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UIB Universitat de les Illes Balears Official Postgraduate Programme in Economic and Legal Sciences (Tourism and Environmental Economics) SUBJECT DESCRIPTION Details Subject Name of subject: Project Assessment Timetable: 4 p.m. – 8 p.m. Teaching staff Subject leader Name: Javier Capó Other staff Name: Diego Azqueta Contact: [email protected] 971 172905 Contact: [email protected] Number of ECTS credits: 3.5 Contact hours: 25 Independent study hours: 75 Subject skills and objectives The aim of this course is to familiarise students with cost benefit analysis, one of the most common techniques for assessing projects. Upon completing the course students will be able to carry out a simple cost benefit analysis. Amongst other subjects, areas to be covered are: identification, quantification and evaluation of relevant costs and benefits; problems related to uncertainty and weight distribution; discussion about rate of social discount; alternative selection criteria; and analysis of sensitivity of results. Some of this course’s specific objectives are: Learn to plan economic theory models using tools to interpret reality. Apply scientific methods with knowledge of their principles. Contribute to knowledge of economics and tourism. Understand the reality of tourism from different points of view expressed by international academics. Apply cost benefit analysis. Assess the consequences of a project. Assess and compare various alternative projects. Carry out case studies on experiences of cost benefit analyses. Relate environmental economics to economic wellbeing theory. Be aware of the tools, arguments and consequences of environmental assessment. Be aware of market deviation related to the environment. Content 1. Introduction. Meaning of cost benefit analysis (CBA). CBA steps. Private and public CBA. CBA and project assessment. CBA and effective cost analysis. 2. Scene of original planning. Modelling of situation without the project. Identification of various alternatives. Zero option. Postpone and plan investment again. 3. Efficiency and equality. From financial to economic assessment. Shadow prices. Cost of job opportunity. Shadow price of exchange rate. 4. Discounts. Social rate of discount. Divergence between the rate of consumption of interest and accountability of interest: optimal savings rate. Shadow price of investment. 5. Equality. From financial to economic assessment. Factors in personal and temporal redistribution of income. Critical minimum level of consumption. 6. Investment criteria. Current net worth. Internal rate of return, cost benefit percentage. Accept-reject. Ranking of alternatives. Sensitivity analysis. 7. Risks and uncertainty. Risk avoidance, expected values, standard deviation and certainty equivalent. Uncertainty: payment matrix. Maximax, minimax, pessimism index and Savage criteria (minimax regret). 8. Analysis of economic impact. Price and rate of inflation. Multiplying effects. Net impact on employment: direct, indirect and induced. Effects on movement. Social value of job creation. 9. Externalities: human health. Identification of impact on human health. Analysis of life cycle and approaches to project leadership. Assessment of changes in death and illness rates. 10. Externalities: biodiversity. Assessment of impact on biodiversity. Economic value of biodiversity. INBio experience. 11. Externalities: climate change. Assessment of negative impact on climate change: approach to damage and preventative measures. Carbon trading. Clean development mechanism. 12. CBA: an example 13. Multicriterion analysis Methodology 1. Learning method: Classes E-learning: No Type of group: Large 2. Learning method: Independent study E-learning: Yes Type of group: Individual and small groups Assessment criteria and instruments Assessment criteria: There will be a final written exam on course content, although attendance and participation in class, exercises and coursework will also count. Assessment instruments: Participation in class Oral presentation Written work Final exam Marking criteria: Participation in class (10%) Oral presentation (10%) Written work (30%) Final exam (50%) Bibliography, resources and appendices Basic bibliography: EPA (2000). Guidelines for Preparing Economic Analysis. United States Environmental Protection Office. EPA 240-R-00-003. Complementary texts: Adler, M.D. and E.A. Posner (ed.) (2001). Cost-Benefit Analysis: Legal, Economic, and Philosophical Perspectives, University of Chicago Press. Azqueta, D. (2002). Introducción a la economía ambiental. McGraw-Hill, Madrid. Barba-Romero, S. and J.C. Pomerol 1997). Decisiones multicriterio: fundamentos teóricos y utilización práctica. Universidad de Alcalá, Servicio de Publicaciones. Boardman, A.E., et al. (2000) Cost Benefit Analysis: Concepts and Practice. 2nd edition; Prentice Hall. Dinwiddy, C. and F. Teal (1996). Principles of Cost-Benefit Analysis for Developing Countries. Cambridge University Press, Cambridge, U.K. De Rus, G. (2004). Análisis coste-beneficio: evaluación económica de políticas y proyectos de inversión. 2nd ed. Barcelona, Editorial Ariel. Zerbe, R.O. and D.D. Dively (1994). Benefit-Cost Analysis in Theory and Practice. Harper Collins, New York.