Costing in economic evaluation

This is another in an occasional series of notes on economics

These notes are edited by James Raftery (J.P.RAFTERY@bham.ac.uk)

As argued in previous notes, the perspective of an economic evaluation—societal or confined to some organisation—affects the range of both outcomes and costs that should be included. The case has been made for taking a societal perspective,1 particularly for publicly funded programmes, but the range of resource effects that are potentially relevant is enormous. As with a stone dropped in a large pool of water the ripples in theory go on indefinitely, and some have spill-over effects. For practical purposes, however, one would want to measure only those occurring within a certain radius. The perspective adopted affects the “resource frame” of the study. The societal perspective implies taking a very large frame, while that of the public sector, or a particular organisation, implies a much reduced frame.

Three stages can be usefully distinguished in costing: identification, measurement, and valuation. Identification consists of …