Worksheet 17. Frameworks of Benefit-Cost Analysis.

Use this worksheet to identify what forms of economic analysis you need for the planning issues you face. Each member of your planning team should know the strengths and limitations of the methods - possibly through training sessions. These techniques are complex, and their application is a matter for experienced economists.

Economic Framework

Applications in Your Strategic Planning

Financial Analysis. - Here you estimate the private profitability of a proposed action using market prices. Taxes and subsidies are treated as costs and returns, respectively. The analysis takes the viewpoint of individual enterprises and landowners.

Private profitability has to be estimated for the following proposed actions:
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Social Benefit-Cost Analysis. - This determines the social attractiveness of a proposed action, using "shadow" or "accounting" prices. Taxes and subsidies are treated as transfer payments. The analysis takes the viewpoint of society as a whole. It values resources that have no market prices, or that have "incorrect" market prices (because of government controls, monopolies, etc.)

Social BCA is needed where resources have social value but distorted market prices such as in the following proposed actions:
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Extended Benefit-Cost Analysis. - Social benefit-cost analysis is extended to include as many environmental impacts (both positive and negative) as possible. This requires that you account for on-site and off-site impacts. You attempt to recognize and quantify Total Economic Value (TEV) of the forest resources.

It is important for you to focus on TEV in the following proposed actions:
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Cost-Effectiveness Analysis. - This approach is used when benefits cannot be valued in monetary terms. For a given target in your plan (e.g., number of community meetings in South Region), the analysis specifies the most efficient (least-cost) means to achieve it.

You are able to estimate costs but not benefits in the following proposed actions:
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Weighted Social Benefit-Cost Analysis. - This method weights benefits and costs according to who pays and who receives. Benefits and costs are weighted heavily if they accrue to favored socioeconomic group (e.g., women, landless people, tribal groups, and so on). Conversely, you assign smaller weights to benefits that accrue to "the rich."

Proposed actions that require specific attention to the distribution of benefits and costs include:
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Economic Framework	Applications in Your Strategic Planning
*Financial Analysis.* - Here you estimate the private profitability of a proposed action using market prices. Taxes and subsidies are treated as costs and returns, respectively. The analysis takes the viewpoint of individual enterprises and landowners.	Private profitability has to be estimated for the following proposed actions: .................................................................................... .................................................................................... .................................................................................... .................................................................................... ....................................................................................
*Social Benefit-Cost Analysis.* - This determines the social attractiveness of a proposed action, using "shadow" or "accounting" prices. Taxes and subsidies are treated as transfer payments. The analysis takes the viewpoint of society as a whole. It values resources that have no market prices, or that have "incorrect" market prices (because of government controls, monopolies, etc.)	Social BCA is needed where resources have social value but distorted market prices such as in the following proposed actions: .................................................................................... .................................................................................... .................................................................................... .................................................................................... ....................................................................................
*Extended Benefit-Cost Analysis.* - Social benefit-cost analysis is extended to include as many environmental impacts (both positive and negative) as possible. This requires that you account for on-site and off-site impacts. You attempt to recognize and quantify Total Economic Value (TEV) of the forest resources.	It is important for you to focus on TEV in the following proposed actions: .................................................................................... .................................................................................... .................................................................................... .................................................................................... ....................................................................................
*Cost-Effectiveness Analysis.* - This approach is used when benefits cannot be valued in monetary terms. For a given target in your plan (e.g., number of community meetings in South Region), the analysis specifies the most efficient (least-cost) means to achieve it.	You are able to estimate costs but not benefits in the following proposed actions: .................................................................................... .................................................................................... .................................................................................... .................................................................................... ....................................................................................
*Weighted Social Benefit-Cost Analysis.* - This method weights benefits and costs according to who pays and who receives. Benefits and costs are weighted heavily if they accrue to favored socioeconomic group (e.g., women, landless people, tribal groups, and so on). Conversely, you assign smaller weights to benefits that accrue to "the rich."	Proposed actions that require specific attention to the distribution of benefits and costs include: .................................................................................... .................................................................................... .................................................................................... .................................................................................... ....................................................................................