When benefits are difficult to measure

Abstract

Benefit cost analysis is seldom applied to programs which aim directly at improving human well-being; the problems in quantifying such benefits, particularly in dollar form, are simply too great. This paper explains /ldthreshold benefit analysis," the derivation of the minimum dollar value which the benefits must attain in order for the value of the benefits to equal the cost of the intervention. As an example, the method is applied to a mobility training program. The threshold benefit of such training is approximately two dollars per commute. The empirical results include a sensitivity analysis which allows considerable flexibility on the part of potential users. The methodology is applicable to analyzing any intervention where costs are incurred early, initial "successes" can be counted in natural numbers, and duration of success can be modelled simply.