AREC365 Lecture 9: AREC 365 Lecture Notes Sept 28 - BCA, Welfare, Discounting

• School: University of Alberta
• Department: Agricultural and Resource Economics
• Course: AREC365
• Professor: Terence Veeman

Document Summary

Purposes/uses of benefits/costs analysis: determine the scale of a project (diagram to follow, determines whether project/policy should go ahead, 3 decision rules (investment criteria), npv (net present value) > 0 (present value of benefits is greater than present. At times, bcr and irr can lead to inconsistent rankings. Criterion of pareto optimality: (cid:862)allo(cid:272)atio(cid:374)s are pareto-optimal if no other feasible allocation could benefit at least one person without deleterious effe(cid:272)ts o(cid:374) so(cid:373)e other perso(cid:374). (cid:863) You (cid:272)a(cid:374)"t (cid:373)ake so(cid:373)e(cid:271)ody (cid:271)etter off without (cid:373)aki(cid:374)g so(cid:373)eo(cid:374)e else worse off. ^ benefit/cost analysis (bca) rests on this compensation principle, as well as surplus (cs is in twtp or. An allocation of resources that maximizes the present value of nat benefits (really net social. Pv of a benefit in year n = (b in year n)/(1+n)n. Pv on an infinite benefit stream in perpetuity = b/r: ex. Pv of a variable benefit stream = .