Public sector investment in higher-quality foster care services could substantially improve the long-term mental and physical health of foster care alumni.

The concept of market failure was originally presented by economists as a normative explanation of why the need for government expenditures might arise. Gradually, the concept has taken on the form of a full‐scale diagnostic tool frequently employed by policy analysts to determine the exact scope and nature of government intervention. For some time, economists have known that the market failure idea is conceptually flawed. The authors of this article demonstrate why this is so, employing concepts drawn from the perspective of transaction costs. In a review of empirical studies, they further show how the market failure diagnostic leads analysts to make generalizations that are not supported by facts. Transaction cost analysis helps to explain the underlying processes involved. © 1999 by the Association for Public Policy Analysis and Management.

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In order to be sensible about what discount rate to use one must be clear about its purpose. We suggest that its purpose is to help select those projects that will contribute more net benefits than some other discount rate. This approach, which is after all the foundation for benefit-cost analysis, helps to reconcile different suggested procedures for determining the discount rate. We suggest that the social opportunity cost of capital (SOC) is superior to other suggested approaches in its generality and its ease of use. We use the SOC to determine a range of real rates that vary between 6% and 8%. We suggest that approaches based on determination of preferences, which result in hyperbolic discounting, are less appropriate and less useful.

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Genetic differences (polymorphisms) among members of a population are thought to influence susceptibility to various environmental exposures. In practice, however, this information is rarely incorporated into quantitative risk assessment and risk management. We describe an analytic framework for predicting the risk reduction and value-of-information (VOI) resulting from specific risk management applications of genetic biomarkers, and we apply the framework to the example of occupational chronic beryllium disease (CBD), an immune-mediated pulmonary granulomatous disease. One described Human Leukocyte Antigen gene variant, HLA-DP beta 1*0201, contains a substitution of glutamate for lysine at position 69 that appears to have high sensitivity (approximately 94%) but low specificity (approximately 70%) with respect to CBD among individuals occupationally exposed to respirable beryllium. The expected postintervention CBD prevalence rates for using the genetic variant (1) as a required job placement screen, (2) as a medical screen for semiannual in place of annual lymphocyte proliferation testing, or (3) as a voluntary job placement screen are 0.08%, 0.8%, and 0.6%, respectively, in a hypothetical cohort with 1% baseline CBD prevalence. VOI analysis is used to examine the reduction in total social cost, calculated as the net value of disease reduction and financial expenditures, expected for proposed CBD intervention programs based on the genetic susceptibility test. For the example cohort, the expected net VOI per beryllium worker for genetically based testing and intervention is $13,000, $1,800, and $5,100, respectively, based on a health valuation of $1.45 million per CBD case avoided. VOI results for alternative CBD evaluations are also presented. Despite large parameter uncertainty, probabilistic analysis predicts generally positive utility for each of the three evaluated programs when avoidance of a CBD case is valued at $1 million or higher. Although the utility of a proposed risk management program may be evaluated solely in terms of risk reduction and financial costs, decisions about genetic testing and program implementation must also consider serious social, legal, and ethical factors.

Regulatory impact analyses (RIAs) weigh the benefits of regulations against the burdens they impose and are invaluable tools for informing decision makers. We offer 10 tips for nonspecialist policymakers and interested stakeholders who will be reading RIAs as consumers.1.Core problem: Determine whether the RIA identifies the core problem (compelling public need) the regulation is intended to address.2.Alternatives: Look for an objective, policy-neutral evaluation of the relative merits of reasonable alternatives.3.Baseline: Check whether the RIA presents a reasonable “counterfactual” against which benefits and costs are measured.4.Increments: Evaluate whether totals and averages obscure relevant distinctions and trade-offs.5.Uncertainty: Recognize that all estimates involve uncertainty, and ask what effect key assumptions, data, and models have on those estimates.6.Transparency: Look for transparency and objectivity of analytical inputs.7.Benefits: Examine how projected benefits relate to stated objectives.8.Costs: Understand what costs are included.9.Distribution: Consider how benefits and costs are distributed.10.Symmetrical treatment: Ensure that benefits and costs are presented symmetrically.