a guide and reference for CBA. Prerequisite: Econ 1B. Textbook & Course Materials Required Text – Cost-Benefit Analysis: Concepts and Practice 4e, Boardman, Greenberg, et al., Prentice Hall, 2011. Available at Hornet Bookstore, Pearson Publishing, Amazon, etc., paper or electronic. Reading Assignments: Chapters as indicated on Course Outline, plus other sources as assigned. The instructor will indicate when certain text passages are to be skipped. The schedule will be reassessed continuously and adjusted to better meet student understanding and topic coverage. California State University, Sacramento Page 1 Cost-Benefit Analysis Spring 2014 Syllabus Homework: End-of-chapter problems may be assigned. Special projects will be assigned periodically, often due at the beginning of the next class meeting. Some special homework projects may be assigned to term paper groups. An absence is not an excuse for missing an assignment. Cost-Benefit Analysis: You will participate in a team project to prepare a true cost-benefit analysis (not the same as a term paper) on a current issue that I will announce in class. Your grade will be influenced by the quality of the report, its analysis, presentation of the results in class and evaluations by fellow project team members. Graded Course Activities Homework Assignments 10% 2 Mid-term exams 20% each Pop Quizzes 5% Final Exam 20% CBA Term Paper 25% Extra Credit up to 3 points on final grade for superior class participation Letter Grade Assignment Letter Grade A AB+ B BC+ C CD+ D F Percentage 93-100% 90-92% 87-89% 83-86% 80-82% 77-79% 73-76% 70-72% 67-69% 60-66% 0-59% Performance Excellent Work Nearly Excellent Work Very Good Work Good Work Mostly Good Work Above Average Work Average Work Mostly Average Work Below Average Work Poor Work Failing Work Course Structure In the Classroom — The nature of the course will be face-to-face lecture, augmented with whiteboard explanations and occasional PowerPoint slides. It may be helpful to bring the text to class, as I typically refer to it. Class time will be allocated to team meetings, discussion and project presentations as needed. Announcements — Announcements will be made during lectures, but sometimes also sent by email using SacCT. Be sure your email on file with the University is correct, my e-mail is not SPAM and that your inbox is not full. California State University, Sacramento Page 2 Cost-Benefit Analysis Spring 2014 Syllabus Responsibilities — I will come to class well prepared; respond to and encourage questions and other appropriate class participation; grade your quizzes, exams, term papers and any other assignments fairly and in as timely a fashion as possible; be available during office hours and for scheduled appointments; let you know as soon as any changes are made to the schedule, course or class meetings; and do my best to stimulate your appreciation, interest and enthusiasm for economics. I expect you to read the syllabus thoroughly and understand the ground rules; attend and actively participate in lectures; complete all the assigned readings in a timely manner; complete all assignments on time; ask questions when you are lost or confused; ask questions even if you fear they might be “dumb” or that you’re the only one who doesn’t get a point (believe me, you are not alone); seriously think about the material and study for and complete all homework, quizzes, midterms and a comprehensive final examination. I also expect that you will refrain from asking me to make special exceptions to the requirements laid out in this syllabus just for you. Caveat Emptor – Economics is a discipline that is built up cumulatively, brick by brick, so is not a subject that you should let slide until the last minute, fall behind on readings or fail to ask questions as soon as you realize you don’t understand something. Ask classmates, an economics student assistant or me. Forming study groups is also a good way to learn the material. Many students have found that using their term paper group as their study group is very helpful, but you can always do both. Even if you are the best student in a group, you will still learn through your efforts to explain the material to others. If at any point during the semester you are having difficulty, PLEASE come see me sooner rather than later. If you do keep up with the material, most of you can do well in the course. Key Estimated Exam Dates Thursday March 6 Thursday April 10 Thursday April 24 Tuesday May 20 – – – - First Mid-term exam Second Mid-term exam CBA Projects due Final Exam California State University, Sacramento Page 3 Cost-Benefit Analysis Spring 2014 Syllabus Topics, Readings, and Estimated Schedule Week (Est.) Course Outline Why Government? Topics: Opportunity cost, efficiency and markets, market failure, consumer and producer surplus, standing Week 1/2: Week 2/3: