Chapter 3. Cost Concepts 45 3.1. The Concept of Costs 46 3.2. Cost per Unit 49 3.3. Costs and the Theory of Change 51 3.4. Costs Data and Budgetary Information 54 3.5.Motivation for Cost Analysis 56 3.6. Conclusions 58 Discussion Questions 59 Exercises 59 Chapter 4. The Ingredients Method 61 4.1. Identifying Ingredients 62 4.2. Specifying Ingredients 63 4.3. Sources of Ingredients Information 71 4.4. Conclusions 74 Discussion Questions 75 Exercises 75 Chapter 5. Placing Values on Ingredients 77 5.1. Methods for Valuing Ingredients 78 5.2. Placing Dollar Values on Ingredients 82 5.3. Costs Over Multiple Years 93 5.4. Conclusions 100 Discussion Questions 100 Exercises 101 Chapter 6. Analyzing and Reporting Costs 103 6.1. Tabulating Total Cost Using a Cost Worksheet 104 6.2. Reporting Costs 109 6.3. Allocating Costs Among Constituencies 117 6.4. Analyzing Cost Determinants and Generalizing Costs 123 6.5. Conclusions 128 Discussion Questions 129 Exercises 129 Chapter 7. Effectiveness 131 7.1. Specifying Effectiveness 132 7.2. Methods for Identifying Effectiveness 141 7.3. Utility Analysis 149 7.4. Conclusions 162 Discussion Questions 163 Exercises 163 Chapter 8. Cost-Effectiveness Analysis 8.1. Cost-Effectiveness Ratios 166 8.2. Alternative Cost-Effectiveness Metrics 169

There is a growing body of research emphasizing the advantages of teaching students social and emotional (SE) skills in school. Here we examine the economic value of these skills within a benefit-cost analysis (BCA) framework. Our examination has three parts. First, we describe how the current method of BCA must be expanded to adequately evaluate SE skills, and we identify important decisions analysts must make. Second, we review the evidence on the benefits of SE skills, again noting key methodological issues with respect to shadow pricing. Finally, we perform BCA of four selected social and emotional learning (SEL) interventions: 4Rs; Second Step, Life Skills Training; and Responsive Classroom. These analyses illustrate both methodological and empirical challenges in estimating net present values for these interventions. Even with these challenges, we find that the benefits of these interventions substantially outweigh the costs. We highlight promising areas of research for improving the application of BCA to SEL.

In this article, we perform cost-effectiveness analysis on interventions that improve the rate of high school completion. Using the What Works Clearinghouse to select effective interventions, we calculate cost-effectiveness ratios for five youth interventions. We document wide variation in costeffectiveness ratios between programs and between sites within multisite programs, reflecting differences in resource use, program implementation, and target population characteristics. We offer suggestions as to how cost-effectiveness data can be used to inform policymaking, with the goal of improving the efficiency with which public and private resources are employed in education.

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Benefit–cost analysis is an important part of regulatory decision-making, yet there are questions as to how often and how well it is performed. Here we examine 28 Regulatory Impact Assessments performed by the federal government on education regulations since 2006. We find many Regulatory Impact Assessments estimated costs, albeit using informal methods, but most failed to adequately report benefits. Also, most studies did not estimate net present value or clearly report methodological assumptions. In reviewing the relatively high quality studies we identified a number of discrepancies from best practice. Most importantly, few Regulatory Impact Assessments attempted a social benefit–cost analysis: Most examined “administrative burdens” from compliance with legislation. This alternative focus on administrative burdens has significant implications for economic evaluation in practice.

Talent Search was created to improve high school completion and college enrollment for disadvantaged students. Since the program's inception in 1967, there has not been a valid study on its economic value. In this paper, we perform a full economic evaluation, yielding direct information on the value of Talent Search and highlighting key methodological issues relating to economic evaluations of education programs. We provide rigorous estimates of social costs using the ingredients method. Using prior estimates of impacts from Constantine et al. [(2006). Program Studies Service], we perform a cost-benefit analysis based on new estimates of shadow prices. Finally, to examine site-specific differences in impacts and costs, we undertake cost-effectiveness analysis and derive confidence intervals that illustrate key sensitivity issues. Regarding costs, we find significant resource use beyond federal funding amounts; but we also find that the present value benefits of Talent Search almost certainly exceed the present value of costs by a substantial margin. With regard to cost-effectiveness, we find significant differences across sites and extremely wide confidence intervals. We conclude with an outline of key research issues that need to be addressed to enhance future economic evaluations in educational settings with wide site-specific variation.

Educational interventions are complex: Often they combine a diagnostic component (identifying student need) with a service component (ensuring appropriate educational resources are provided). This complexity raises challenges for program evaluation. These interventions, which we refer to as service mediation interventions, affect additional resources students receive that mediate the impact measured. Evaluations of these types of programs that solely report effects are potentially misleading. Cost-effectiveness analysis clarifies the importance of assessing service-mediated receipt for evaluation purposes. We illustrate our argument empirically from City Connects, a comprehensive student support intervention. We find that the direct costs of the program represent only one-third of the total change in resource use by program participants required to produce impacts. Evaluative statements of service mediation interventions should be accompanied by information on the full costs to achieve effects. Many interventions might be structured in this way and require evaluation that includes an economic perspective.

Cost, cost-effectiveness, and benefit-cost analysis are methods used by economists to evaluate public policies. Essentially, these methods rely on impact evaluations, that is, research studies of efficacy and effectiveness. However, in most research in education, these cost and impact evaluations are performed separately. This separation creates methodological deficiencies and undermines the contribution of educational research to decision making. In this article, we identify key domains of educational research evaluations that, we believe, would be enhanced if resource and cost analyses were integrated more directly. These domains relate to outcome specification, treatment contrast, implementation fidelity, the role of mediators, power of the test, and meta-analysis. For each domain, we provide a case study example of how these cost analyses can complement and augment current research practices in educational evaluation. More interaction between economists and education researchers would be beneficial for both groups.