Page 177 - DEDU503_EDUCATIONAL_MANAGEMENT_ENGLISH

Unit 14: Cost–Benefit and Cost–Efficiency Analysis in Education

Cost-effectiveness analysis is closely related to cost-benefit analysis in that both represent economic Notes
evaluations of alternative resource use and measure costs in the same way (see Cost-Benefit Analysis).
However, cost-benefit analysis is used to address only those types of alternatives where the outcomes
can be measured in terms of their monetary values. For example, educational alternatives that are
designed to raise productivity and- income, such as vocational education, have outcomes that can
be assessed in monetary terms and can be evaluated according to cost-benefit analysis. However,
most educational alternatives are dedicated to improving achievement or some other educational
outcome that cannot be easily converted into monetary terms. In these cases, one must limit the
comparison of alternatives to those that have similar goals by comparing them through cost-
effectiveness analysis.
The purpose of cost-effectiveness analysis in education is to ascertain which program or combination
of programs can achieve particular objectives at the lowest cost. The underlying assumption is that
different alternatives are associated with different costs and different educational results. By choosing
those with the least cost for a given outcome, society can use its resources more effectively. Those
resources that are saved through using more cost-effective approaches can be devoted to expanding
programs or to other important educational and social endeavors.
Cost-effectiveness analysis was developed in the 1950s by the United States Department of Defense
as a device for adjudicating among the demands of the various branches of the armed services for
increasingly costly weapons systems with different levels of performance and overlapping mission.
By the 1960s it had become widely used as a tool for analyzing the efficiency of alternative government
programs outside of the military, although its applications to educational decisions have been much
slower to develop. Indeed, in the early 1990s the use of the tool in considering educational resource
allocation is restricted largely to the United States and has not emerged as a decision approach to
resource allocation in other countries.

In some countries books are financed with public funds and provided to pupils free
or at a subsidized price. In this case the appropriate way to measure their cost is by
public expenditure on books or materials.

14.4 Measuring Cost Efficiency
The basic technique has been to derive results for educational effectiveness of each alternative by
using standard evaluation procedures or studies and to combine such information with cost data
that are derived from the ingredients approach. The ingredients approach was developed to provide
a systematic way for evaluators to estimate the costs of social interventions. It has been applied not
only to cost-effectiveness problems, but also to determining the costs of different educational programs
for state and local planning
14.4.1 Assessing Effectiveness

Before starting the cost analysis, it is necessary to know what the decision problem is, how to
measure effectiveness, which alternatives are being considered and what their effects are. If a problem
has risen on the policy agenda that requires a response, a careful understanding of the problem is
crucial to addressing its solution.
Once the problem has been formulated, it will be necessary to consider how to assess the effectiveness
of alternatives. For this purpose, clear dimensions and measures of effectiveness will be needed.
(Examples of effectiveness measures that respond to particular program objectives.
Given the problem and criteria for assessing the effectiveness of proposed solutions, it is necessary
to formulate alternative programs or interventions, The search for such interventions should be as

LOVELY PROFESSIONAL UNIVERSITY 171