Week 3/4: Week 4/5: Week 5/6: Week 6/7 Introduction and review of the “basic model” Text Chapter 1: Introduction to Cost-Benefit Analysis Efficiency and CBA Text Chapter 2: Conceptual Foundations of CBA Which is better? Use producer/consumer surplus to see Text Chapter 3: Microeconomic Foundations Appendix 3A Valuing Cs & Bs in Primary and Secondary Markets Willingness to pay Market Failures and social values Text Chapters 4 & 5 Review and Midterm Exam #1 Return/Discuss Exam #1 Cost-Effectiveness Analysis Text Chapter 18 Technical Components (Guts) of Classical CBA Topics: Net Present Value, discount rate, price and value, real and nominal values, economic “justice”, multi-project questions, sensitivity analyses, uncertainty Week 6/7: What’s it worth today? tomorrow? Text Chapter 6: Discounting Bs & Cs Week 7/8: Uncertainty ruins CBA, right? Wrong! Text Chapter 7: Dealing with Uncertainty Week 8: Can mere existence of an unused thing cause value? Text Chapter 9: Existence Value Social values now and again Text Chapter 10: Social Discount Rate Week 9: Spring Recess! March 25-29 Week 10: Prediction is very difficult, especially about the future Text Chapter 11: Predicting and Monetizing Impacts Week 10/11: Review and Midterm Exam #2 Week 12: Return/Discuss Exam #2 California State University, Sacramento Page 4 Cost-Benefit Analysis Spring 2014 Syllabus Measurement Issues and Non-Market Problems Topics: Value of life, shadow prices, contingent valuation, surveys Week 12/13:Indirect measurement methods Text Chapter 14: Valuing Impacts from Observation How much is a life worth? Yours? WWALS? Text Chapter 16: Shadow Prices Text Chapter 15: Contingent Valuation: Using Surveys You say you’ll do it, but will you really? Week 14: (Thursday) CBA Project Papers Due Week 15 CBA accuracy and relying on the kindness of strangers Text Chapter 20: How Accurate is CBA? CBA Project presentations Review Week 16: CBA Project presentations Review Week 17: FINAL EXAM WEEK Tuesday, May 20 Final Exam 12:45 – 2:15 pm in Amador 217 Assignments, Exams and Weekly Readings Homework will be completed on time. “The dog ate my computer”, “I eloped that weekend”, “My (fill in relationship – dog, friend, dealer, car etc.) (fill in catastrophe – left me, didn’t leave me, borrowed my computer, broke down, etc.) ”, or other problems are no excuse for missing assignments or exams . I will sometimes take some class time to examine and discuss articles appearing in the Sacramento Bee, often the Sunday Business section. This course is crammed with readings, homework and a cost benefit analysis term paper, so the only Extra Credit available to you is class participation. Extra credit for above-average class participation is very difficult to achieve if you are not in class. I often take roll, typically at or near the beginning of the lecture, so punctuality matters, but I also sometimes take roll later. No late homework. Due dates for all homework assignments will be clearly conveyed in class in advance. It is not possible to extend time for assignments after the due date. If you add the course late in the semester, you cannot makeup work you have missed. Give yourself ample time to complete assignments. These assignments are challenging and important both for your homework grade and your performance in the class. I encourage you to spend time working through them carefully and to seek out help from a classmate, an economics tutor, or me when you encounter problems. Please ask me questions if you do not understand a part of the lecture or the readings. And please ask your questions either in class or during California State University, Sacramento Page 5 Cost-Benefit Analysis Spring 2014 Syllabus office hours. I believe that it is particularly important that you ask your questions during the class so that other students will be able to learn from them, too. You may fear that you are the only one lost and that your questions will betray ignorance, but nothing could be farther from the truth: many, if not most, students will have the same questions but hope that they will figure it out somehow on their own. Also, the moment may pass and you’ll forget the question or the material itself. Thus it is important not to give in to the temptation to hold the question until class is just over, when everyone else and I will be departing for the next class and the next class and professor will be coming in. Pop quizzes will be given approximately three times per month. They typically contain T/F, M/C, and/or one short discussion question concerning either recent lectures to show how you are “getting” the covered material, or an assignment made for that day. Mid-term exams are closed book and given in class. All Mid-term exams are comprised of written response, true/false, true/false/explain, multiple-choice and or discussion questions, requiring