Tag: cost-benefit analysis

According to Sir Liam Donaldson, England’s Chief Medical Officer, swine flu is on its way back. However, vaccinations are now available to the most vulnerable people, including front-line medical staff, people with chronic health problems and pregnant women. But, what about every-day workers? Surely, these are people that need protecting too, as they are the ones who contribute to the economy. How do you prioritise?

A key question is how much swine flu has actually cost the UK economy. Here, we’re not just concerned with the cost of the vaccines, but also the opportunity cost of that money, the lost output from illness, the human suffering – both of the victims and of their relatives and friends – and, of course, the impact on business and the economy. Some of the countries worst hit by the outbreak of swine flu have faced particular problems, such as protectionist trade policies and a significant fall in business through tourism.

So, will the vaccine prove cost effective for the government, or is it more about the moral obligation to provide it? These articles look at some of the recent developments in the worst pandemic in years.

Mexico economy squeezed by swine flu BBC News (30/4/09)
Swine flu vaccine on its way to GPs Grimsby Telegraph (21/10/09)
Exclusive – WTO protectionism report to feature swine flu bans Reuters (12/6/09)
Flu bill ‘may hit fire plans’ Teletext (27/10/09)
Swine flu vaccination under way BBC News (21/10/09)
Swine flu costs have put dent in profits, Amerigroup says Pilot Online, Tom Shean (27/10/09)
Swine flu gives Pharmaceutical Companies a New Edge Top News, Tangaroa Snell (26/10/09)
Economic cost of swine flu could be around $3 trillion to $4.4 trillion Today’s Zaman (Turkey) (2/11/09)
Swine flu mass vaccination programme launched Guardian (21/10/09)
Full list of swine flu cases, country by country Guardian (updated daily)
Doctors plan mass swine flu jabs for under-18s Times Online (1/11/09)

Questions

  1. What is the opportunity cost of swine flu? How could you illustrate this on a diagram?
  2. Vaccines are going to those at risk first. Why is this particularly relevant in terms of the economic problem?
  3. What is protectionism and what are the main forms? Discuss the advantages and disadvantages of protectionist policies in the context of swine flu.
  4. If the government had to decide whether or not a swine flu vaccine was worth producing, how could they have done this? Outline the process by which costs and benefits can be weighed up. Are there any drawbacks to this method?
  5. How have businesses been affected by swine flu? Think about those who have benefited as well as those that have lost.

The traditional macroeconomic issues are well-known: unemployment, inflation, economic growth and the balance of payments. However, the environment, and specifically climate change, have become increasingly important objectives for the global economy. Over recent months, many countries have announced new policies and measures to tackle climate change.

The costs of not tackling climate change are well-documented, but what about the costs of actually tackling it? Why is a changing climate receiving such attention and what are the economics behind this problem? The articles below consider this important issue.

Tougher climate target unveiled BBC News (16/10/08)
Brown proposes £60 billion climate fund BBC News (26/6/09)
EU says tackling climate change will cost global economy €400 billion a year Irish Times, Frank McDonald (26/6/09)
Obama makes 11th-hour climate change push Washington AFP, Ammenaul Parisse (25/6/09)
UK to outline emission cut plans BBC News (26/6/09)
What’s new in the EU: EU examines impact of climate change on jobs The Jerusalem Post, Ari Syrquin (25/6/09)
Climate change: reducing risks and costs The Chronicle Herald, Jennifer Graham (25/6/09)
Obama to regulate ‘pollutant’ CO2 BBC News (17/4/09)
Billions face climate change risk BBC News (6/5/07)
Obama vows investment in science BBC News (27/4/09)
Japan sets ‘weak’ climate target BBC News (10/6/09)

Questions

  1. Why is climate change an example of market failure?
  2. Apart from imposing limits on emissions, what other interventionist policies could be used? What are the advantages and disadvantages of each of them?
  3. According to the EU, the cost of tackling climate change is very high. So, why are we doing it? See if you can carry out a cost-benefit analysis!
  4. Why is climate change presenting a problem for insurance companies? Can it be overcome?
  5. Why is finance such an issue between developed and developing countries in relation to tackling climate change?
  6. What is the likely impact of climate changing policies on the labour market? Will we be able to adapt in the current economic crisis?

“As the global economic crisis forces everyone to downsize, the self-sufficient worker once again has a chance, whether as a farmer growing vegetables for local consumption or as an open-source software developer who makes a living in his basement office.” So argues the first article linked to below. Does this mean that economies of scale are over-exaggerated? Should developing countries provide more support to small-scale production as a growth and development strategy? And does small-scale production provide benefits beyond those of production and profit? Does it meet broader human and social needs? The articles explore the issues: the first two in the context of the developed world and the other four in the context of developing countries.

The Return to Yeomanry New America Foundation (22/6/09)
Entrée: Small-scale farmers on the forefront of a greens revolution The Vancouver Sun (19/6/09)
Extracts – the future of small-scale farming Oxfam International
Malawi’s fertile plan Mail & Guardian Online (25/6/09)
Development: Investment in small farmers crucial in Africa Bizcommunity.com (24/6/09)
Toward Agricultural Sustainability Philippines Business Mirror (24/6/09)

Questions

  1. What are the benefits of ‘a return to yeomanry’ (a) to the individuals themselves; (b) to society and the environment?
  2. Why might it prove a risky strategy for those embarking on small-scale production? How could governments help to reduce the risks for the producers? Should they?
  3. Discuss whether fostering small-scale farming is an appropriate development strategy for developing countries. What specific policy measures should governments adopt?
  4. Is land reform (a) a necessary condition; (b) a sufficient condition if small-scale farming is to flourish in developing countries? What pitfalls are there from a policy of land reform?

Having secured the 2012 Olympics, we now have to work out how to pay for it. Recent news has indicated that the cost of hosting the Olympics has risen significantly from the original estimate. However, there is considerable debate in the media about what the real cost is. The figures given are massive, but what will we be left with after the games are over? How can we value these assets? The blog below from Evan Davis looks at some of these issues and discusses the real cost of hosting the Olympics.

Why do costs overrun? BBC News Online (16/3/07)
Real cost of 2012? BBC News Online – Evan Davis blog (15/3/07)

Questions

1. Identify five fixed and five variable costs of running the Olympics.
2. Discuss the value of the opportunity cost of hosting the Olympics.
3. List the direct and indirect benefits of hosting the 2012 Olympics in London.