Cost benefit Analysis in educational planning

1. PLANNING OF ECONOMY AND
FINANCING IN EDUCATION
UNIT-III
COST BENEFIT ANALYSIS IN
EDUCATIONAL PLANNING
Dr.N.SASIKUMAR
Assistant Professor
Department of Education
Alagappa University
Karaikudi-630003

2. COST BENEFIT ANALYSIS IN
EDUCATIONAL PLANNING
4 Cost- benefit analysis provides a measure
of the profitability of education as an
investment for society, or for the
individual student or his/her family.
4 It will act as a general guide for resource
allocation and enable the comparison of the
profitability of different types of education.

3. COST BENEFIT ANALYSIS
4 Cost analysis can contribute significantly to decision-
making, planning, and monitoring in education. The different
concepts of costs explain how they can contribute to improve
policy-decisions in education.
4 The purpose of this review is to introduce you to the
different types of educational cost analysis and explain how
they can contribute to improve policy decisions in education.
4 The major tool used by economists to explain the past,
analyze the present, and predict the future; it can and should
be an integral part of students' thinking as they make
personal and social decisions in the context of the nation.

4. 4 Generation and utilization of resources is also important
for educational institutions.
4 Utilization of resources for various sectors and levels of
education would mean expenditure to meet certain set
objectives. Such expenditures as would reduce regional
disparity, and provide for equality of educational
opportunity may be incurred.
4 The ultimate considerations when these expenditures
are incurred will be the costs' involved and the benefits
received from them.
4 Moreover, it is also essential to examine both cost
effectiveness and cost-efficiency in order to evaluate the
work of an educational programme.

5. Purposes of using cost analysis
 Testing the feasibility of expansion plans,
proposals and targets.
 Projecting future levels of educational costs.
 Estimating the costs of alternative policies and of
educational reforms and innovations.
 Comparing the alternative ways to achieve the
objectives.
 Comparing the profitability of alternative
investment projects.
 Improving the efficiency of resource utilization.

6. Cost -Benefit v/s Cost
Effective Analysis
4 Cost effectiveness relates to value of the outcome
compared to the expenditures.
4 Cost efficiency analyzes how a provider uses
available resources to supply goods and services.
4 While cost-benefit analysis asks whether
the economic benefits outweigh the
economic costs of a given policy, cost-
effectiveness analysis is focused on the
question of how much it costs to get a
certain amount of output from a policy.

7. 4 CBA and CEA differ in the quantification or valuation
of the demonstrated health effects. CBA requires that
health effects (benefits) be valued in the same unit as
costs.CEA values benefits in “health effects” units-lives
saved, years of life saved, days of disability avoided.
4 Cost-effectiveness analysis (CEA) compares the relative
costs of the outcomes of two or more courses of action and
is considered an alternative to cost-benefit analysis (CBA).
CEA is most useful when analysts face constraints that
prevent them from conducting cost-benefit analysis.
4 Both CBA and cost-effectiveness analysis (CEA) include
health outcomes. However, CBA places a monetary value
on health outcomes so that both costs and benefits are in
monetary units.

8. Unit Cost and Capital Cost
4 A unit cost is a total expenditure incurred by a company
to produce, store, and sell one unit of a particular
product or service. Unit costs are synonymous with cost
of goods sold (COGS). This accounting measure includes
all of the fixed and variable costs associated with the
production of a good or service.
4 Capital costs are fixed, one-time expenses incurred on the
purchase of land, buildings, construction, and equipment
used in the production of goods or in the rendering of
services. In other words, it is the total cost needed to bring
a project to a commercially operable status.

9. Social and Individual Cost
4 Social costs means costs estimated from the viewpoint of
society, rather than individual stakeholders. Social cost
represents the total burden imposed on the economy; it is the
sum of all opportunity costs incurred associated with taking
actions.Social cost is the total cost to society. It includes
private costs plus any external costs. Example of driving to
work. Costs of paying for petrol (personal cost) Costs of
increased congestion (external cost)
4 individual costs means expenditures for travel, meetings,
attorneys, accountants, consultants, vendors, and other
service providers, as well as expenditures for internal
resources, incurred by Parties as parties and/or in their
individual capacities which are not Common Costs.

10. Recurring and Non-recurring Cost
4 A recurring cost is one that occurs at regular
intervals and is anticipated. The cost to provide
electricity to a production facility is a recurring cost.
A non-recurring cost is one that occurs at irregular
intervals and is not generally anticipated.
4 The main difference between recurring and non-
recurring expenses is the difference between regular,
fixed expenses one-time or extraordinary expenses.
Recurring expenses typically appear on a company's
income statement as indirect costs and are also
factored into the balance sheet and cash flow
statements.

11. Opportunity cost
4 Opportunity cost is the value of what you lose
when choosing between two or more options.
Every choice has trade-offs, and opportunity
cost is the potential benefits you'll miss out on
by choosing one direction over another.
4 Opportunity cost is the profit lost when one
alternative is selected over another. The
concept is useful simply as a reminder to
examine all reasonable alternatives before
making a decision.

13. Economic Returns to
Higher Education
4 Higher education institutions assure the relevance of their knowledge,
identify skills gaps, create special programmes and build the right
skills that can help countries improve economic prosperity and social
cohesion, adapt workforce development to the economy and changing
demand for the new skills, develop relevant recourses.
4 The private rate of returns to education is the increase in the earnings
from an additional year of education for an individual who makes
the investment decision on education, while the social rate of returns
to education measures the increase in national income resulting from
the same year of education.
4 Economic growth has historically been included in higher
education as part of the core mission. A key factor in the growth and
technological progress, as the literature has demonstrated, is higher
levels of education.

14. Signaling Theory v/s Human
Capital Theory
4 Signaling theory is useful for describing behavior when
two parties (individuals or organizations) have access
to different information. Typically, one party, the sender,
must choose whether and how to communicate (or signal)
that information, and the other party, the receiver, must
choose how to interpret the signal.
4 Human capital theory is about the idea of humans
increasing their productivity and efficiency through a
greater focus on education and training. Human capital
is the study of human resources. It talks about the
development of economic value from how we function as a
society.

15. 4 Signalling theory says that, in pursuing more
education, people who know they are more
capable thereby send a signal to potential
employers that they are the more capable
workers. Education therefore screens out the low-
productivity workers from the high-productivity
(more educated) workers.
4 Human capital theory emphasizes how education
increases the productivity and efficiency of
workers by increasing the level of cognitive
stock of economically productive human
capability, which is a product of innate abilities
and investment in human beings.