a large Blue Book and Scantron 882-E form. Please use a pen for the written questions and a No. 2 pencil for the T/F-MC questions. The Final Exam may be similar to the Mid-term exam style, may include analysis of a CBA study or may be a take-home exam. I will provide more information as the semester progresses and the final exam nears. All exam dates are scheduled and fixed. As there are no make-ups, these dates are set in concrete so that you can arrange to be here. If your grades are sufficiently high, such as “A-”s, “A”s and “A+”s, you may be able to exempt the final exam. Free peer tutoring for reviewing basic economics concepts used in this class is available in the Department of Economics. Tutoring hours are posted in the Department office during the first week of classes and at http://www.csus.edu/dev/managed/College-ofSSIS/econ/undergraduate%20program/tutoring.htm. Policies As a student in this course (and at this university) you are expected to maintain high degrees of professionalism, commitment to active learning and participation in this class and also integrity in your behavior in and out of the classroom. Academic honesty is expected. Students suspected of cheating will be reported to Judicial Affairs. There will be no makeup quizzes or examinations. Exam dates are given in the course outline. This is to avoid any potential conflicts. Attendance is both expected and highly recommended. If you miss a class, be sure to check with your fellow classmates, to see what material you missed; I recommend finding at least one “study buddy” or join a study group to facilitate information flow for exams or in case of an absence. Come to class on time; you will not be given extra time if you are late for a pop quiz or an exam. If you decide to withdraw from this class, make sure you do so with the registrar. If you withdraw without permission, you will be assigned California State University, Sacramento Page 6 Cost-Benefit Analysis Spring 2014 Syllabus a failing grade. Once a student submits work for a grade, he/she will not be assigned a grade of “WU” under any circumstances. Keep mobile devices off during class, including laptops. If you wish to use your laptop during class, please come speak with me. You may not use your phone/MP3 player as a calculator on exams. You may use a calculator without programming capabilities. No phones, please! We have a student assistant for this class, so be sure to avail yourselves of his economics and CBA expertise. Keep the all your exams and quizzes and problem sets until after receiving your final grade, for future reference. I will be available by phone during office hours, so if you have questions and cannot get to my office then, please phone them in. remember, though, I already may have students in the office. A person with a documented illness for missing one midterm exam will have the weight of his/her midterm added to their final exam, so that their final exam will be 40% of the grade. Failure to provide the required documentation within one week from the date of the exam will result to a grade of zero for the exam. If you have a learning disability or a physical disability that requires accommodation, please let me know as soon as possible. It is the student’s responsibility to provide documentation to the Office of Services to Students with Disabilities (SSWD) and meet with a SSWD counselor to request special accommodation before classes start. SSWD is located in Lassen Hall 1008 and can be contacted at (916) 278-6955 (Voice), (916) 278-7239 (TDD only) or sswd@csus.edu. All needs that have been verified through the Services to Students with Disabilities (Lassen Hall) will be accommodated. Life Lessons If you find that you have any trouble keeping up with assignments or other aspects of the course, make sure you let me know as early as possible. As you will find in life, building rapport and effective relationships are keys to becoming an effective professional. Make sure that you are proactive in informing your instructors when difficulties arise during the semester so that they can help you find a solution. Understand When You May Drop This Course It is the student’s responsibility to understand when they need to consider dis-enrolling from a course. Refer to the Sac State Course Schedule for dates and deadlines for registration. After this period, a serious and compelling reason is required to drop from the course. Serious and compelling reasons includes: (1) documented and significant change in work hours, leaving student unable to attend class, or (2) documented and severe physical/mental illness/injury to the student or student’s family. ___________________________________________________________________________________________________________________________________________________________ California State University, Sacramento Page 7